Mission Accomplished: New England Post Finds an Economist* who Supports Forgiving Student Loan Debt

For several weeks now, New England Post has been exploring the idea of forgiving all current student loan debt as a way to simulate the economy.

In our first story on the subject, we put forth the opinion of Justin Wolfers, who teaches economy at UPenn’s Wharton School of Business. Wolfers contends that forgiving student loan debt would be the “worst idea ever,” and cites several reasons as to why. Examples include the argument that recent college grads would put their newfound cash in the bank instead of pumping it back into the economy, and that if the government were to give money to anyone, they should give it not to the college-educated, but to high school dropouts (because they would be more likely to spend it immediately).

In the firestorm of comments that followed that original student loan debt story, it was argued that Wolfers could not speak for all mainstreams economists. So, New England Post tracked down an economist from our neck of the woods for a second opinion.

Unfortunately for those in favor of the idea, Professor Michael J. Carter, the chairman of the UMass Lowell Economics Department, told New England Post that forgiving student loan debt would be a “huge mistake.” Carter contended that such a strategy would make future student loans largely unavailable for generations to come.

In the closing lines of our second student loan debt story, we challenged the New England Post community, and ourselves, to find an economist who actually supported the idea of forgiving student loan debt.

Mission accomplished… well, sort of.

Robert Allen is a management consultant, not an economics professor like Wolfers or Carter. However, Allen has a degree in International Business — with a focus on Multinational Economics & Economic Policy — from the Florida Institute Technology.

“My initial reaction to this radical form of stimulus was the same sense of wonder I got as a child when first reading Peter Pan,” Allen told New England Post. “It took me a while to think about it practically, since it seems far too well-reasoned and supportive to be anything sponsored by the US government, but I am seeing it as more and more likely.”

According to Allen, current stimulus plans fail to provide funds to the right people: recent college grads who are ready to innovate.

“While the newest stimulus plan promises construction jobs for individuals largely unworthy of credit, it offers nothing for the present middle class straddled with the reality of rare minimum wage jobs following four-year degree program.”

In response to the argument that forgiving student loan debt would cripple student lending for years to come, Allen suggests that such fears are unfounded, as “the government is tossing around a 400 billion dollar bill which can be spent wherever works best.” Erasing student loan debt, according to Allen, would “instantly free up 400 billion USD of SallieMae et al capital for fresh loans.”

Perhaps the most interesting argument that Allen makes in the case for forgiving student loan debt is that it would “free up significant monthly and annual income for unemployed grads to start new companies.”

“Just watch. If it [forgiving student loan debt] happens, and I truly hope it does, there will be a glut of venture capital firms across the nation looking to capitalize on the entrepreneurial spirit of these presently-yoked grads.”

So there you have it, New England Post community: an argument for student loan debt forgiveness coming from someone with a background in economics. What do you think of his ideas? Share your thoughts, leave a comment below.

Related posts:

1. Forgiving Student Loan Debt as an Economic Stimulus; What Does a Local Economist Think?
2. Should the Government Forgive Student Loan Debt? College Grads Say Yes; Economists Say No
3. OP-ED: Why Student Loans Should Be Forgiven
4. Is Unemployment Decreasing in New England? A Look at New England’s August Unemployment Rates
5. An Economist’s Twitter Experiment Begins

Short URL: http://www.newenglandpost.com/?p=5278

Posted by erik devaney on Oct 7 2011. Filed under Featured - For home page featured article. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry