06/12/2013 02:39 pm ET Updated Aug 12, 2013

Forgive All Student Loan Debt

With all the other high-anxiety news out there -- from NSA snooping to Syria to the trial of Trayvon Martin's killer -- there's a quiet crisis that could get lost in the shuffle: If Congress doesn't act, on July 1, students attending school on subsidized Stafford student loans -- loans awarded on the basis of economic need -- will see their interest rates double from 3.4 percent to 6.8 percent.

Brandon Anderson is one of those students, and he's started a petition urging Congress to keep the loan rate from doubling. Brandon, a veteran who is working with the I Am Not a Loan campaign, is worried about graduating with around $25,000 in debt, and with good reason. For someone just starting out on a career in an uncertain economy, debt like that -- and for many students, it's even more -- can be a major obstacle to getting established in life, starting a family, and all the things we used to take for granted for young adults.

Not surprisingly, this burden falls heaviest on young people of color, who remain on the losing end of America's yawning racial wealth gap.

That a pile of debt is a burden on new grads is pretty obvious. Less obvious is that the student debt burden, now in excess of $1 trillion by some estimates, is beginning to be a drag on the economy.

A recent analysis by economist Meta Brown of the Federal Reserve Bank of New York laid out the numbers. For one thing, the Fed reports, "the share of twenty-five-year-olds with student debt has increased from just 25 percent in 2003 to 43 percent in 2012." Worse, student debt seems to be starting to interfere with major purchases such as homes and cars.

Until a few years ago, those with student loan debt were actually more likely to make such purchases than those without, a sign that more education was translating into greater earning power. That began to shift in 2009, and now those with student debt are, for the first time, less likely to have a home mortgage. The same pattern has occurred with auto loans.

In part this is because these grads simply have less money to spend. In part it's the impact of tighter lending standards combined with the fact that on average, student loan debtors now have credit scores 15 points lower than those without student debt.

This could impact our whole economy. As Brown explained, this depressing impact on major purchases "may have broad implications for the ongoing recovery of the housing and vehicle markets, and of U.S. consumer spending more generally. While highly skilled young workers have traditionally provided a vital influx of new, affluent consumers to U.S. housing and auto markets, unprecedented student debt may dampen their influence in today's marketplace."

That's the big-picture view of why this crisis impacts us all. But to me, the most important thing is that bright young people like Brandon Anderson risk getting started in their adult lives as economic cripples, chained down by debt that will take years and years to pay off. It's time to take drastic action to keep that from happening.

A short-term fix to the pending doubling of loan rates is a critical first step, but it's not nearly enough. Let's forgive all student loan debt.

That's right, forgive it all. Banks got bailed out in the infamous TARP, but most ordinary Americans got no bailout at all. Forgiving student debt would give the economy an instant shot in the arm by putting billions of dollars in the hands of the people most likely spend it: young adults just starting families and households. The result would be a massive infusion of business into virtually every corner of the economy -- housing, retail, restaurants, you name it.

This may seem like a radical idea, but I'm not the first person to suggest it. Before we start thinking of an economy with seven and a half percent unemployment and millions of long-term unemployed as normal, let's jolt ourselves out of this dreadful situation.

And let's give students like Brandon Anderson a chance to live life without chains.