While playing around on Facebook the other day, I came across Robert Applebaum’s “group” called Cancel Student Loan Debt to Stimulate the Economy. On the group home page, Applebaum goes into detail on how canceling student loan debt would stimulate the economy in a variety of ways. Here is only a sampling of what this lawyer-turned-advocate suggests:
Forgiving student loan debt would have an IMMEDIATE stimulating effect on the economy. Responsible people who did nothing other than pursue a higher education would have hundreds, if not thousands of extra dollars per month to spend, fueling the economy NOW. Those extra dollars being pumped into the economy would have a multiplying effect, unlike many of the provisions of the new stimulus package. As a result, tax revenues would go up, the credit markets will unfreeze and jobs will be created.
Let me be clear. This is NOT about a free ride. This is about a new approach to economic stimulus, nothing more. To those who would argue that this proposal would cause the banking system to collapse or make student loans unavailable to future borrowers, please allow me to respond.
You can go read Applebaum’s group page to see how he responds to the obvious criticism. What strikes me is that that aggregate student loan debt in America is roughly $600 billion. The government passed $700 billion in stimulus spending last October (which has been a failure) and another nearly $800 billion last month. Plus there is a spending bill currently before the Congress that would increase the number of dollars being spent on ridiculous earmark projects. By some estimates, in total we could be spending $2.3 trillion on stimulating the economy…with little of that actual money going directly to benefit the middle class.
Applebaum’s suggestion is an interesting one and given the personal nature of the suggestion, each person who supports or rejects it will have specific reasons why. Many of those who reject it will project their life experiences on the stories of those who support it (a common, aggravating problem in the student loan world). Likewise, many of those who support the proposal will have a level of debt that could likely be paid off after a few years of hard work and saving. But there were always be exceptions that drive the argument forward in some people’s minds. You can find some of those exceptions by reading the a petition currently on The Petition Site calling for Applebaum’s plan to be put into action.
I signed the petition and added a little bit of my story, which I think suggests why enacting a student loan forgiveness policy would be beneficial for me. Here is my little blurb, reprinted for your reading:
I graduated with $118,000 in student loan debt. Without taking out these loans, I would have never been able to receive the high quality education that I did. All I did was pursue the American Dream…and now I pay about $1,000 each month because of those student loans. I have a great job and I still can’t buy a home – heck, I can’t even buy a new car! I’m still making my payments and I’m still paying down my debt (down to $104,000 now). But if I could use that extra money each month to buy a home or a new car, I would do it in a heartbeat. However, on the path that I’m on now – neither purchase will be possible for at least the next ten years. Great…
I’m not sure if either purchase won’t be available for the next ten years, but repaying at the rate that I’m currently going (which is above and beyond the minimum monthly payments) will certainly put me on that timetable. Something needs to be done and though I have a few different ideas about how I plan on addressing this debt (can’t keep a good man down!), it would be so much more effective if the government stopped collecting it’s 4.75% interest rate off of the $50,000+ that I owe it in principle.
I don’t want a handout and I know that if things don’t change, then I’ll be able to payoff my student loans in due time. But during a time when Wall Street executives are getting million dollar bonuses for failing and when banks, insurance companies, and the automakers are getting money hand over fist from the government, you would hope that – at some point – someone in Washington steps back and says, “Whoa! What are we really doing here?!” If somebody would do that and champion this cause over the current bailout causes, I think it would truly stimulate the economy.