While playing around on Facebook the other day, I came across Robert Applebaum’s “group” called Cancel Student Loan Debt to Stimulate the Economy. On the group home page, Applebaum goes into detail on how canceling student loan debt would stimulate the economy in a variety of ways. Here is only a sampling of what this lawyer-turned-advocate suggests:
Forgiving student loan debt would have an IMMEDIATE stimulating effect on the economy. 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. Those extra dollars being pumped into the economy would have a multiplying effect, unlike many of the provisions of the new stimulus package. As a result, tax revenues would go up, the credit markets will unfreeze and jobs will be created.
Let me be clear. This is NOT about a free ride. This is about a new approach to economic stimulus, nothing more. To those who would argue that this proposal would cause the banking system to collapse or make student loans unavailable to future borrowers, please allow me to respond.
You can go read Applebaum’s group page to see how he responds to the obvious criticism. What strikes me is that that aggregate student loan debt in America is roughly $600 billion. The government passed $700 billion in stimulus spending last October (which has been a failure) and another nearly $800 billion last month. Plus there is a spending bill currently before the Congress that would increase the number of dollars being spent on ridiculous earmark projects. By some estimates, in total we could be spending $2.3 trillion on stimulating the economy…with little of that actual money going directly to benefit the middle class.
Applebaum’s suggestion is an interesting one and given the personal nature of the suggestion, each person who supports or rejects it will have specific reasons why. Many of those who reject it will project their life experiences on the stories of those who support it (a common, aggravating problem in the student loan world). Likewise, many of those who support the proposal will have a level of debt that could likely be paid off after a few years of hard work and saving. But there were always be exceptions that drive the argument forward in some people’s minds. You can find some of those exceptions by reading the a petition currently on The Petition Site calling for Applebaum’s plan to be put into action.
I signed the petition and added a little bit of my story, which I think suggests why enacting a student loan forgiveness policy would be beneficial for me. Here is my little blurb, reprinted for your reading:
I graduated with $118,000 in student loan debt. Without taking out these loans, I would have never been able to receive the high quality education that I did. All I did was pursue the American Dream…and now I pay about $1,000 each month because of those student loans. I have a great job and I still can’t buy a home – heck, I can’t even buy a new car! I’m still making my payments and I’m still paying down my debt (down to $104,000 now). But if I could use that extra money each month to buy a home or a new car, I would do it in a heartbeat. However, on the path that I’m on now – neither purchase will be possible for at least the next ten years. Great…
I’m not sure if either purchase won’t be available for the next ten years, but repaying at the rate that I’m currently going (which is above and beyond the minimum monthly payments) will certainly put me on that timetable. Something needs to be done and though I have a few different ideas about how I plan on addressing this debt (can’t keep a good man down!), it would be so much more effective if the government stopped collecting it’s 4.75% interest rate off of the $50,000+ that I owe it in principle.
I don’t want a handout and I know that if things don’t change, then I’ll be able to payoff my student loans in due time. But during a time when Wall Street executives are getting million dollar bonuses for failing and when banks, insurance companies, and the automakers are getting money hand over fist from the government, you would hope that – at some point – someone in Washington steps back and says, “Whoa! What are we really doing here?!” If somebody would do that and champion this cause over the current bailout causes, I think it would truly stimulate the economy.
“But during a time when Wall Street executives are getting million dollar bonuses for failing and when banks, insurance companies, and the automakers are getting money hand over fist from the government, you would hope that – at some point – someone in Washington steps back and says, “Whoa! What are we really doing here?!” ”
So true.
A COPY SENT TO CONGRESS, SENATE, PRESIDENT
May 5, 2009
My name is Laurie and I am taking classes at Capella University, hoping to earn a Masters Degree in Professional Counseling. Originally, I began graduate school in 1984 through 1987, in the field of Clinical Psychology. I earned 56 credits but did not complete the program. At the time, I was 24 and abusing drugs and alcohol. I took out 3 student loans, $5000.00 a piece, minus administrative and processing fees. After withdrawing from school in 1987, I was very irresponsible and defaulted on my student loans. They were accruing interest while I was making poor choices.
When I got sober, I learned it was imperative for me to make restitution. Two loans went from Citibank to The California Student Aid Commission, eventually landing with The U.S. Department of Education. One loan was awarded by The Sally Mae Foundation, which is now PAID IN FULL. Although earlier payments were made sporatically, I began making consistent payments in 1999 towards Sallie Mae and in the year 2000, towards The U.S. Department of Education. All loans were at fixed at an 8% interest rate, while two were eventually consolidated.
Although Sallie Mae’s principal began at $5000.00, I eventually paid approximately, $8300.00 on that loan. When I began making restitution on the consolidated loan, the principal balance was totaled at $21, 035.37. Fortunately, this loan was reduced to 7.75%, by having the money removed electronically from my checking account. To date, I have made approximately 82 payments, totaling $12,569.54. My principal balance is totaled at $22, 137.224, an amount greater than when I began making restitution.
I am requesting that my student loan be FORGIVEN, as I have consistently made payments above and beyond the original $5000.00 loans.
Currently, I am a Licensed Social Worker and a Licensed Chemical Dependency Counselor. I have been working at Neighboring, a non profit organization treating the mentally ill and chemically dependent population. I am struggling to pay for my required coursework at Capella University, an accredited online program for Professional Counselors. The predicament I put myself in is frustrating and endless. I cannot increase my salary without a Masters Degree, and cannot afford to complete my education with an outsdtanding balance of $22, 137.244. I have tried refinancing our home but was told our DEBT RATIO IS TOO HIGH.
One of my areas of interest includes working with victims suffering from Post Traumatic Stress Disorder. This population may consist of men serving our country or victims of physical and sexual abuse. As you are aware, PTSD has become a national crisis, with the suicide rate among War Veterans increasing each year. I want to make a difference in someone’s life by working in a nonprofit organization. The catch 22: I cannot afford graduate classes because my salary is below average. I cannot secure a higher paying position because I do not have a Masters Degree. I cannot refinance my home because my student loan debt is too high. I cannot cash in my IRA’s because the penalties are too high and the value has decreased in this economy! Thus far, I have taken 5 classes towards a Masters Degree as a Licenced Professional Counselor. Capella University allows 6 years to complete. I have a 4.0 grade point average.
Although I am 100% responsible for defaulting on my student loans and accruing interest, I need this loan to be FORGIVEN in order to achieve my goal of becoming a Masters Level Therapist, specializing in treatment for PTSD. According to the US Depatment of Education Payment Estimator, I will ultimately pay $68,586 on two $5000.00 student loans. Currently, my loans are 22+ years old.
I have enclosed detailed documentation regarding these loans, as well as my past graduate transcripts from John F. Kennedy University. In addition, I filed for bancrupcy in the early 1990’s and was able to discharge all debts except the student loans. My first loan in 1984 is 25 years old.
Sincerely,
Laurie Truhan, LSW, LCDC III