On Student Loan Relief and the Potential for the American Economy

This morning, while checking some of the news and pundit websites I follow, I found a link to a chart at Mother Jones on student loan debt.

To describe the charts in words, over the last decade, student loan debt in the United States has quintupled. Americans now owe more in student loans than they do in credit card debt.

This wasn’t new to me. The Atlantic ran a similar chart a month ago. Student loan debt has exploded over the last decade, while in the past three years, excluding student loan debt, total household debt has declined.

This got me to thinking.

The American economy is stagnant. For all that the Republicans say that the economy is stagnant and jobs aren’t being created because of regulation (or because, according to Speaker of the House John Boehner, “job creators in America are essentially on strike,” whatever that means), the problem is that there’s no demand. Consumer spending has declined over the past three years, which means that people are putting less money into the economy, and in that environment business won’t invest or hire. The problem with the economy isn’t government regulation, the problem with the economy is insufficient demand.

The Republican solution is to cut the corporate income tax and taxes on the wealthy. Their idea is that by pumping more money into the top of the economy, then money will flow down to the bottom.

But it occurs to me that student loans are taking money out of the bottom of the economy. Jeffrey Williams argues that student loans are a modern form of indentured servitude, to a faceless corporation rather than an individual, and the payment terms on student loans can last for most of a person’s working lifetime depending on payment terms and deferrments.

America’s youth, because they’ve been conditioned to believe that the way to a job is through college, take out onerous loans that sap their financial power for fifteen years or more after graduation.

Think about that. How can those young Americans become the entrepreneurs of the 21st century and create the jobs of the future if they’re burdened with student loans? Daniel Indiviglio wrote in his piece for The Atlantic:

All this college debt could put the U.S. on a slower growth path in the years to come. As Americans grapple with high student loan payments for the first few decades of their adult lives, they’ll have less money to spend and invest. All that money flowing into colleges and universities is being funneled away from other industries where it would have been spent in future years. Of course, this would be a rather unfortunate irony: higher education is supposed to enhance a nation’s growth, but with such an enormous debt burden, graduates might not be able to spend and invest enough to allow that growth to occur.

Perhaps the solution to getting our economy growing again isn’t tax cuts for the wealthy or gutting social programs but student loan relief. Or we need to create middle class jobs that don’t require a college education and the burdens of student loans to acquire.

If we relieve the financial chains on America’s youth, what might happen? We could actually have the small businesses that Republicans say they’re defending when they call for regulatory reform because young Americans would be able to better create and invest in those businesses.

Student loan relief. It’s such a simple idea.

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