Robert Applebaum, a 35-year-old attorney from New York, was watching the TV news in late January when a piece flashed across the screen about the US$700 billion Wall Street bailout—money that seemed to him to be flowing without accountability to the very people that caused the crisis. That’s when he came up with what he figured was a much better way to rescue the economy: forgive student loan debt. “Why not free up hardworking, educated, middle-class Americans of their student loan debt, such as myself, so that we would have hundreds, if not thousands of extra dollars to spend each month?” he asks.
His proposal, while hardly mainstream, has been gaining a surprising amount of support lately. A Facebook group he started, called “Cancel Student Loan Debt to Stimulate the Economy” has over 100,000 members, and has been circulating a petition it plans to send to President Barack Obama. (It has over 30,000 signatures.) “I think that I’ve obviously hit a nerve,” Applebaum tells Maclean’s.
Supporters argue this isn’t about a free ride or an easy out of their debt obligations. Rather, it’s a plan that could have a very meaningful impact on the economy. “Forgiving student loan debt would have an immediate stimulating effect,” the Facebook site states. “Responsible people who did nothing other than pursue a higher education” would have the money to spend on things like cars and down payments on houses rather than being caught in the often punishing cycle of student-debt payments.
The idea has a certain appeal to it, if only because of the major pitfalls of the current stimulus package. The U.S government has already handed General Motors and Chrysler US$17.4 billion. They will likely need another US$20 billion. Canada could end up lavishing them with $10 billion. The stimulus efforts in the U.S., all told, now total over US$10 trillion. Whether this largesse will fix the economy is a subject of much debate. And one that leaves a bad taste for a lot of people. Wall Street is hardly an innocent victim here and auto makers have long been beneficiaries of public money, with less-than-stellar results. The only certain outcome is massive public debt, which younger generations (often enough, those with student debts) will be saddled with long into the future. “My proposal doesn’t ‘break the bank’ any more than every other approach Washington has done or is considering,” says Applebaum. “It’s simply a different approach.”
A student loan bailout would arguably have some useful effects in Canada too. There is about $13 billion worth of student debt in this country—a figure that increases by $1.2 million a day, according to the Canadian Federation of Students (CFS). Student groups here have long preached that government spending on debt relief for students is good for the economy. There’s a “compelling argument” for relieving an entire generation of its student debt obligations, says Ian Boyko, the campaigns coordinator with CFS. It would allow young grads to do things like invest in the housing market, he adds.
The proposal is long shot for grabbing Washington or Ottawa’s attention. But at the very least, says Applebaum, it has “opened a dialogue that shifts the focus away from the typical Washington solutions to our economic problems and has gotten people to start thinking outside the box.”