There’s a campaign on Twitter called
#ListenToTheMillion, pushing Congress and the powers that be to forgive student debt to stimulate the economy. I’ll admit: the Student Loan Forgiveness act sounds great on paper. I regret borrowing as much as I did for college, and I’d be the first to sign up for some extra financial support.
But what would really happen if student loan debt were forgiven?
As with much of the student loan debate, there is a lot of hype. Before I answer whether or not loan forgiveness would boost the economy, let me clarify a few things:
- Debt forgiveness would only apply to federal loans (this includes Parent PLUS loans)
- If you have consolidated federal loans through a private service, you are not eligible
- You must have paid at least 10 percent of income for at least 10 years to have your loans forgiven
- The plan would be retroactive (your loans would be forgiven if you already met the above requirement)
- To prevent abuse, the act caps the amount that could be forgiven for new borrowers
My Two Cents
I don’t think that Congress (or advocates, for that matter) get it. This is just a conciliatory gesture, but it will not stimulate the economy.
The problem doesn’t lie with folks that have spent 10 years paying 10% of their income toward their federal loans.
The student loan problem happened because of the ridiculous cost of higher education, access to easy borrowing, students attending schools they might not be able to afford and no jobs for college graduates.
Here’s what we do need:
- Provide better information to high school students about borrowing for college and attending a college you can afford
- Use technology and remote learning to support cost-effective, low-touch and distance education
- Fix a broken and wildly expensive market for post-secondary education system by creating a grading system for students to compare their “return on investment” across multiples colleges
I don’t have the solutions, but I do think that more of our country’s time and resources would be better spent fixing the root of the problem instead of applying a band-aid.
What do you think? Do you think forgiving student loans will actually stimulate the economy? How would it affect you if federal student loans were forgiven? Let me know on Twitter, Facebook or in the comments below!