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Forgiving Student Loan Debt by Jacob Perkins March 31st 2009 Delicious

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Exploring Student Debt

"Never underestimate the capacity of angry populism in times of economic stress."
— Robert Reich, NYT March 16, 2009

AIG’s plans to distribute $165 million dollars from the tax-dollar funded government bailout in the form of multi-million dollar bonuses sent mini tidal waves crashing around the halls of Wall Street and Washington this Month. "Outrageous" is evidently the word that Democrats and Republicans have reached across the isle to agree upon, and the Obama administration, bracing for a public backlash over their insistence that Wall Street and the banking sector continue to be propped up, seems flustered. Lawrence Summers, director of the president’s economic council, and Timothy Geitner have each contributed their own "outrageous!" to the growing chorus, but are hesitant to mettle with the binding contract that apparently makes the AIG bonuses non-negotiable. President Obama, has come out swinging a little harder: "This (AIG) is a corporation that finds itself in financial distress due to recklessness and greed... Under these circumstances, it’s hard to understand how derivative traders... warranted any bonuses, much less $165 million in extra pay. How do they justify this outrage to the taxpayers who are keeping the company afloat?"

After all of the talk in the presidential campaign season of helping out the invaluable but underrepresented little guy — the small business owner, the school teacher, the community organizer — it’s frustrating to have so much of the available media space dominated by the shenanigans of a small handful of huge financial institutions. In recent weeks, however, there have been a number of peripheral developments that may prove beneficial to those of us who are not entitled, by contract law, to a 7 figure bonus this year. While the giants of the American political and economic spheres continue to circle one another snorting, snarling, and stomping their feet, a small but rapidly growing movement with an impressive web presence has emerged, galvanized by a truly radical idea: bail out poor and middle-class Americans too!

Since the last issue of the htmltimes was published, Van Jones, the increasingly visible activist, lawyer, author, and founder of the Ella Baker Center for Human rights has been appointed Special Advisor to the White House Council on Environmental Quality. It’s still far too early to gauge the influence Jones will wield in Washington, but his appointment within the administration may indicate that as promised, President Obama, is laying the groundwork for progressive economic reform targeted at the chronically poor and disenfranchised Americans who Jones has devoted his life to serving. Jones has argued tirelessly in recent years that millions could be lifted out of poverty building the infrastructure to support a green economy — that we could take a step toward saving the planet by “giving the people who most need work the work that most needs doing.”

As the recession deepens, however, the tendrils of unemployment are climbing up the economic latter into the middle class, and it’s becoming more difficult to identify which people most need special economic attention. People out of work are struggling to find new work, and in many cases are struggling to make ends meet. Young Americans are attempting to establish careers, an in some cases families, but are strangled by monthly student loan payments. Might freedom from educational debt unleash an entrepreneurial wave? Is student loan debt stifling the economy?

Robert Applebaum, a 35 year old attorney from New York, thinks that it is, and has started a facebook group called "Cancel Student Loan Debt to Stimulate the Economy." Conceived in late January of this year, the group has already attracted more than 125,000 members, and has generated a trickle of modest, somewhat consternated media interest. "I can’t believe no one thought of this earlier... (it) might have some legs," says James Pethokoukis from Applebaum’s simple argument is put forth thoroughly and convincingly, and is no doubt being buoyed along by the fact that his proposal is no crazier than any other daily financial headline. "Washington will spend trillions of dollars in unprecedented ways... (This plan) is no less feasible than handing blank checks... to the very financial institutions that caused the problems we face to begin with... What is the argument against directly helping middle class people who are struggling...?" Applebaum challenges, and His point is well taken. There is surprisingly little discussion in the mainstream media or by our elected officials of the millions of college graduates drowning in debt. What incentive is there to take entrepreneurial risks and make investments if simply paying routine bills becomes a challenge? Applebaum goes on to argue that "Forgiving student loan debt would have an immediate stimulating effect on the economy... Responsible people who did nothing other than pursue a higher education would have hundreds, if not thousands of extra dollars per month to spend, fueling the economy now."

After undergoing the requisite barrage of discussion, prodding, and tweaking, such a plan could conceivably be integrated meaningfully into President Obama’s domestic agenda. During the campaign season, Obama was frequently compared to JFK and FDR for calling for "a new spirit of service" to help guide and inform one’s sense of citizenship in America. Ironically, however, many recent college graduates are forced to work in areas unrelated to their education or training because following an altruistic or service oriented career path is not lucrative enough to pay off their college loans. "Many of us go into public service... something that’s repeatedly proclaimed as something society should encourage," Applebaum writes. "Yet, the debt we’ve accrued... (has) crippled our ability to reap the benefits of our educations, causing many to make the unfortunate choice of leaving public service so as to earn enough money to pay off that debt."

As Wall Street and Washington continue to wrestle over the nature of the latest stimulus package and the various bailouts, it’s increasingly clear that a true restructuring of the financial system will demand more attention paid to the everyday Americans who are currently struggling under the tremendous burdens of foreclosure, growing unemployment, and burgeoning debt. How do we go about making public service a financially sound choice of action for young, educated middle-class Americans? Would a plan like the one that Robert Applebaum has put forth enable us to begin to shift away from levels of debt that inhibit college graduates from engaging in society to their fullest potential?