Wednesday, March 25, 2009

Student Loan Forgiveness

Apparently a minor movement has been building to forgive (to one degree or another) that tens or hundreds of thousands of student loan debt that many college and professional students have incurred (via Allahpundit):

Student loan repayment can be difficult for young people starting off their careers and has become even more challenging now with the economic downturn, as recent graduates lose their jobs or struggle to land one. Groups like Applebaum's on Facebook, and other organizations such as, are part of a new movement advocating for an overhaul of the country's troubled student loan system. Frustrated with often unaffordable monthly payments, loans that are nearly impossible to discharge, and restrictive loan repayment plans, student borrowers are pushing the government and private loan companies to devise new solutions.

Allahpundit has this to say:

Unfair to those who repaid their loans or didn’t have loans in the first place? Sure — but no more so than dumping oceans of TARP cash on the banks that created the crisis. And if, if the stimulus effect of loan forgiveness is as profound as these guys think, taxpayers would be repaid in the form of a quicker economic rebound. One question, though: Why do they assume forgiven debtors would spend the savings instead of pocketing them or using them to pay off other debt a la tax rebate checks? The answer, maybe, is the sheer amount of money we’re talking about. In my case, forgiving federal loans would save me north of $8,000 a year; toss private loans in there and it’s a cool ten grand. I’d sock some of that away, but with tens of thousands dollars suddenly freed up, I’d also start looking at home prices in the area. Stimulating! Exit question: Who’s onboard?

I'd be lying if I said I don't think something similar. Now I certainly do not believe that for most graduates the slate should just be wiped clean. But to me there is no doubt that many students incurred debt with the expectation that they'd be able to repay that debt by virtue of the jobs that their college and professional degrees would permit them to obtain. Graduates were already finding themselves severely disappointed (and severely in debt) well before the present economic crisis began, but the situation is now dramatically worse for those who find themselves graduating into an economy where opportunities are far and few between. Were they irresponsible to incur debt to attend college? Hardly, in my opinion, given that most young people are told that college or a professional degree is more than worth the debt incurred obtaining their degree (and until tuition began to rise dramatically in the last decade or so, going to college didn't require incurring so much debt.)

How difficult would it be to expand on programs that permit students to defer debt, or lower their interest rates, or get some measure of debt forgiveness in exchange for public service? I don't know. Not that difficult I would think, and maybe somebody should be looking into that.

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