Should the Government Forgive Student Loan Debt? College Grads Say Yes; Economists Say No
Posted by erik devaney
Imagine waking up tomorrow morning, logging into your student loan website and seeing “$0.00” under the “principal balance” column. I would likely pinch myself in disbelief and assume that it was all just a dream: a wildly fantastic, impossible dream.
However, there is currently a movement in the works that aims to make this dream a reality. Spearheading the movement is U.S. Congressman, Hansen Clarke (D-MI), who is garnering support for his “H. Res 365” bill. This bill would provide student loan debt forgiveness as a means of economic stimulus.
“If we cut student loan debt that’s going to create more jobs and that will provide more financial security,” Clarke recently stated. According to Clarke, student loan debt is “the true debt that is burdening American families. If we cut student loan debt, we’ll have a freer, more prosperous country.”
Over 300,000 people have showed their support for H. Res 365 by signing an online petition at SignOn.org. The creator of the petition, Robert Applebaum, also created a Facebook page for the movement: President Obama: Forgive all Student Loan Debt to Stimulate the Economy. College graduates have been using this page as a platform for voicing their opinions.
“I agree the bailout should start with the common folk here instead of the big guys! I have been in deferment for 4 years, I have to decide between a house payment or a student loan. What would you choose?” commented Kim Cleary-Bieker, who graduated from UIC in 1994 and who got her Masters at Saint Xavier University in 2006. “I’m a teacher…my small income is pretty much wiped out after my student loan payments,” said Rosalie George Rodriguez, who graduated from UTSA in 2005.
But despite the growing support for forgiving student loan debt, Justin Wolfers, who writes for the Freakonomics website, argues that this plan does not make economic sense. Actually, he’s a bit more blunt than that, calling it the “worst idea ever” and noting, “I bet that the proponents can’t find a single economist to support this idiotic idea.”
Wolfers gives several reasons for why forgiving student loan debt is idiotic and would do little to stimulate the economy. For example, he argues that college grads typically have high incomes: so why should the government eliminate their debts and not the debts of high school dropouts, who are more in need of the money? He also points out that if you want to simulate the economy, “you get more bang-for-your-buck if you give extra dollars to folks who are most likely to spend each dollar.” If college grads got those extra dollars, “Much of it would go into the bank.”
From an emotional standpoint, I will still keep my fingers-crossed and hope that one day I will wake up to find that my student loans have been wiped away. But from an economic standpoint, I understand that Wolfers is right in his assessment. What do you think? Let New England Post know, leave a comment!
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Posted by erik devaney
on Sep 21 2011. Filed under Politics, Top Stories.
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I agree with Rep Clarke. What Mr. Wolfers doesn’t get is that if you give say $1000 to a poor person they will spend all that money right away and then have none left over to support the economy long term. But on the other side if you give a college graduate forgiveness of their loans that is $200 to $1000 or more they would have EACH MONTH not just once for 20 to 30 plus years to put into the economy. Yes the college graduate may save some of that money but they will spend as well. In addition with such large student loans looming over their head they wouldn’t even dream of a big ticket item such as a car or a house, but if this debt was forgiven or erased there is a good chance they would have the capital to purchase a car or a house which would help the housing market out of its current slump. Overall this is a good solution to get our country out of the situation it is currently in.
I am also a teacher and I have the same problem as the teacher quoted in the article — after bills, including my student loan payments, I am wiped out! College degree or no, If I didn’t have to pay hundreds every month to Sallie Mae, I wouldn’t save it — I would buy a new car!
There is both an endogenous and exogenous effect playing within Rob’s plan. Neither of which will have a straight 1:1 multiplier (economics is 5% simple accounting, 20% higher math, 75% human behavior). Within the simple supply and demand theory, freeing up a vast amount of potential income within the most productive and participatory working class (college graduates) will greatly improve demand for everyday items we all need and use. But more importantly it will create higher demand in sectors that have historically been a savior for a limping economy (housing market). The exogenous effect will consist of an important shift in preferences. Not only will middle salary earners buy more, they will buy more quality and luxury goods. No, not talking about gold plated faucets, I’m talking about things you wouldn’t intelligently buy if you knew you only had a couple hundred dollars left over after paying the loan sharks (if you are lucky). Think of all the money that is spent when one buys a home. Now think of the money to fix/upgrade/etc this new home. Need a plumber? How about an electrician? Considering contracting an architect for that addition? What about a Landscaper for the yards? Looks like you could use a new porch or overhang. Are those gutters rusted? I think Mr. Wolfers is forgetting that college graduates with heavy loan burdens, in all likelihood, have a greater or equal marginal propensity to consume than those at or below the poverty line. Its funny to me that these supposedly prestigious economists are talking very little economics…
HI… Best Idea Ever!! We need to help the people who tried to only help themselves and contribute to society and a better future in a meaningful way by educating themselves. The educated people of this country would spend money on meaningful things. Trust me, they will not put it in the bank.. thats what comes after you have purchased a new home, car, tv, lawnmower, airline tickets etc. This is why they went to school, so they could have those basic things, right now they can’ t even afford rent of food. The high school dropouts are looking cool right now cause they can. Its sad, but the folks who didn’t go to college are way better off right now - they can at least afford mortgates and food. In fact all of my college educated friends who took out loans are greatly suffering - if they are luck enough to have a job, it is as if they are makeing $7.50/hr after their loan payments if that. Do we really want our educated people of this country bogged down to the point they can no longer contribute.
