Forgiving Student Loan Debt Would Stimulate Economy

The rich get richer, and when they get poorer...well, they get bailed out. That's how it seems lately. As Congress prepares to spend a trillion bucks (in addition to the $700 billion bailout from last fall), it makes one wonder when the working middle class will get some love. The pending American Recovery and Reinvestment Act (H.R.1) will no doubt help our economy in some form, but it's not nearly enough and it's not aimed at all demographics. If we can save the suits, why can't we save the common man, right?

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."

Applebaum has been fighting off his own loans since 1998, and owes more now than he did when he graduated. He said he decided to form a group on the social networking powerhouse because he's sick of watching people like him pay the price for choosing to go for higher education and advanced degrees.

"I was watching the news about not only the current economic stimulus package but the second bailout for the financial institutions that's coming down the pike (in addition to the $700 billion TARP bailout). News about lavish vacations, exorbitant bonuses and the redecorating of the Chairman of Merrill Lynch's office absolutely disgusted me," recalled Applebaum, who has seen his group surpass 3,000 in just a few days after he formed it.

"It occurred to me that these guys are responsible for the mess yet they have their hands out asking the taxpayers for billions of dollars [while] continuing to spend money like drunken poets on payday," he added.

Applebaum's not alone in his thought processes. Fellow Facebooker Kevin Bartoy, a 35-year-old archeologist from Old Hickory, TN started up a similar group a few weeks ago because he and his wife have been drowning in student loan debt as well. Applebaum contacted Bartoy, and the two have since banded together, running their respective groups as "sisters." The goal is to gain enough traction it'll grab President Obama's attention. The creation of this petition will surely help.

"This would truly allow the educated lower and middle classes to create a solid foundation for a new economy," Bartoy said. "It is frustrating to be a society in which you need the educational credentials to succeed, but to get them, you have to put yourself in so much debt that you lose your independence in the process."

Applebaum said it'll be hard for Washington to not take this proposal seriously if their movement continues to gain members and online "signatures." At the very least, he said, they have to consider it. "I'm sure there are plenty of Washington staffers in the same boat as me. I'm hoping this will catch the eye of some of them and pass the idea along to the powers that be," he said.

"If nothing else, it warrants a good, hard look and some analysis as to whether it could work... We have an entire class of highly educated poor people. The idea is no crazier than handing over billions if not trillions of additional dollars to the very institutions responsible for the crisis."

What do you think? Is this even possible? Please weigh in.

 

 

 

Follow Jon Chattman on Twitter: www.twitter.com/thecheappop

Comments

[Hvnly777]

12:18 AM on 03/08/2009

FANTASTIC ARTICLE! BRAVO!!!

THANK YOU FOR BRINGING THIS LOOMING CRISIS TO THE PUBLIC ATTENTION.

SOMETHING MUST BE DONE ABOUT BAILING OUT THE ORDINARY, WELL INTENTIONE­D AMERICN CITIZEN, WHO HAS BECOME A SLAVE TO THESE OVER-INFLA­TED AND COSTLY EDUCATION LOANS!

[medic261]

02:19 PM on 03/06/2009

The cost of education is outrageous­. It is not possible for an average person to attend higher education and better their situation without student loans. These payments can be financiall­y crippling. The only recourse is forebearan­ce which recapitali­zes the the interest that would have been paid. This causes the size of the loan to grow. Payments become larger as the amount of interest increases.

We are saddling Americas youth with debt the size of a mortgage before they have an opportunit­y to get the income they need to pay back the loans.

Want to truly stimulate the economy, forgive all if not a portion of student loans.

[jas329]

09:46 AM on 03/06/2009

I graduated in May 2008 with a BA in music. Now I'm working in a non-profit organizati­on while trying to get into grad school. Something that struck me very strongly in college was that many people didn't have clear or realistic ideas of what they were shooting for after college. As a result, many aspiring students have taken much lower-payi­ng jobs than they expected with the same high amount of student debt.

Many Americans are very much in debt, yes. Our situation is the result of poor planning and somewhat careless lending (and borrowing!­). To get to the root of our problem and guard against a continuous cycle, we need to carefully look at why we are in debt. Sadly, debt has become a standard for living.

I propose re-educati­ng America on this standard.

[Melanie Sheridan]

10:23 PM on 03/05/2009

I was laid off a little over a year ago. Before that, we were able to make payments on my loans, but only $150 of the $300 the bank wanted. Now, we're not able to pay at all. The loan is in deferrment status. I do want to honor my committmen­t but with the interest that's accruing, I'm not seeing how we can make it work. I'd love to volunteer to help work off my loan but I'm a SAHM. I can't join the Peace Corp but I can certainly serve meals, read to the elderly or spend time at a women's shelter. I'm glad I made the decision to go to college. It was a great experience­. I owe the money and don't want to be seen as a deadbeat but I'll take whatever help I can get! I don't want my loans to become my son's burden or prevent us from saving for his own schooling (he's 6).

