Across-the-board student loan forgiveness would break the slate, not wipe it clean
Every couple weeks, I see a link going around Facebook to a petition that calls for the government to erase all student debt. The creator of the petition sells it as a “real economic stimulus and jobs plan” and claims that erasing student debt will basically solve all the economy’s problems. The petition is getting close to reaching its goal for signatures, but I don’t understand how anyone could delude themselves into believing that it will change anything.
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Across-the-board student loan forgiveness would break the slate, not wipe it clean
Kayla Nguyen / Vanguard Staff
Every couple weeks, I see a link going around Facebook to a petition that calls for the government to erase all student debt. The creator of the petition sells it as a “real economic stimulus and jobs plan” and claims that erasing student debt will basically solve all the economy’s problems. The petition is getting close to reaching its goal for signatures, but I don’t understand how anyone could delude themselves into believing that it will change anything.
This isn’t a rant about how useless online petitions are, because that would be too easy. Erasing student debt is a terrible idea. Back in April, the total sum of America’s student debt exceeded $1 trillion. Everyone knows we have a huge problem. But we can’t just magically make it disappear.
People insist on talking about how the millennial generation is lazy and entitled and expects things instantly. I don’t think that’s true (or, if it is, the blame doesn’t lie solely with our generation), but things like this fuel that idea.
Let’s say theoretically this petition gets its number of signatures, someone turns it into a bill and it becomes a law. The first big problem is that the government doesn’t own all student loans, so it would first have to buy them all out. When it goes ahead and does that, the government then forgives the loans. And with a snap of the fingers we’ve added a trillion dollars to the national debt.
Student debt equals zero. National debt equals $16.8 trillion.
This would be insane. Throwing money at every single problem is what got America into this terrible economic situation to begin with, so we should just set a precedent to keep doing it for years?
What happens after the debt is forgiven and people keep graduating? How can it be justified to forgive the debt once, but then fail to do so for the next group of students that has a hard time with loans? It can’t. If this debt forgiveness somehow became a reality, it would have to continue to be granted for each successive year of graduates, unless they’re forced to fend for themselves because they graduated at the wrong time.
Neither option is attractive, nor is this one of those lesser-of-two-evils situations.
The higher education system in the U.S. has to change. As certain members of my family love toremind me, a college degree is worth less and less these days. We’re told throughout our lives that we must have a degree to compete, that it’s a global economy, add cliché, one more cliché and tag on a platitude for good measure.
Still, for most of us, college seems like the best option. So we take out tens of thousands of dollars in loans to get a piece of paper that’s supposed to make us more hirable and then can’t find employment anyway. At the same time, we’re expected to start paying off those loans. This model has never been sustainable.
Instead of wiping the board clean, the government should institute more plans like the Public Service Loan Forgiveness Program. This allows people working in the public sector who make monthly payments on time for 10 years to have their direct federal loans forgiven if they haven’t been paid off in that time. Eventual amnesty is less of a burden on the federal government’s budget, and it makes more sense. As much as the debt situation sucks, people across the board shouldn’t get a Get Out of Debt Free card.
Yes, there’s a problem, and it needs to be addressed. But it needs to be addressed in a way that won’t set up everyone involved for failure. Rather than asking to have our problems taken away, students should be looking for new and better ways to solve them and to make sure no one has them again.
“This would be insane. Throwing money at every single problem is what got America into this terrible economic situation to begin with, so we should just set a precedent to keep doing it for years?”
What are you talking about? We had a recession because our financial sector was overleveraged and overexposed to toxic mortgage-backed securities. When the sub-prime folks started defaulting on their loans, banks realized that they all owned a bunch of securities with varying degrees of exposure to those loans (ie, they realized they had solvency issues). They realized that every other bank had the same toxic stuff on their books, and stopped loaning out their money to each other (and everyone else, really). Compounding that problem was the total stop of the asset-backed commercial paper market (non-banking firms selling short term bonds), a vital source of short-term funds in today’s economy. In short, our housing crisis caused a financial/liquidity crisis which caused a recession.
I wasn’t meaning America in terms of government, but in terms of as a people; that was poorly phrased. I’ve never thought government spending caused the recession. But people started defaulting in the first place because they thought that taking out loans and mortgages they couldn’t pay back would make things better. The mentality of taking out a loan, rather than saving, cutting back spending, or fixing the problem that’s causing you a financial burden definitely contributed to the recession. The way the banks handled sub-prime loans was terrible, but the way most Americans approach debt is equally terrible.
“This would be insane. Throwing money at every single problem is what got America into this terrible economic situation to begin with, so we should just set a precedent to keep doing it for years?”
What are you talking about? We had a recession because our financial sector was overleveraged and overexposed to toxic mortgage-backed securities. When the sub-prime folks started defaulting on their loans, banks realized that they all owned a bunch of securities with varying degrees of exposure to those loans (ie, they realized they had solvency issues). They realized that every other bank had the same toxic stuff on their books, and stopped loaning out their money to each other (and everyone else, really). Compounding that problem was the total stop of the asset-backed commercial paper market (non-banking firms selling short term bonds), a vital source of short-term funds in today’s economy. In short, our housing crisis caused a financial/liquidity crisis which caused a recession.
It had nothing to do with government spending.
I wasn’t meaning America in terms of government, but in terms of as a people; that was poorly phrased. I’ve never thought government spending caused the recession. But people started defaulting in the first place because they thought that taking out loans and mortgages they couldn’t pay back would make things better. The mentality of taking out a loan, rather than saving, cutting back spending, or fixing the problem that’s causing you a financial burden definitely contributed to the recession. The way the banks handled sub-prime loans was terrible, but the way most Americans approach debt is equally terrible.