The “Freaks” should re-evaluate their statement - the indebted educated class won’t be putting money in the bank for years to come as they recover and finaly move out of their parents basements, start familys and can afford to eat a steak once a week.
Excuse me:
But how does Mr. Wolfers qualify as spokesman for all economists? You’re title is, consistent with the sorry state of American journalism, misleading in it’s inaccuracy. Mr. Wolfers is one economist. You don’t cite anyone other that Mr. Wolfers, and therefore have mislead the reader by the implicit suggestion that his knee jerk dismissal, which was utterly devoid of any macro-economic analysis (e.g. data re. the amount of money at issue, likely savings rates, spending patterns, etc.) was one among many such analyses. Clearly you didn’t mean that Mr. Wolfers spoke for all economists, or provide any evidence that he had the authority to do so.
My response to Mr. Wolfer’s ad hoc conclusions, posted to the more accurate (it pains me to say) account of same in the WSJ (hardly a bastion of populism) is as follows:
“Now, instead of arrogantly telling us (one of two generations of wage slaves) what we will do, why don’t listen to us instead?
If I were to put the $1k a month I spend on student loan payments back into my budget I’d set the following priorities 1) further debt reduction on other consumer accounts; 2) more aggressive retirement savings (in order to avoid being a public charge a quarter century from now); 3) consumer spending on household goods (i.e. replacing furniture, clothing, etc.) which I cannot presently afford; 4) and yes additional savings for unforeseen calamities (all the more important given the undermining of support for social safety nets by the fringe right). At a minimum I would be putting $4.8 to 6K a year back into the economy, rather than simply servicing debt.
In your response spare me the self-serving deontological moralisms. That’s either the language of the simple minded, or a tool of the cynical propagandist.”
Mr. Wolfer’s article has been roundly criticized for it’s lack of information. His credentials as an economist SHOULD indicate that he had some actual knowledge about the FACTS behind the student loan debacle . Unfortunately, such was not the case - and it certainly shows.
I disagree.
My education: 4- year BS degree, 4-doctorate degree
Debt owed: $160k
Facts: Working part time in my field, married (husband works full time in same career (pharmacist), two kids (with which we’re saving for college, although I seriously question this), house payment, two car payments (both to end next year), and we’re in the midst of saving to build a home (which will only be ~2500sq ft, and is by NO means large).
We had no vacation this year, and probably will not have one for several years because between saving up for a hefty down payment, we don’t have much left between our household bills, my loans, gas, and every day purchases.
What I’ve learned: college is a joke!! They’re more about making money and having lucrative sports programs than they are about education. It doesn’t pay to work. The govt doesn’t care about my situation because they don’t care about the middle class.
The rate of inflation for college tuition has NOT matched salaries. Hence, many of our economic woes when it comes to the middle class. My husband and I DO make good money, but that’s only on paper. Take out taxes, health insurance, and everything mentioned above, and what do you have left. Little…very little.
I did everything “right” or so I thought. But look at me now. The joke’s on me, and everyone else that believed getting a higher education would benefit them. Oh, I’ll see the rewards, but it won’t be for many many years. I didn’t go to school so that when I’m almost 50, I could finally build a bigger home for my children, who will be in college by the time I pay off my loans and can afford to save for a mortgage. I went to school and earned a doctorate degree so that I could have the life that I wanted. I worked hard for it, but I won’t see it for decades.
So you’re saying it’s okay that banks are legally stealing from ALL of us(unless you’re using a federally run bank) in the form of: mantiance fees, ATM fees, check cashing fees, moving money fees, deposit fees, year end fees, etc.? Yet when our future, yes the generation that you are deeming unfit for assistance needs help we can just turn our back on them?
Why are you only using ONE economist’s point of view? That isn’t reporting…that’s called a remark column. They are not treated as news, and this should not be treated as fact either. You are capable of so much better work, with intelligent and logical remarks…but this misses the issue entirely.
