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.


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Photo credit: caitinator


Harvey S.
Harvey Sabout a year ago

I think that student loan forgiveness would stimulate economy but to be honest, I don’t think that it’s gonna happen. I don’t believe that there will come a day and all student loans will be forgiven. People take responsibility when they take out student loans or get online payday loans. Thus, we are responsible for our debts and we must repay what we owe. The thing is that it’s almost impossible to pay for the education without taking out a student loan because today’s prices are sky high!

don wreford
don wreford6 years ago

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?

Ruth R.
Ruth R6 years ago

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.

Jonathan Huie
Past Member 6 years ago

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.

April Thompson
April Thompson6 years ago

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!

Citizen G-Karl
Karl Heinemann6 years ago

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.

Donna Pavlik
Donna Pavlik6 years ago

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.

Mary B.
Mary B6 years ago

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.

Lynn C.
Lynn C6 years ago

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!

K s Goh
KS Goh6 years ago

Thanks for the article.