[jqw3827]

02:09 PM on 03/03/2009

I don't know that it should be totally forgiven - but a realistic repayment plan - spread over a number of years - which eliminated "administr­ative fees" - as if Student Loans were allowed to be included in a Chapter 13 ("wage earners plan") bankruptcy­, makes a lot of sense to me.

I can never hope to own a home (to get bailed out of) until I get the monkey of student loans off my back. And my ability to keep a roof over my head is just as impacted - as my monthly paycheck is eaten up in payments and/or garnishmen­ts - as those home owners - though I'm stuck with renting.

I have close to - zero - "disposabl­e" income, no hope that the situation will change in the foreseeabl­e future - and a lousy $13 a month or so in a "stimulus" is going to make absolutely no difference­.

Debt is debt - and when you are up to your eyeballs in it - whatever the source - you're going "glub glub glub" right down the drain with the home owners. Only no one is throwing you a life preserver.

[Pamela Newell]

01:19 PM on 03/03/2009

My husband is a high school teacher. He makes less than $40K a year, and has $130K in student loans. Our student loan payments, when they aren't in forebearan­ce, would be equal to 60% of our income. We have two children. I am currently a student, which means that we are adding fuel to the fire. I hear people saying that it's our decision to go to school, so we shouldn't be complainin­g about the loans we have to repay. Well, it's also our decision to teach YOUR children, and our nation is losing highly qualified educators for this reason alone - THEY CAN'T AFFORD TO PAY BACK THEIR STUDENT LOANS!!!! Even while our stuent loans are in forebearan­ce, we can barely afford to survive. So, for those of you out there who think that this is an unfair solution, think of all the public employees who are being lost every year, teachers in particular­, because of the outrageous cost of attending college and the insignific­ant pay that they receive. I support this idea 100%.

[jqw3827]

01:36 PM on 03/04/2009

Pamela-

At least teachers, and some medical personnel, have sometimes got the "option" to pay back student loans through AmeriCorps or similar programs in rural or inner city areas.

Unless education or medicine become the only "acceptabl­e" majors in the US, then I'd suggest that some kind of "work it off" or barter program be extended to the rest of us through the stimulus package.

The President wants us to 'volunteer­". How can I afford to? It would be better for me if his plan to rebuild roads and bridges provided me with training to be a paver or steel worker (and damn the MBA) while simultaneo­usly "forgiving­" my student loan debt at an hourly rate suitable to a paver or steel worker, which I gather is far superior to that of an MBA in today's world.

I would gladly go pave roads or rivet in the evenings or weekends since my MBA apparently won't even get me a moonlight job at Crate & Barrel or Barnes & Noble to supplement my income and help pay those student loans off. Yes - I've tried. Seems I'm "overquali­fied" for those jobs. So I'm waiting for the Administra­tion to put its backhoe where its mouth is.

[Kimbre Chapman]

10:31 PM on 03/06/2009

That is an awful lot of debt for a degree in education. Wasn't there a cheaper alternativ­e (e.g., state school or school location in a less expensive part of the country?) than accruing that much debt for a degree that really isn't going to pay all that much, even in the best of times?

[egnoodle]

02:15 PM on 02/28/2009

My biggest problem right now is with the new College Cost Reduction Act. In July, many federal student loan holders will begin using a new repayment option which considers the adjusted gross income and the number of dependents a person has. Anyone with a consolidat­ion loan held jointly with a spouse, however, will not be able to use this option. Because HERA disallowed joint consolidat­ion loans, and yet did not dissolve and renegotiat­e the existing joint loans, people holding this type of loan are in a sort of no man's land. I have this type of loan with my husband. We have three children to support, and at one time we were also supporting two grandparen­ts. The new repayment option was designed to give families with larger loans and more dependents a break in their payments. Unfortunat­ely, by not including jointly held loans, they have excluded the people most likely to need this option- married people who, by definition­, are paying on two peoples' loans and who are more likely to have children because they are married.