Forgiving the college graduates makes sense. For one it means: those whom were supposed to be spurring on the markets will do so again. Imagine a freshly forgiven student having their rights back, not being forced to send almost all if not all of their paycheck to a bank.
“If college grads got those extra dollars, “Much of it would go into the bank.””
Nice lie. Now the truth of the matter(if you had taken ten to fifteen minutes of your day to google information and not fox-esque reports like that one) is that it would…to PAY OFF THE DEBT. Duh. Are you so narrow in your focus that you forgot a majority of people took this debt out to spur themselves into a better job?
Notice how the people in the housing market crash had bankruptcy protections? College graduates don’t have that. They don’t have protections, they don’t have the funds to be paying these crazy compounded interest on top of fees monthly…and if they don’t have the money guess who suffers?
You sir, you. In the form of a depressed market, next to no housing being purchased, very few being willing to buy cars,electronics or anything of that matter. Which means less jobs and…yes you guessed it ! A depressed market. Quite cyclical actually.
This is wrong.
Banks get help, then proceed to steal and it’s a bailout. Average people ask for help and they’re called lazy,and deadbeats. We need to fix the present so the future can actually do what is necessary. If this isn’t fixed we are going to go into a full blown depression: not because the banks aren’t rich enough, but because people are going to get to a point where they can’t pay it anymore.
And once that happens there will be hell to pay for everyone involved with this massive scam.
MAKE YOUR OWN INFORMED DECISIONS PEOPLE! The rich are counting on you ignoring and following them to your demise. Check out: http://www.forgivestudentloandebt.com and studentloanjustice.org
I sincerely hope this passes.
However, it is extremely faulty. We are all complaining about being “lied to” and having “outrageous tuition costs”. So hallelujah if our debt is restored, but what about the next generation? Will they still have to take out loans? Will they end up wearing our burden? If my debt is forgiven, will my younger brother end up having $150,000 in debt?
Let’s focus here people. We need to look at the bigger picture when it comes to education. Changes will need to be made at all levels, not just changed for those of us that got hit by the loan-system and regret it after the fact.
There needs to be a stronger, longer-lasting solution to getting an education. Loans should be more difficult to receive. Scholarships should be more strongly encouraged. Going for higher education should not be treated as a privilege, it should be far more difficult to obtain.
We should encourage those who want to go into a trade profession to start in the work world and get their training on the job- not spend thousands of dollars to take a couple of bullshit “required” classes like “analytical reasoning” or “astronomy” and party on the weekend.
Students should not feel as though they are a failure if they don’t go to college immediately after High School. Most 17 and 18 year old’s do not have enough real world experience to know what they want to do as a profession. All they have known is 12 years of Math, English, and basic sciences. So gap years to study abroad or have an actual job before college could be incredibly beneficial in helping students choose majors that are worth their money.
High School guidance counselors should also have stronger conversations with their students about college, and especially the realities of debt. There should be far more career guidance than there is in high schools. All of this well help future American students to feel more comfortable with their debt if they wind up with it.
These are just a few suggestions I have in changing our mentality and the way we talk about college to prevent future generations from being stuck in the position that many of us are in right now. Having our debt lifted would be a great way to restart and refuel the American way, however, lets make sure that we don’t repeat history, as we so often do.
OH. and on a sidenote.
Dear Freakonomics:
I AM A COLLEGE GRAD AND I GET PAID $10/HR. MY BROTHER IS STILL IN HIGHSCHOOL AND MAKES $10/HR AT HIS JOB. I DIDN’T NEED TO GO TO COLLEGE TO MAKE THAT WAGE.
Thanks,
Disgruntled College Graduate.
“typically have high incomes” - that’s not a fact, that’s a load of nonsense.
The 6 months grace period should be changed to 1 year.
Unfortunately, the comments made by Justin Wolfers, affiliated with the Wharton School of Business and Princeton at the Freakanomics website were nothing more than snide, off the cuff remarks putting down the bold and controversial idea of student loan forgiveness. Nowhere did he mention any facts or figures or lead the reader through an economic analysis of what it is doing to the huge segment of our economy who cannot stay solvent much less break into the middle class thanks to student loan payments that are unaffordable and far, far, larger than repayment of the amounts they originally borrowed.
He did not address why tax credits haven’t helped. Why banking bailouts to stimulate the economy have helped, despite being hard for the American people to swallow. Not to mention no acknowledgement of the predatory lending practices and the lack of bankruptcy and other consumer protections that surround the student loan crisis. Nor did he mention the national debate that must take place as we realize that it has become too expensive for most people to obtain a higher education. Even in this short piece, he could have at least mentioned the current lack of jobs, the rate of unemployment, or ANY of a number of factors that might make this a timely and effective solution for millions of Americans.
