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Stimulate the Economy by Forgiving Student Loans?

Stimulate the Economy by Forgiving Student Loans?

 

Would forgiving student loans help economic recovery?  This morning, sipping my coffee and doing my usual wandering around on various social media sites, I came across a petition asking the above question more than a couple of  times. The petition addresses H. Res 365, which seeks “student loan forgiveness as a means of economic stimulus.”

The basic argument runs along these lines: if the loans are forgiven, then the money that would normally go to pay off those loans will be dropped back into the economy, stimulating the need for more jobs. Even if people decide to take the money they are saving and pay off another loan, the reasoning remains, sooner or later, the money will get back into the economy. It is an interesting idea and one that takes the problem to the people and not to the corporations or the extremely wealthy.

Many argue that student loans create a divisiveness in our economy.  The rising costs of education affect middle and lower classes more since they are more likely to take out loans because of the lack of jobs for high school graduates. The middle class has all but been eliminated in our country due to debt.  Student loans are often categorized as good debt, meaning debt that has a low interest rate and long-term payoff.

The saying goes, “the best investment you can make is in yourself.” Unfortunately, it’s getting harder and harder to see the immediate pay-off.  Almost half the graduating class of 2010 was unable to find work after a year, and those who did saw a drop in salary. And the grace period to begin repaying a loan is six months.

Many college graduates struggle under the weight of student loan payments, and the default rate on federal loans is over 7% now – down from 2007 at 9%, the all-time high.  This is still higher than most years, however, and pundits say it has gone as far down as it will go.  For people like teachers, it is ironic that they have to borrow almost more than they make in order to do something noble and give back.  Add this to the deep cuts that are happening in education, and many of them can’t get jobs to pay back the loans.

Democratic Michigan Rep. Hansen Clarke introduced this legislation to end all student loan debt. “We need to cut, cap, and forgive student loan debt,” said Clarke. “That is the true debt that is burdening American families. We cut student loan debt we’ll have a freer more prosperous country.”

It will be interesting to see what happens. If it passes, I will be perfectly happy to help stimulate the economy with my loan payment.

 

Related Stories:

Student Debt Grows and Grows: Default Rate on Student Loans Up

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A Woman’s Ph.D. is Worth a Man’s B.A.

 

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152 comments

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5:03PM PDT on Oct 28, 2011

The environment has been overworked in is present format, churning out more specialists with university degrees, do we need this? created jobs for the bureaucracy that make more rules?, frequently frustrate workers and artificially inflate costs to the public, the idea that we keep creating new work loads is a fallacy, as for example creating more roads, 1/ its a loss of potential agricultural land, 2/ its attracting more heat and heating up the planet, 3/ encouraging greater use of fuel, 4/ the desire to travel to escape the hell created by US, the creation of roads are more jobs, at the same time having a negative effect, we are now on a plateau of having overworked the planet, the desire for economic growth is the destruction of the planet, it is now time to evaluate Human endeavor, and to summarize whether we are all their, or not all their?

12:19AM PDT on Oct 28, 2011

Have already signed the petition: Forgive student loans. The students -- for the most part need this because of the economic situation. Student grants would be the best until the economy gets about 70 million new jobs.

1:52PM PDT on Oct 20, 2011

The point of a stimulus is to even out the ups and downs of the economy.

For our government to work in the long run, we need stimulus in bad times, but we also have to collect more than we spend in good times, in order to build up a reserve for the next downturn, and also to even out the economy. We should have been building up a surplus in the good years of the late 90's.

I would advocate a holiday on repaying student loans that lasts until the unemployment rate drops below 5%. That would be a true stimulus, rather than a long term give-away we would live to regret.

4:07PM PDT on Oct 6, 2011

I have been unable to pay back verry little of my student loans due to low wages and cut in hours. I would love for my loans to be forgiven because I don't think I will ever be able to pay them all back and the interest as well before my time comes to meet God!

10:03AM PDT on Oct 3, 2011

How about a program to forgive a certain dollar amount or percentageof household debt for ~ALL~ households, not just those where some residents happen to hold educational debts. Home mortgage debt also is an "albatross around the neck" for most American households, and reducing the monthly mortgage payments also would free up a certain amount of cash to more discretionary spending, and eventually stimulate the wheels of commerce. Frankly, with so many "good" American technical jobs being outsourced or offered to temporary overseas visitors, I definitely can feel why so many young adults are questioning the benefits of going in to debt for a post-secondary education.

1:58PM PDT on Oct 2, 2011

Yes, please forgive the student loan debt bc Im almost 40, graduated from NYU in 1998 with my Masters in Social Work & still owe $68,000 and the interest rate is 8%. I wanted a career in helping & empowering others, however, my salary doesnt even compare to my student loan debt.

7:01PM PDT on Oct 1, 2011

Yes do absolutely forgive the student loans and everybody else just stop speculating on what you think it will 'do' to those young people. Do you think they really comprehended at an emotional and physical level what taking on the amount of debt they needed to for school would mean for their lives? And remember, they were encouraged and courted to take this on, as well as subjected to scare tactics about their job/income prospects.

7:46AM PDT on Sep 30, 2011

Yes forgive them...but then we need to stop the reasons for these high costs for an education. Fat chance, I guess, because the fat cats who created the loan systems are raking it in and aren't about to give that up!

6:13AM PDT on Sep 30, 2011

Thanks for the article.

10:41PM PDT on Sep 28, 2011

I would not be so quick to blame our students David A. Yes, in some lower income areas or schools "not peforming", its mostly due to lack of involvement of parents with their kids. But in many areas (my son's school for one) I see my 3rd grader doing the level of work my husband and I did in 5th grade, and we are a Ph.D. and MBA respectively. He does fabulous, but I am very involved in his day to day homwork, volunteer in school etc. Parents HAVE TO DO THIS in order for kids to do well, can't get lazy about it. The biggest problem is the NCLB Act, which requires double digit growth each year in API and AYP, which are educational development growth expectations that no other country requires, including China & Singapore which "scores higher than U.S>", It is kind of deceiving overall, as the highest pefroming schools (like my sons) would outpace China in academic achievements, but there is such a disparity in U.S. Anhow, Chinese investors are losing faith big time in U.S. bonds MAINLY due to our deep pocket spending on wars, they see us as collapsing like the Soveit Union once did. Our country is destroying itself by playing perpetual Global Cop. today, I heard a private school in my city is going bankrupt. I private K-8 which cost parents $20,000 per year to send kids to Kindergarten-8th. Pretty gosh darn sad when we are allowing something like this to happen, wonder if those parents will even get their $20K back this year. Time to prioritize our education, not o

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