Could Student Loan Forgiveness Stimulate the Economy?
After months of stories about corporate execs getting bailed out of their bad debts, many of us are wondering where our economic stimulus plan is. Why is it that hardworking, responsible people have to continue paying off their debts, but the AIG and Citigroup types of the world get a free pass?
One man thinks he has the answer. According to the Huffington Post:
Robert Applebaum, an attorney from New York, thinks so and has an idea on how to help many in his shoes — and trust me, there are many — while stimulating the economy at the same time. The 35 year old started up an online campaign this month to bail out those “hard-working, educated middle class” suffocating in college loan debt on Facebook. He formed the group “Cancel Student Loan Debt to Stimulate the Economy” because he believes forgiving student loan debt for those making under $150,000 annually would help boost the economy from “the bottom up.”
“I struggle to pay my rent and bills and have never defaulted on my student loans,” he said Feb. 4. But I also don’t spend money on consumer goods anymore — not only because I can’t afford them, but because I’m afraid the situation will only get worse…”
He continued, “One-time tax rebates and meager tax cuts do nothing to stimulate the economy. A recession is as much a psychological phenomenon as anything else. Knowing I’d have an extra $500 per month in my pocket will get me spending again. Multiply that across the country and the economy will start to move again.”
Let’s put it to the Queercents readers. Do you think that student loan forgiveness would stimulate the economy by freeing up money for consumer spending? How much would you personally stand to benefit from a plan like this?
That would be great! I currently pay around $400 a month for my graduate school loans. I can pay and am happy to do so – I got my job because of my graduate degree. However, it would free up that money for other things, like funding a business.
I gotta say, I have several thousand in student loans. In fact, the majority of my debt is student loans.
I would love it!
Every month, I pay out 35% of my take-home to student loans.
My rent, church tithe, and car insurance equals 32% of my take-home pay.
Yes, I’d say forgiving student loans would give me a rather large amount of money with which to stimulate the economy.
Good points everyone.
Why just forgive everyone who has a student loan? I’m not feeling too sorry for the NYC lawyer in the article who is wanting to be able to write off his likely very large loans. He may have large loans, but he also has a very large earning potential.
I’d much rather see us do a TARGETED program instead. I don’t care about writing off $100K in loans for some corporate lawyer. How about just lawyers working for the DA office — and require a minimum commitment of service. Or public school teachers — that would be great. We’ll write off your loan if you want to teach high school for the next ten years. Or maybe even for some higher earning professionals if they are willing to work in underserved markets. We’ll write off your medical school loans if you are willing to work in that impoverished community in Tennessee for the next decade.
From the front end, it sounds like a great idea. But from a back end, it may not be. When you think about the banks carrying these student loans, these may be the best debt they have on their books. After all, under the FFEL program, student loans are guaranteed from default. So if we erase these loans from the bank books, will that end up making their portfolios even worse?
Bucky, there are already some targeted forgiveness programs for teachers and people in public service. There are certainly plenty of ways to beef up those programs but they do exist. Teachers need to work in low-income areas in high-need subjects like math and special ed. Public servants need to pay their loans for 10 years before having them forgiven.
As someone who wracked up student loans based on ignorance and came out of school with a masters that will NEVER lead to high-paying job, I’d love to see my “2nd mortgage” forgiven. But, I certainly wouldn’t ask for it if it would risk deepening the credit crisis.
Femmknitzi – great argument. I hadn’t considered it from that angle.
@Femmeknitzi (great name, btw)
I do know that there are targeted programs already, but understand from (very) limited conversations with people in the know that the qualifications are difficult to meet. I’d love to see them expanded.
I’ll also admit that as I am starting to approach 50 it has been more than a few years since student loans were a concern. So I’m not up on the latest.
Still … when has that ever stopped me? I do know that there are many people like you who incur great debt to get an advanced education in an area that just doesn’t pay well. Why it doesn’t is another conversation, of course. But I’ll still argue that I’m not much concerned with forgiving the corporate lawyer’s debt.
You do raise a great point about the loans already being guaranteed. But that is only SOME of the loans. Many people take out loans that aren’t a part of the gov’t program, so there is room to make a difference.
I would certainly love to reward people for making a difference in areas that are overlooked instead of just helping out the already lucky straight white male lottery winners.
My student loan is $40K and is currently in forbearance for the third time – This time because of the 15% pay cut I’m under at work. Would forgiving my student loan stimulate the economy? Ultimately maybe, but that doesn’t make it right. I choose to take a risk and go to grad school. I borrowed that money. I’d welcome some sort of program where I serve the country to have it forgiven, but have it just erased? What about people who choose not to go to school because they didn’t want to take on the debt? A mass wiping out of student loan debt doesn’t sit well with me. I borrowed it; I should pay it back. Eventually.
My first reaction to this is that “everyone wants a bail out these days. Let’s just forgive every loan out there.”
But when I see some very hard working college graduates struggling – as they take on their new adult responsibilities of health insurance, rent, car payments…. I would vote to give those kids a break.
If I didn’t have to pay my $400 a month in student loans (for the next however many years!?) I would buy a house. I would also go to graduate school.
I think it is important to recognize that the recipients of this benefit are all COLLEGE EDUCATED and would likely use the “extra money” wisely.
I didn’t more house than I can afford therefore I get no help. I am middle class so I can’t afford to add energy effeciency and get a rebate for doing so. I didn’t go to school at an institution that I could not afford so why should someone else get their educational debt forgiven?
Oh and I am an only parent that has raised her child alone for the last 15 years (she was 2 when her sociapath father abandoned us) so c’mon people lets think of some ideas and start with the next group rather than forgiving everyone for bad choices…..
Yes it would stimulate the economy eventually but will it really teach people how to manage money?
I doubt that actually.