I always suspected that Freakonomics was a bit too glib and facile, now that I know firsthand what I’m talking about, I’m sure of it. What would really be helpful is for one of our fine New England based economists to publicly analyze this proposal and, if its not a good idea, prove it.
Who would pay for this?
I’m as liberal as anyone, but this makes no sense. As of 2010, according to the WSJ there was $829.785 billion worth of outstanding student debt.
Yes the banks got bailed out big time and I’m as pissed about that as anyone, but many would likely require another bailout if we just decided to write off billions of dollars from their balance sheets.
This would create a huge moral hazard problem. I have worked like mad to pay off my loans, paying off nearly 40,000 of my 67,000 or so of loans by cutting back on everything in the past 3 years. I’ve worked my tail off to do this. Would I get my 40,000 back? Why did I even work my ass off to pay off my loans if something like this got passed? Whatever happened to accountability and upholding the terms of a contract all students voluntarily entered?
I think you should have to pay back your loans!!!!!!
Maybe we should all have are home loans forgiven since we are all so far under.
I’m so sick of you people that want bailouts! Try living within your means and working hard!
Hey Katie -
I understand why you feel as though it’s absurd/lazy of people to expect to have our college tuition paid for, but a lot of people took out loans when times were better and they anticipated being able to pay off the loans within a reasonable amount of time and effort.
For example:
When I took out loans for school, my father was making $140,000/year and my family was living well within our means. (even with the loans taken out) Then he lost his job due to cuts at his office when the economy slumped during my second year of school. He is now making $60,000/year, and my family is struggling to stay afloat to pay for their mortgage, taxes, insurance, and other loan commitments that we were involved in prior to my father’s large pay cut.
Long story short, the debt is now in my lap- something that was never anticipated by anybody.
How can it be fair that I will be paying back loans that were granted to someone who was making $140,000/year? I never would have been granted the loans in the first place had I applied for loans and wrote down the $25,000 salary that I’m making right now out of college. I do work hard, I am working 30 hrs/week in NYC and waitressing part time on top of that to supplement my income. Working hard does not necessarily equate more money in this economy unfortunately.
At this rate, I will be in debt to Sallie Mae until I am 46 years old. My credit will probably be really crappy, and it will be really difficult to get a house, have a family, and own a car. If I were able to purchase such things, along with the thousands (maybe millions?) of other student-loan-debtors, perhaps the economy really could receive a boost which would help everyone out, including yourself.
I don’t necessarily need a clean slate from the government, nor do I really think that it would be fair to the millions of others that honorably paid for their education, but if some better options for loan assistance could come out of this nationwide movement, it could really help a lot of us out.
I wonder if Mr. Wolfers uses the same logic when discussing tax cuts for the wealthy - the argument pushed by conservatives to “stimulate the economy.” Oddly, I never read that the wealthy - who, by definition, “have higher incomes” - would just put most of that money into savings, thus not doing anything to stimulate the economy. Yet, that plan seems to be pushed CONSTANTLY.
The idea that “college grads typically have high incomes” might have made some sense 20 years ago. But, currently, a college degree is little guarantee that a person will have a high income. Current graduates are now seeing lower entry level salaries than previous graduating classes (http://blogs.wsj.com/economics/2010/04/08/2010-college-grads-face-lower-salaries/) and with the shape of the economy, that doesn’t seem likely to change anytime soon. And, when you look at specific fields (education, for example) the numbers are even worse. Certainly forgiving some debt - and freeing up that cash for purchases - would be beneficial in a sagging economy.
I’m not arguing the moral perspective - there is a point to be made that people should pat what they owe. But I wish we would see less blatant hypocrisy. When it’s okay to bail out billion dollar bankers, and allow corporations to shield their money in offshore tax havens, and grant the wealthy tax breaks for “investment income,” it’s tough to argue against helping recent college graduates!
I think if they just reduced the interest rates to 0 or 1 percent that would be a boost. I know that if all loan debt was forgiven we would pay it back one way or another in the form of taxes down the road.
If you believe in student loan forgiveness, please read this petition (and f you believe in it accordingly sign) as well for those having problems with their private student loans:
https://wwws.whitehouse.gov/pe...
Please pass it on
Read more: http://dailycaller.com/2011/09/15/moveon-org-u-s-rep-promoting-student-loan-debt-forgiveness/#ixzz1Z5PlqT2p
That economist is dead wrong. Most recent college grads are working entery level jobs for minimal wages, because of the job scarcity. As a recent college grad, I can vouche for us in saying that most of us would spend more money if we had it to spend. Most graduates have to move back in with their parents, because they can’t afford their own place. If I didn’t have student loans, I would buy a new car, clothes, and travel the world. I would also be able to afford health insurance, which is a major concern in this country for a lot of people, and could help the government with their medicaid expenses. That economist is an ididot, because he obviously is an older man, and has forgotten how extravagant and frivilous young people are with money, due to superficial standard of living in this country. If young adults had their student debt erased, we would spend more money, not put it in the bank, and would be able to help out their parents and children, which would have positive effects in multiple sectors of the economy. This plan will save americas middle class
Are you serious? Wolfers is an idiot if he thinks that college grads these days actually can find work. I know most of my friends who have gone to college cannot find work or are in jobs that they are over qualified for.
