Saturday, August 29, 2009

Student Loan Debt Forgiveness for Stimulus?

An interesting idea making the rounds in recent weeks has been to have the government pay off all currently outstanding student loan debt as a means of stimulating the still-in-recession economy.

It is an intriguing concept. The theory goes that this measure would inject money into the economy (the purpose of all stimulus) by freeing up additional spending cash each month for the hundreds of thousands of citizens currently dedicating a portion of their income, not to mention setting aside money in their savings accounts, for debt repayment. Additionally, this would avoid moral hazard, as their was no expectation on the part of these people that they'd be bailed out and there would not be future expectation of bail outs. And, even if there were, since this would reward higher education, the additional people paying for more learning would increase the human capital of the nation.

Of course, Republican Punk doesn't support any additional stimulus. The country is in the process of a slow recovery and we cannot afford any further deficit spending or bubble-creating. Would this have been a good idea if it had been thought of before the pork-basket that was the $700 million plus "stimulus" package. Very possibly. But keep in mind, higher education costs are rising much faster than inflation, primarily due to government intervention that promotes lower-and-middle class people going to college regardless of their ability to pay or whether it is actually in their best interest. So, there are a lot of unintentional consequences that must be considered with any plan.

1 comment:

  1. We actually pay out the stimulus money so very slowly that it's still being spent, is it not?

    You would know better than I would, but it seems to me as it took less than a month to decide to spend trillions of dollars, congress ought to have enough time to intercept/redirect the original stimulus money, should it choose to do so.

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