The Real Impact of Student Loan Forgiveness

As we prepare for the Jackson Hole reaction from traders... I wanted to take a moment to discuss something really important to me.

I suppose it is fitting, coincidence or irony -

I've never understood the distinction at times.

I took school very seriously. I think you see that each day that I'm on air. But there's another side to the story you don't see when the camera goes off.

After four years of aggressive student loan payments, I made the final payment on my graduate student loans on Tuesday, August 23, 2022.

One day later, the President announced that he aims to forgive $10,000 in student loans for millions of Americans. The deal, reportedly, includes graduate debt.

It makes me laugh, you know.

Because for four years, I put in - aggressively - 80- to 90-hour weeks to make enough side pay to eliminate my student payments as fast as possible.

I had sizable graduate school debt after my three tours ended in 2016.

In 2018, I had to pay off my last loan: My MBA.

That wasn't cheap.

With my daughter under a year old and my desire to pay for her to go to college, my wife and I decided that I'd push aggressively to wrap up my loans by the time she turned five.

Why? Because interest rates can add up a LOT of money over time.

Let me tell you what happened next.

Paying It Off

With a lot of debt remaining, I went to work.

I took on new clients - some I liked, others I did not.

I worked very long days, too long in fact. I traveled. I consulted. And I put about 85% of post-tax side pay into my loans. I refinanced with SOFI and did a variable rate (risky at the end of 2018 as interest rates started ticking higher). I had two doctors tell me to slow down.

Despite COVID, I still pumped every dollar possible into the loan payments. I kept an adjusting autopay in place and threw whatever I had at the end of the quarter into driving this loan lower.

With my fiscal Q3-2022 ending soon on my side business, I could make the final payment on Tuesday.

Last week, with under $4,000 left, I received an email from SoFi.

My variable rate would rise above my mortgage rate.

So, instead of paying roughly $200 on the remaining five-year loan payment, I just wrote the final check instead on Tuesday morning.

It is done.

And then, like some cosmic prank, the White House announced that it would forgive $10,000 in loans.

I'm not angry. I'm not disappointed.

I'm not a person who asks, "What about me?"

In fact, on Wednesday, I had a small celebration after paying off these loans.

Having "Time" Again

I bought a tent for my yard. My daughter and I sat inside it, ate ice cream, and discussed why the children's show Bluey is superior to Paw Patrol. She agreed and asked if we could sleep in the tent on Friday and watch Bluey. It was the first time after 7 pm I didn't work in so long I don't remember anymore.

That was one of the happier evenings I've had in so long.

It felt like absolute freedom.

It felt earned.

Next year - I no longer need to do this - work that hard - and put myself in a position where I'm straining my eyes into the midnight hours.

So, I wish this feeling for so many people who now have the chance to eliminate said loans.

Before those loans disappear, please tell anyone you know who is getting student loan relief that I have three requests.

Three Requests for Student Loan Forgiveness

First, this is not a license to start buying meme stocks or racking up new credit card debt. Instead, it should be a license to build your emergency fund (every dollar plus the expected interest), your rainy day on all things forward.

Or pay off existing debt.

Two, show some appreciation for your country. Not to Joe Biden or Congress.

It's very easy for politicians to move money from one place to another. It's easy to spend other people's money. Every dollar spent on this could have been spent on mental health and homelessness. Your fellow taxpayers are picking up the tab.

Third, and most important, understand what debt means... and never claim that this massive injection into your tax structure for 2022 "isn't enough."

Let me tell you what student loan debt meant to me.

It isn't about the money... You can have it. That doesn't bother me.

Whether it's inflation, taxes... or especially debt, it's about my "time."

Because that is the actual cost of debt - time that can't be returned.

Working off debt meant missing an hour a night - each night - for three years with my only child to get this debt load off the books.

It meant skipping pool parties.

It meant taking projects in Washington and then flying home early, exhausted to watch two minutes of a dance recital. It meant missing small moments, small memories, and small things that can't be bought, returned, or promised. It meant missed dinners and editor calls during family events to review submissions.

It meant time; the only commodity debt cannot purchase or repurchase.

You've just been given a lot of time back on behalf of your nation.

Be grateful for this opportunity.

Please pass this message along.

Today's Momentum Reading


The World's Biggest Trade.

Broad Market: Green

S&P 500: Green

Recap: Momentum is Green. The SPY bounced off the 50 on RSI, and the markets held and pushed higher. That said, we see a selloff in the bonds market as investors continue to take small positions and hedge.

Three Things I'm Watching

Bye Peloton: Shares of Peloton (NASDAQ: PTON) plunged after the company reported weak earnings and struggling customer retention. Its Connected Fitness business (subscriptions) revenue dropped by 55%. This is why you don't hold junk stocks into earnings. Yesterday, shares surged on news of the company's partnership with Amazon (NASDAQ: AMZN). But as I've noted, Peloton faces incredible challenges ahead. I'm not talking about a sales slump. I'm talking about the possibility of bankruptcy in 2023.

Inflation Watch: I've been asked a lot of questions about the impact of student loan forgiveness on the U.S. economy. It's an inflationary policy. There's no other answer. As I have noted, none of the money addresses the underlying problem from day one with college tuition costs: The government's loan program. We'll see people thinking they now have an additional $10,000 to spend. That's basic human behavioral economics. My concern is that this is a measurement of how comfortable America will be with canceling other debt in the future. This might just be a trial balloon for canceling other private debt in five to 10 years.

Drought Woes: I'm keeping in contact with colleagues out on the Pro Farmer Crop Tour to get a sense of grain quality across the United States. I'm naturally worried about food. There are problems with drought in Western portions of Iowa, but Illinois farms look surprisingly okay. There's a LOT of speculation about farming disasters or record yields for certain farms. But the reality is that we're at a middle ground. I think that food prices will pick up in the fall as we start to see what final numbers look like at the start of harvest.

Hot Long Shot

Tune in to discuss today's long shot. There's A LOT to understand here.

What You Missed

Well, this is fun. It's like watching the slowest car crash ever. I see it coming. It's right there. Yet somehow, this could be a while.

We see Fed members echo the same sentiment day in and day out...We have not conquered inflation... Expect additional rate hikes.

But the market chugs along.

I've studied financial crises my entire adult life and know better than most that markets are irrational. Just like Burry in '07, I'll remain steadfast in my approach.

Low-volume environments such as these are challenging to navigate as a tug-of-war occurs between the bears and bulls. Traders and algos alike see the same writing on the wall... as we do... so they take their shots... as we do.

But as it is in any low-volume environment, the slightest breeze can take prices higher, which causes a rush of algorithmic short covering. It's automatic and usually followed by retail FOMO. So you can short this just can't stay short this market.

And that's why the World's Biggest Trade is critical to your wealth creation. Knowing when to go short, stay long, and where to aim is imperative for someone looking to manage their portfolio.

The next big leg down IS coming... and we'll be ready in the World's Biggest Trade.

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About the Author

Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.

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