First off, if these college grads actually find work, they make descent money, then they are a part of a majority percentage that pay for taxes. What better way than to forgive college grads loans so that they can stimulate the economy with their money every month rather than pay a loan payment.
Wolfers
It’s idiotic to assume we’d save ALL the money if loans were forgiven. I’d be so thrilled I’d buy a house, car, clothes, trips, etc. I’d also find smart investments that would boost the economy. It’s stupid to give money to those who wouldn’t be smart enough to save or invest but rather spend. It’s all that SPENDING that got us into this mess.
I’m a college grad and I can’t believe anyone with a four-year degree would agree that forgiving student loan debt would stimulate the economy. If anything it would put banks into a more precarious position. Socializing secondary education isn’t the way to go. What we should be focusing on is putting more money into primary education. Perhaps the proceeds from college loans can be rerouted to our children’s education to secure the future of our civilization.
Wolfer is arrogant, ill-informed and clearly represents the segment of the economy that got the country into the economic mess in the first place. This guy is clearly a lunatic! Wouldn’t surprise me if he works for the banking industry. I guess it’s okay for the country to bail out banks and insurance giants like AIG, despite the concept of moral hazard. It sounds like this idiot is applying the moral hazard concept to college students….but not to banks and insurance companies. Wolfer should get into another line of work. Perhaps car wash attendant. Let him try paying down student loans on that level of pay.
On the one hand I would do just about anything to get out of the Student loan hell I am in, but on the other I made the choices that lead to the mess I am in. Yet on the third hand if it weren’t for some very shady things done by first my lenders and then even more so by the government when they defaulted (Yes due to my own waiting to the last minute to get the paperwork in, but it was in on time and yet they claim they did first did not receive my certified mail by the deadline and then did not receive the multiple faxes for the appeal even though I asked if there was a way I could fax it while on the phone to have someone confirm receipt), I would be a lot less willing to go along with something that shirks my responsibilities. Which is why I would be happy with a reset of all un-subsidized and subsidized loans are forgiven. That would be more than enough for me. \
They got bailed out for their mistakes why can’t I get bailed out for mine?
I should note that I’m going to be a PhD student with an enormous debt. Of course, I don’t think student loan debt relief is a bad idea, but I do think it is important for the educated to take social responsibility for at least a portion of their debt in a way that still allows them to live comfortably, but also in a way that pays back the great nation which helped them through their studies. Australia has a lot of systems in play which allow students to do this though I am not certain of their specifications. Another way is to have students pay a student loan tax, whereby students pay a percentage of their annual income toward their student loan debts a year for a set amount of time. How much a student pays could be based on their income, which means students who end up with incredibly successful jobs will help subsidize students who are in jobs that may not make as much, but enrich society through means of art, education, social work, etc. I know there is something like this already in play - but I don’t know how much relief it is offering to postgraduates at this point in time, or if it requests too much payment from lower income postgraduates. I also think the government should consider abolishing interest on student loans, or else have it match the increase of inflation only. Finally, part of the reason it is so hard to pay student loans also relates to the fact that it is so hard to find jobs in the workforce with decent salaries. There is too much money in too few hands, and there are too few opportunities for students at this point in time. So yes - I do believe a form of forgiveness is well over due - and I believe it would have been useful to take some of that 700 billion dollar bailout money to help students and struggling families in 2008. How we relieve student debt is another question entirely.
this is insane, some people (myself included) when to state school to major in engineering or some other technical program. We had to work our rups off while networking with the career counselors and doing internships and such. I payed my dues and I think you should too. And I dont believe this will create jobs either; one would think that $150,000 in student loans would give said person a little bit of incentive to fill out that application for McDonalds.
College students should not repay debts……… all the kiddies of congressional workers have automatic debt forgiveness…….. everyone should have same opportunity…..
