Hey, money is pretty boring, right? I mean, save, spend. It is more or less that.

Well, not so fast. Money is often one of the most controversial aspects of our life. It’s not just about what we do with money, but how we think about it and how we enjoy it – and our behavior is often changed by money, even to the point of ‘encourage people to do unethical things out of selfishness.

Latest example to date. President-elect Joe Biden wants to waive the $ 10,000 repayment for every American who has student loan debt. It’s too little a waiver, let’s say 238 organizations, including the American Federation of Teachers and the NAACP. They want Mr. Biden to write off $ 50,000 in federal student debt per borrower. And they want this to happen on the first day of his presidency.

More than 43 million US borrowers owe $ 1.4 trillion in federal student loans. Forgiving $ 10,000 per person would cost the government $ 430 billion, almost a third of the total amount it lent. The cancellation of $ 50,000 would be perhaps the largest wealth transfer program in American history.

Proponents rightly argue that crushing student debt hinders the ability of young Americans to buy cars and homes. Studies even show that people in debt delay marriage and childbirth. And save for retirement? Fuggedaboudit.

No wonder 70% of those surveyed support the cancellation of the $ 10,000 debt. But I’m pretty sure those 70% all have student loan debt that would be forgiven. After all, there is no such thing as the promise of free money to get policy backing!

The problem is, the proposal is the wrong way to help struggling Americans. The people who need money the most – and most urgently – are the unemployed. At last count, that’s about 10 million Americans (thanks, Covid). But 70% of the unemployed do not have a university degree. In fact, 43% of them have not attended college at all, which means they have no student loans to give up. And 60% of student debt is owed by households earning more than $ 74,000 – far from the most needy group of Americans.

Suppose you owe $ 10,000 in student loans. Even if President-elect Biden forgives you, your situation won’t improve much. This is because the typical payment on this debt is only around $ 100 per month. It will not relieve anyone of financial difficulties. It would be much more efficient for the government to put the debt aside and just send $ 10,000 to each of these borrowers. It would create an incredible and immediate impact – and not just for these families but for the economy in general! So even if the supporters of this free government donation are right, they are going in the wrong direction.

And here is the big ethical problem that worries me. Government policy is often designed to change consumer behavior. Congress gives tax credits to encourage us to buy electric cars. It creates tax-exempt “opportunity zones” to encourage businesses to operate in disadvantaged urban areas. It offers tax deductions to motivate us to donate to charity. To do well while doing good, as they say.

This waiver of debt, however, would change behavior in all the wrong ways.

Everyone knows that getting a college degree is a great path to a better life. That’s why millions of moms and dads scrimp and save so their kids can go to college. Imagine, however, that you are one of those parents. Because you lived frugally, saved a lot, deprived yourself of many luxuries, and delayed gratification for decades, you never needed to borrow money to send your kids to college. So when the President-elect’s waiver is enacted, you get no benefit. Instead, those who haven’t worked as hard as you will benefit. Some of these people could have saved but chose not to. They are now being rewarded for their behavior, and the taxpayer (you) are paying their bill for them.

Or say you had to get loans but worked hard to make extra payments so you could pay them back sooner. No benefit of the waiver for you.

Or what if you have borrowed, but not from the Federal Student Loans Program. Instead, you got a home equity loan. No waiver for you.

Government policies should encourage and reward appropriate behavior, not punish people for making good decisions and working hard by the rules. And government policies should not compensate people for making bad decisions – such as paying too much for degrees they could have obtained cheaply or for taking on debts they did not have the realistic ability to repay. .

The new administration’s bailout will create a loophole, and some people – and some financial advisers – will tell you to take it, allowing you to take advantage of this new $ 10,000 waiver. If you’re in college, or have a kid or grandchild in college, they’ll tell you, go get a $ 10,000 student loan even if you don’t need it. Put the money in a bank account and let it sit there. On January 21, if these 238 organizations get what they want and the president says the loans should never be repaid, that $ 10,000 would be yours, tax-free.

I’ll come back to ethics in a moment. But first, be aware that this idea might not work. The president-elect might not present the legislation, or it might not be passed by Congress. Or the bill could contain caveats making the loan forgiveness applicable only to families within certain income limits, or for debt that was already in place (to close the loophole).

But now to ethics. This flaw is not ethical. Our government created the federal loan program to help millions of students attend university who otherwise would not be able to afford it. So just because there is a loophole doesn’t mean you have to exploit it. If everyone did that, it would be bad for the country. This would worsen the financial crisis in our country.

But I do hope that the president-elect and these 238 organizations realize that their proposal encourages people to exploit this loophole. People who engage in Medicaid planning are also doing something unethical – encouraged by many older lawyers to charge large fees by showing people how to protect their money in order to qualify for Medicaid. Just because you have the right to do it doesn’t mean you have the right to do it. Mr. President-elect, please consider the moral and financial aspects of your decisions and not just the political ones.