Should All Student Loans Be Forgiven?

Published

September 16, 2011

Contributing writer for Credit.com, Chris graduated with honors from the Columbia University Graduate School of Journalism, and has reported for a number of publications including The New York Times, TIME magazine and Popular Mechanics.

Liberal blogger Robert Applebaum has an interesting idea: Let’s forgive everybody’s student loan debt. All of it. According to a petition that Applebaum recently sent via the MoveOn activist network, erasing student loan debt would do a lot more to stimulate the economy than further tax cuts to corporations and billionaires.

“How do we ever expect the housing market to improve when the very people we rely upon to buy houses are already strapped with so much debt?” Applebaum said in a recent interview. “How are they going to afford a house?”

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Is this proposal a mite bit utopian? Yes. Dead on arrival? Most definitely. But as the total student loan debt in America creeps towards $1 trillion, one wonders if such a radical idea could someday gain a little traction.

And as Applebaum points out on the website he created to promote the idea, we’ve already spent $787 billion on stimulus packages and another $700 billion to bail out troubled investments, which may have prevented utter collapse of our financial system but did little to provoke a sustained recovery.

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“The Wall Street financial institutions, auto manufacturers, insurance companies and countless other irresponsible actors have now received TRILLIONS of taxpayer dollars…to bail them out of their self-created mess,” Applebaum writes on the site. “This, too, does nothing to stimulate the economy. It merely rewards bad behavior and does nothing to encourage institutional change.”

On the other hand, if the government pays off everyone’s student debt, “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,” Applebaum says.

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While a broad federal program to forgive all student loan debt appears unlikely to pass any time soon, many universities and some states do offer forgiveness programs. In 2008 Harvard University’s law school began forgiving some student loans for people who work in public service law and earn below a certain income threshold for a certain number of years after graduation. Various states offer to forgive loans for graduates who go into public service careers including nursing and social work.