I’m with Rachel. I see a lot comments here about spending the savings from a forgiven loan debt. So unless that spending is on essentials that one couldn’t afford before why not just continue to pay the loan? Also two things I know from experience 1. you don’t have to have a college degree to be successful you just have to be good at what you do. 2. If one thinks they need or they want a college degree there are plenty of ways of getting one without borrowing to do it. I know from experience because I have done both. Never borrowed to get an education. I am actually now at 67 going to school to get a Bachelors in Electronics Engineering Technology and I’m only paying $125 a month. I’m in my second year. I am doing it just for myself. I never needed it when I was working. Of course I had military electronics training, but I turned that into a successful civilian career as a Test Engineer. Oh, and I also am a High School dropout. The library and books are a great place to learn and mostly free. What you are paying for at high price schools is mostly sports programs and the salaries of teachers and administrators. You can serve that purpose yourself and you don’t have to pay for it. The most important education one can get is in the years between first grade and senior year in high school. If you have a strong base by 17 the rest is a cake walk. My daughter went to FSU, which is expensive, on a full scholarship. She also has her Masters and no student loan debt. She owned her first house when she was 19, she comes from a broken home, and she is a Principal at a Magnet high school. It can be done.
I can’t find any information on how this exactly will work. This could really adversely affect the colleges themselves unless this is specific to government backed loans. The only student loans I have are directly from my college. This would definitely help stimulate the economy, but let’s make sure it doesn’t backfire and hurt the already struggling colleges across the country.
Why not forgive the interest?
Or make the student pay back in community service?
This is the most ridiculous thing I’ve ever heard. Why don’t we just erase everyones credit card bills…and mortgages while we’re at it. YOU decided to go to college..YOU knew what it was going to cost…YOU pay the bill.
Oh, and BTW,
I PAID MINE BACK!!!!!!!!!!
I read through the material regarding the student loan petition. To be honest, I’m not entirely sure how their plan would work. It seems like they are focused on a lot of hypothetical possibilities rather than relying on concrete facts. There’s no guarantee that just because people have a little bit more money that they would automatically increase spending in these as undefined “ailing sectors” or that jobs would begin to open up since that’s not the only factor determining why businesses are currently not hiring.
One thing I am not sure they considered is this: while there are a few independent student loan programs from banks and other groups, a large majority of student loans come from the federal government through their direct loan program, which was created as a government reaction to the unfair lending practices of the aforementioned groups. Forgiving these loans would have the unfortunate side-effect of causing the current national debt to increase since all that money loaned out wouldn’t be paid back to the government but still has to be accounted for since it was paid out.
While I understand this petition’s popularity, nobody forced these people to take out student loans. They did so voluntarily in order to pay for their education, and now they are trying to get all that for free regardless of the detrimental impact this plan could have on the entire infrustructure of the higher education system. Unfortunately, I don’t see it as very well thought out and I personally couldn’t support this initiative in its current form.
Absolutely do not forgive college loans. This is a slap in the face to hard working parents who stepped up and paid the bill for their children. My wife and I have sacrificed greatly to put our children through college. Given the choice to buy a beautiful cottage on a lake or send our children trhough college we did the right thing and chose the latter.
What world is Justin Wolfers living in? All college grads have high paying jobs?? Uh, I don’t think so. In fact, I can only think of 2 aquaintances of mine who have what would be considered “high paying jobs”, and all of my friends have at LEAST a bachelor’s degree, and some have one or two master’s degrees as well. While forgiving student debt may not be the perfect solution to our economic crisis, it seems a lot more productive than bailing out AIG and the like. From a person standpoint, I always pay my loan payments, I always pay on time…I’ve been paying for 13 years on my undergrad and still owe 16k, and now I have graduate school debt in an attempt to get a higher paying job that has yet to pan out. I am not asking for a handout, but I know if I had that extra $400-$500 a month I would be putting into the economy…buying a house…purchasing goods…upgrading my car, etc. a lot sooner than I ever will at this rate. Just my opinion.
To all the “let them eat cake” and “I did it and so can you,” I add my story.
My first degree is in engineering. I graduated with about $25K in loans and landed an awesome job in 1989. Over the next five years, I had it paid down to half and was on track to pay off in 10 years. Then the entire division where I worked (a division of a Fortune 500 company) was sold, lock, stock and barrel. The first thing the new owners did was turf all of the existing management to make room for their own excess staff.
Unemployed at a time when companies were firing engineers by the dozen. So, I went back to school. As a skilled environmental engineer, I planned on making the transition to regulatory law. Three years later - a law degree. Debt now $100K and law firms firing 2nd and 3rd year attorneys by the dozen. A few low end jobs. Worked legal aid. Practiced on the side and helped my husband build a modest business that sustained us. Had to use as much forebearance as possible. Got a part-time job in the poverty law area as a public defender.
With the interest, debt now $200K, but making $425/month payments.
Now, fast forward a few more years and the knock on the door at 1:20 AM and the four words that change everything, “there’s been an accident.”
