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Can Forgiving Student Debt Help Fix the Economy?

An online petition asking for a one-time bailout of student loan debt has gathered 670,000 signatures. But is it a realistic way to help the economy while preserving the notion of fairness?

What’s the Latest Development?

Faced with $88,000 of debt incurred through student loans, Robert Applebaum started a petition in 2009 that asks for a one-time bailout of American student loan debtcurrently valued at $1 trillionas a way to stimulate the struggling economy. “With the stroke of the President’s pen, millions of Americans would suddenly have hundreds, or in some cases, thousands of extra dollars in their pockets each and every month with which to spend on ailing sectors of the economy,” Applebaum writes in the petition. Since 2009, the Occupy Movements have gotten strongly behind Applebaum’s message. 

What’s the Big Idea?

Because student loans are not erased by declaring bankruptcy, banks have little incentive to screen candidates according to whether or not they can pay the loans back. Meanwhile, universities have little incentive to curtail tuition increases, which are occurring at twice the rate of inflation, because they know students will be given generous loans. “Perhaps the biggest roadblock to Applebaum’s plan is that a one-time bailout is a temporary fix to an on-going problem. What’s really needed is a long look at how higher education in the U.S. is financed.” 

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