The Forgive Student Debt to Stimulate the Economy plan, an initiative to forgive all students loans, now has actual legislation. Rep. Hansen Clarke (D-MI) has apparently introduced legislation seeking to forgive student loan forgiveness.
Clarke’s bill recommends that:
Congress should cut the United States’ true debt burden by reducing home mortgage balances, forgiving student loans, and bringing down overall personal debt.
This will likely go nowhere. As by Ken Layne over at Wonkette writes:
Wonkette operative “Andrew L.” sends along this petition and the resulting doomed bill, introduced by the socialist freeloader Rep. Hansen Clarke — not because it will ever get close to becoming a law, but because of the sad statements of the petitioners and the old-timey Middle Ages talk of “indentured servitude” in the resolution itself.
It’s also pretty vague. This idea does, frankly, have some real merit; if young Americans had less debt in the form of student loans they would have more money to save, invest, and buy other things. It’s hard to argue that such a change in spending priorities would be bad for the United States economy.
That being said, there are two basic problems with the “Forgive Student Loans to Stimulate the Economy” plan:
1) What does “forgive” mean here? Does that mean just zeroing out all student loans, in which case banks and the federal government would lose billions, and would be in actual financial trouble. This is money owed to them. Without these funds the entire system breaks down. How would they stay afloat? Or does this mean actually paying banks and government the money they’re now owed in student loans? How would we pay for this? Current student loan burdens now total over $900 billion. Would we simply raise that in taxes? How?
2) What do we do about the larger problem? Funding higher education with massive student loans is now, for better or worse, the way we do it. Even if the United States were to take the massive step of forgiving all student loans, what about the children entering college today? Will they still face huge student loans once they graduate?