Picks up speed now . . . nohealthinsurance-emergencyairlift-permanentlyparalyzed-sixweekcoma-lifeanddeath-respirators-awake-learningtobreathagain-rehab-wheelchair . . . forever . . . now take a breath and consider what comes next. Unless you live here already, don’t even think you have a clue. And all the bullies and naysayer don’t live here because the first thing you learn is humility.
The bills for the first 24 hours were $250K. Total by the end of his 4 month hospitalization, almost $2 million. His yearly medical care is about $100K. To qualify for Medicaid, I had to gut every last asset, including the little bit left in my 401K. For him to remain eligible, there is only one requirement, stay in poverty for the rest of his life. I can’t work more than part-time or run the business at any more than a bare minimum or he loses his benefits.
My loans are now in default and my phone rings 60 times a day (my cell phone is basic, not smart and not a luxury - I have to have it for my work and my car has 220,000 miles, I need it for safety).
I did everything right. I got scholarships. I paid thousands on my loans. I served the public good. I cleaned up the environment. I protected you and your children in the criminal justice system. I helped abused women escape and be safe. I now enforce child support orders.
I am being crushed by my situation. And you can be too. All it takes is one knock on the door after midnight.
Do not be smug and think you know what is going on with those begging for help and relief. We are you.
This is a joke. I am sitting on 100K in loans, but that was a decision I made. I’m sorry philosophy major who went to school out of state….what did you think would happen when you graduate with a degree in nonsense?? I know as well as anyone that this isn’t the best economy…but really people quit making excuses.
It angers me that some people are naive thinking they have/had it the worst.
I agree with johnny. I am a hard working individual who has 2 jobs and lives on my own and struggles to make ends mean. I had to cut back tremendously on spending just so I can get my bills paid. I understand how people feel that ‘it’s your debt, pay for it’ (the people who have worked hard to pay theirs off), but maybe, others situations are/were worse off than yours.
Did you graduate during the economic downfall that many college grads did and still are doing? I did and i ensure you that it was not easy finding a job. I was unemployed for nearly 7 months before i got lucky enough to get a job as a temp, and then eventually got a full time job.
Some college grads will go as far as to get a job working at a fast food gig. Just a question to people who disagree and say ‘pay for YOUR dept’. What do you think paid more? A fast food joint or your first job out of college? Please understand that working harder does not necessarily mean more $$.
I honestly don’t believe we should get complete forgiveness, but i do believe a little help would do more good than bad.
Put the equal amount of the debt in debit type cards that ensures that people will spend such an amount for houses, cars, and whatever equals the amount of the debt. Forgive the debt only for those who sign a contract willing to spend the amount to stimulate the economy. Trust me you will see more houses being bought and the economy starting to pick up in manufacturing and different industries.
Ben Dover
October 20, 2011 - 9:05 am
Absolutely do not forgive college loans. This is a slap in the face to hard working parents who stepped up and paid the bill for their children. My wife and I have sacrificed greatly to put our children through college. Given the choice to buy a beautiful cottage on a lake or send our children trhough college we did the right thing and chose the latter.
What you have done for your children is commendable, even admirable. However, I did not have parents to help me through my college education. I did not choose a selfish career. I chose to teach and help others. So you are saying that since I decided to further my education and join the workforce, even without the help of parents, I should be slapped in the face? Maybe I should have just stayed at home with my two children and lived off of welfare.
I really hope this passes.
I currently own approx 160k in loans due partly due to undergrad but 90% of it due to graduate school so I can obtain a Doctorates in Physical Therapy. Monthly loan payments are around 1400.00 monthly. Live with my parents to help make ends meet. If this loan where to go away or be greatly reduced. I would purchase a home or condo and invest in my practice. This will provide financial freedom, spur the economy and allow people to hopefully open up new businesses and improve overall cash flow.
I am over $100,000 in debt trying to ascertain a Ph.D. I am currently ABD and have quit due to the high cost of tuition, uncertainty of the job market, and I can’t afford to incur any more debt.
I came out of graduate school with $0 in debt. Then I got this grandiose idea to further my education and attain a Ph.D.. It was the worst investment I have ever made. I made $50,000 a year working in a factory 15 years ago and quit to pursue a graduate degree and become a Professor. No one told me a laborer with a high school education can make more than a Professor with 8 years of College. This is where there is a disconnect between education and salary.
I do not expect to have my loans paid for. I will take accountability for these loans and probably never pay them off due to my age (52).
Luckily I paid my house off and have a 401-k from a previoius job. Presently I work three jobs to pay off my loans, help my Mom, and pay off a mortgage on a retirement home I would sell if the market was better.
There is some validity to the plethora of all the arguments. Partial help. Lower interest rates. Better terms for payoffs. No help. This is a phenomeon that needs to be addressed and a viable solution must be found.
