The issue of student debt is clearly one of the most important issues that we face today. There are many different proposals as to how to deal with it, but it seems that the best decision that can be made would be for the government to appropriate the debt of all debt-encumbered graduates. Despite largely unjustified worries about the budget deficit, our government should adopt a policy that would forgive student debt because an action of that kind is a moral necessity at this point and it would actually help the economy.
Forgiveness of student debt is a moral necessity as it would have a tremendous positive impact on the standards of living. It is clear that the future generation of Americans is the first generation that will face a poorer standard of living than their parents did. Due to the financial crisis, these projections appear not just in America but also in England (Boffey).
This is partly because of the shrinkage of job opportunities, but in America, recent graduates face poor living standards primarily because of their enormous debt. Because of the inability to repay their debt, an astonishing figure of 39% of all recent college graduates had to take on further loans to finance their student loan installments (Cooper). This trend is bound to continue, and an increasing number of young people will be forced to undertake those desperate measures.
As Taylor writes, student loans are designed in such a fashion that not even a bankruptcy can free an individual from them. This is not the case for example with credit card debt (Taylor). Therefore, what we are creating with this insistence on student debt is a future class of debt peons who live their lives under the constant burden of enormous debt that keeps piling up. Addressing the issue of student debt is clearly the task of the United States as a nation dedicated to the ideal of individual progress and upward social mobility.
If we transform higher education from the greatest route of upward mobility that it was in the 20th century to the privilege of the elites and the path to the debt peonage for the rest, we can safely conclude that we have collectively given up on the ideal of the American dream that has been with us since the founding of the country.
Moving away from the moral aspects of this decision and concentrating on the effects that student debt forgiveness would have on the general economy, one can easily show how the decision to forgive all student debt could lead to the creation of a large number of jobs. The ideas of student debt forgiveness and job creation seem so unrelated because over the years, we have become used to the mantra that jobs can only be created if wages and taxes go down. However, at this point, at least, it seems that the mantra is completely wrong.
The root of the crisis that we face today is the inability of the market to absorb the amount of goods that are being offered. In other words, people do not have enough money to buy all the products on the market. Over the last decade, the amount of individual debt has skyrocketed while the wages have remained stagnant, and for that reason, people have less and less money to buy products and services, and consequently, the economy is shrinking. At this point, more than a trillion dollars is locked in the student debt (Taylor).
Forgiveness of such a large amount of debt would instantly free up an enormous amount of money for consumer spending. With that much money in their pockets, young people would certainly go shopping for all the things that their parents had when they were their age but that have now been rendered unreachable.
They would buy household gadgets, technological gadgets, cars, etc. All of this would create a powerful force that would get the economy back on track and create new jobs. With this initial push, it is easy to see how these new jobs would then further stimulate the demand and start an upward spiral.
Turning now to the potential issues with this proposal, one obvious criticism would be that this proposal would create huge deficit issues. As is known, the United States is running an enormous deficit, which despite recent deductions, stands at more than 400 billion US dollars (Schwartz). By adding one trillion dollars to its public debt and having to finance monthly repayments according to the deal that would be made with the banks, the US government would certainly increase its budget deficit.
However, despite popular myths, increasing the deficit temporarily does not have to be bad at all. What makes a deficit increase good or bad is the simple matter of where the money goes. If the money went into a sound investment, the deficit increase will be only temporary, and after a short period, the country will be better off. If, on the other hand, the money is simply thrown away or lost in an unwise investment, then the deficit increase becomes a huge problem.
Now, if the argument given above related to the idea that forgiveness of the student loans would stimulate the economy is correct, it follows that a hypothetical decision on the part of the government to appropriate the debt of the students would be a very smart investment. With the economy up and running, the government would soon begin to collect far greater amounts of money through taxes and the budget would increase automatically reducing the deficit.
Furthermore, there are many other methods that the government could use to reduce the deficit. For instance, it could fix the healthcare system which is running up huge amount of debt or decrease the military budget. In sum, if a policy of student debt forgiveness is as efficient, as I believe it is, the government should definitely give their best try to implement it because the gains would be enormous both in moral and economic terms.
In conclusion, student debt should be appropriated by the government, despite all the worries about the deficit because it can both create jobs and address the grievances of millions of young Americans. Forgiveness of the student debt is a vital national interest as the size of debt with which our young people leave universities is enormous and growing. The debt is beginning to cause the situation in which the new generation will not be able to live with the same standards of living as their parents.
Furthermore, the forgiveness of student debt would be a great boost to the economy as it would instantly create a bigger market for selling more products and consequently the need to hire more people. Finally, there is no reason to worry about the short-term increase in deficit that debt forgiveness might cause as the deficit would be repaid very soon after the economy gets on its feet once again.
Works Cited
Boffey, Daniel. “Middle-class young ‘will fare worse than their parents’.” The guardian. 2013. Web.
Cooper, Michelle Asha. “Five Myths About Student Loan Delinquency.” Forbes Magazine, 2011. Web.
Taylor, Astra. “Don’t hate on millennials for selling out. Start forgiving their student loan debts.” The guardian. 2014. Web.
Schwartz, Nelson. “Tax Revenue Rockets Up, Helping Lessen the Deficit, Treasury Department Says.” The New York Times, 2014. Web.