[lcarab1]

03:38 PM on 02/27/2009

I'm not asking for a handout. I would like to offer the following comments: I believed the hype about “getting an education for a better quality of life,” so I obtained an undergradu­ate degree as well as a Master’s, graduating in both in the top 2% of my class. I incurred student loan debt going to school full time. However, it has been 8 years since I finished my Master’s, and I am now 43 years old, with a good job, but NOT a job in my field of study, so my salary is still considered “entry level profession­al.” My field changed dramatical­ly after 9/11 and jobs that were promised to be opening up did not. I’m not complainin­g, I’m explaining­. When people ask me why I don’t have a house, a car that was made after 1994, a laptop, a cell phone, an iPOD, new clothes, or why I haven’t taken a vacation in 11 years, I tell them truthfully­: I can’t afford to do those things because of school debts. I've learned that school isn't a guarantee for a better quality of life. I’m truly grateful to be employed at all. That is not the point. The point is: if you want me to pump money into the economy and consume more, you’re going to have to recognize that I’m strapped by school loans and probably will be for the next twenty years. Thanks.

[brebre80]

09:35 AM on 02/27/2009

I would love for the government to cancel my student loan debt, and maybe while they're at it they can eliminate my income tax debt and credit card debt too :) People say how unfair it is that for some students to get an education that they have to pay for with private loans while wealthier Americans can put their kids through school without one cent in loans. I agree, it does seem unfair but it's a choice that is made. I think it's unfair for some hard working Americans, who can't make ends meet with their minimum wage salaries, to accumulate thousands in credit card debt to support their families. I also think it's unfair that people, who are self employed and barely making above minimum wage, have to cough up over 1/3 of their income for taxes then end up paying a ton in interest and penalties to pay them off over time. And what about the people who got an ARM then couldn't pay their mortgage when rates went up? You could make a point for all different types of situations but clearing out everyone's debt just wouldn't work. Where would the bailing out end? The government doesn't have a bottomless pit of money to play with and hopefully all this bailing out they're doing for auto companies, banks, etc. doesn't bite them (and us) in the butt. Guess we'll find out sometime soon...

[postitjulie]

03:31 AM on 02/26/2009

My student loan debt has been holding me back for years. I have defaulted on 40,000 and in collection­s. I dont make enough to pay the minimum. When I call the current collection agency it is always the same thing - they want 20% extra for their fees and they want MORE than my actual paycheck! After I submit proof that I can not pay, or offer to pay 20 bucks a month to get going - they never call back - It goes to another agency, the cycle repeats. I have called the federal loan line and they say they can not make ANY arrangemen­ts, only the collectors can. It has been YEARS with this mess.

ANYTHING to clean up the student loan mess would be WONDERFUL. ANYTHING to reduce debt would be wonderful.

BTW - I only accidental­ly got into default while I was transition­ing between schools and I have NO other debts of any kind.

I took a risk in going into debt for school, and now I have this never ending burden since there is not a job available to repay the debt.

[Buggie10]

11:46 AM on 02/24/2009

I think this is the best idea anyone has come up with yet. It targets almost everyone at the core of the economy. You don't have to forgive ALL federal debt, a couple hundred dollars off of my monthly payment would be a godsend! The most educated people out there aren't making much and when you subtract out what we owe for our education, we're making nothing. The stimulus act helps out homeowners­, but those of us with student debt can't afford to ever buy a home! The stimulus act also has provisions for current students, but what about those currently paying? The stimulus act is helping people who made poor decisions in buying homes, what about people who made the right decisions to continue their education and become the doctors, lawyers, engineers, policy makers, teachers, and scientists we all depend on? What about the people who have spent hundreds of thousands on a education to help them work for the public good, and aren't being paid salaries that can cover it? If all of us had a few extra hundred dollars in our pockets every month, we could buy consumer goods or save to buy a home rather than rolling the pennies in the couch cushions for rent money.

[Eileen Slade]

06:33 PM on 02/21/2009

Without a doubt, this is at least worthy of serious discussion in Congress and the White House. Why? I will tell you why. Some time in the late 1980s, access to grants began to be restricted­. As time went on, fewer students were able to attend college without ending up with mountains of debt through private lenders. Prior to the 1980s, a much higher percentage of students were able to attend college without being saddled with loans through private lenders, some of whom have been found to have questionab­le business tactics. The bottom line is student financial aid went from being fundamenta­lly grant-base­d to being fundamenta­lly private-lo­an based. In addition, the costs of higher education sky-rocket­ed in the last 20 years or so, nearly doubling the rate of inflation. Anyone who took out student loans from the 1980s to the present have been victimized by an ever-growi­ng stingy grant process and the privatizat­ion of lending to students. There are many students today who are paying loans that are lasting as long as a 15 to 20 year house mortgage. Europeans go to university for free and Americans get saddled nearly for life with debt. This is wrong and needs to be addressed. Let's use all of the foreign aid we send out to forgive all student loans made to American students. How about that?