I do not have any disposable income to interject into the economy and do not believe the future holds anything better for me. I wanted a degree in higher education because of the financial payoff usually associated with a MBA and Ph.D. This stratey has not been successful for me.
Who could predict the economy would take such a steep dive and take such a long time to rebound? Gas prices went up today 20 cents. How come these fleabags are exempt from paying their fair share? Sorry, it is B.S. they do what they want in terms of pricing. I wonder what the trickle down affect has been because of high gas prices in terms of job loss? Layoffs? Vacations?
In order to forgive student loans, all the tuition money would have to be paid back to those that paid as they went….it is only fair!! Deal with the obvious problem with this foregiveness bull before trying to get technical with it. Two people get the same degree - sat side by side all the way through college, one got student loans and the other worked and p-aid the tuition each semester. Now Obama wants to forgive student loans. The student who took out the loans gets them foregiven and therefore got a free education. The student who worked and paid as he/she went is out a lot of money. How does anyone think this is fair??
How Can a $650 Billion Dollar Stimulus Translate into a $1.2 TRILLION Dollar Economy Pumping Machine?
Now that I have grabbed your attention lets break the numbers down. If you want to stimulate the economy, you have to put the money into the hands of the people who will spend it. Better yet, what if you could provide Financial Institutions with a huge amount of money (lets say a one time $650 BILLION DOLLARS stimulus) that they could start to loan out to businesses AND at the same time have a way that $5,135,000,000 billion dollars each MONTH would be placed into the hands of people that will use it to buy things and support those businesses OVER THE NEXT 20 YEARS. That’s right just over $5,000,000,000 dollars each month for the next 20 years. That’s $61,620,000,000 billion dollars per year for the next 20 years. That’s $1,232,400,000,000 TRILLION dollars at the end of 20 years.
Here’s how to do it.
Step one
Provide a one-time stimulus to the FINANCIAL INDUSTRY of approximately $650 Billion dollars. This $650 billion dollars will FORGIVE (payoff) the approximate $650 billion dollars in Federal Government backed Student Loans. The banks now have $650 billion dollars to provide as loan to American Businesses. What should the banks do with the 650 billion dollars? I would suggest that the banks set aside these funds for Small Business Loans. They have enough provide a $250,000 Small Business Loan to 2,600,000 Small Businesses.
Step two
Lets start by explaining how I came up with the $5,135,000,000 per month figure.
There are about $650 billion in government back student loans.
Lets suggest that each loan averages $40,000. That translates into 16,250,000 people with loans.
Lets suggest that each loan is for 20 years at 7.25% (GOV. set rate). A $40,000 loan would have a monthly payment of $316 for 20 years.
If all government backed student loans are forgiven (paid off with bank stimulus package) then 16,250,000 individuals will have an extra $316 each and every month over the 20-year period. 16,250,000 x $316 = $5,135,000,000 that will be pumped back into the economy each and every month or $61,620,000,000 per year or $1,232,400,000,000 over the 20 year period.
What have we gotten for our 650 Billion Dollars?
We have given our economy a double shot of dollars. Banks can make more money on shorter-term business loans at prime + 4.5% (make more money than the student loan rate) with a shorter turnaround as an added bonus. These business will need these loans to provide the goods and services that will be purchased with the 5 billion dollars that consumers will have in their wallets EACH MONTH. With $316 to spend each month I have made my wish list for the next 6 months: NEW Tires, NEW TV, NEW Washing Machine, NEW Twin Mattress, A Weekend Getaway for 2 (two months worth). I wonder what I will buy over the next 6 months. ☺
Yes, I agree loans should be paid. For those who say “I paid mine. So should you” do not understand current people’s situations. I WISH I could pay my debt off. I’m $180k in debt making $42,000 a year. You do the math. I will be in debt for the rest of my life. I will have NO retirement, NO new car ever, NO house and NO children. Unfortunately, I’m not the only one in this situation and in the long run I think it will effect our economy. This is a big problem that must be solved. I regret going to college and will inform everyone even thinking about borrowing money to think otherwise. I’m underwater and will be forever becuase I wanted a better life for myself. Instead I feel like a criminal.
clearly, if my 150,000 student loan debt for attending Harvard which was never completed because an involuntary leave caused by unjust falsitites and lies delivered at me by asiain students who actually did get away with it and ultimately caused me 13 years of isolation and deprived me of the right to have children and any semblance of normal human life … you get the picture. Where is the lawyer to defend me? Where are the student loan lawyers? I would like to know if a school was incapable of providing me with the harassment-free environment .as defined by the international codes of human rights at the Hague? My rights were violated as a child and nobody was there but in spite of the fact that nobody was there to defend me but I sure as hell am NOT going to be bullied every time I enter a school!