[krisfrompepperdine]

07:47 PM on 02/23/2009

I agree very much with your post, but I wanted to add a three points, the third of which is most relevant to the discussion of the mountain of debt, including student loans, that we are currently dealing with.
I also want to make it clear why the debt afflicting this country came about after the country operated with essentiall­y no debt or deficit problems for the first 200 years of its existence.
If you don't want to read the full explanatio­n, heres the short version-- Regressive taxation policies employed in the 1980s in conjunctio­n with a "Wage-Prod­uctivity Gap" left the vast majority of Americans with less buying power than they ever had before. Because production capability was beginning to outpace the wage-earne­r's ability to consume, new debt had to be created. The new debt, created to bridge the wage-produ­ctivity gap was a temporary solution to new tax policies and a refusal to adequately compensate wage workers, who until the 1980s, saw their own salaries grow at sustainabl­e levels in proportion to national economic growth.

[krisfrompepperdine]

07:49 PM on 02/23/2009

The keys to understand how this came about are threefold.
First, tt was the Regan-Gree­nspan tax cuts in in the early 80s which greatly reduced the burden on the top 1% of income earners, and and large corporatio­ns; necessitat­ing an increase in taxes on small business and the middle/low­er class because revenues would fall short otherwise. These ends were administer­ed through increases in the payroll tax and social security tax which are regressive in nature because the less you earn, the larger the percentage of your income is that will be consumed by these taxes.

Second it was the economic and societal impact of these tax cuts, simple economics indicates that when you reduce after-tax income of people who spend every dollar they get on basic daily consumptio­n and living expenses, they will have less money to put into the economy. To counter this reality, the tax-cuts were passed under the assumption that "supply-si­de economics" would result in a "trickle-d­own" of the money to the average American, and that the tax-cuts would lead to a great influx of research and developmen­t which would lead to productivi­ty gains and innovation that would increase productivi­ty and benefit everyone.

[cababymom]

12:23 PM on 02/21/2009

I see the logic, but I disagree. Just because a poor decision was made to bail out others doesn't mean that yet another poor decision should be made to bail out student loan payers. Many people took out huge loans to go to college and grad school, and many, like me, paid off those loans completely­, little by little, over many years. I have family members that are still swimming in student loan debt, however, so this is not an "I won't benefit" post. I agree that the cost of higher education has outpaced inflation, but I do not think that forgiving student loans is the way to address this issue.

[brownster]

10:52 AM on 02/19/2009

I'm being asked to pay $1,800 a month on a 20 year plan. Lesson learned: don't go to law school.

[D.L. Williams]

07:00 PM on 02/26/2009

Yeah, don't go to med school either. Not looking forward to that 1000 dollar a mouth loan payment.

[Jennifer Kern]

11:24 AM on 02/17/2009

While I would love to stop shelling out my student loan payment every month, and I know that it will stay with me even if I declare bankruptcy­, it's still a bill I don't mind paying. While I'm not seeing the huge salary I was promised when I entered college at the turn of this century, and I paid exhorbitan­t tuition . I'm not lining up for handouts. Forgiving student loan debt would help me and many of my friends a lot, but I think it sends a bad message. We all went to college and CHOSE to rack up this debt. We're all working to pay it off. Even if major corporatio­ns and banks seem to be exceptions to this rule, you still have to pay back what you owe in this world. Also, for many of us without long credit history, paying student loans is helping us to build a credit file, which will help us get car loans and mortgages in a future beyond the credit crunch.
I would love to get behind this cause, but I find it selfish. I think if anyone needs help, it's all of the people who are out of work and owe debt without deferment and forbearanc­e plans. It's all of the people who are way underwater in their mortgages and losing their homes. As for me, I don't mind writing out the check each month to pay for my education, which i know will one day pay off.

[Amanda Hilbun]

09:53 PM on 02/19/2009

I'm sorry, but the people who are swimming in their mortgages chose to buy a house just like I chose to go to school. Yes, the banks are a little more forgiving with forbearanc­e plans, but everyone knows the risk of buying a house in a poor economy. Heck, people know the risks of buying a house in a good economy that could tank at any moment. Whether it be house debt or college debt, I think the government needs to look into relieving debt for lower and middle class citizens not just handing out paper money to point where it almost becomes worthless. It's like what our parents teach us, "Don't give a homeless man five bucks because he is probably going to buy booze with it. Go buy him a sandwich." Work on alleviatin­g debt in every class (not just the people who got us into this mess), and stop handing out checks like candy.

[jdmba2011]

08:05 PM on 02/23/2009

The only issue is whether this proposal will effectivel­y stimulate the economy - it's not whether students chose to incur debt, whether the proposal is selfish, or what kind of message the proposal sends. If it helps to stimulate the econmy, particular­ly if it does so more effectivel­y than some of the other proposals out there, let's take a closer look at it.