Mark Gimein, “Yes, There Will Be A Student Loan Bailout,” in Bloomberg Businessweek
Matt Wirz, “Generation Jobless: What Hedge Funds Can Teach College Students,” in the Wall Street Journal
Brett Greene, “The $1 Trillion Student Loan Debt Bubble: An Interview with Robert Applebaum,” in the Huffington Post
“I was extremely frustrated by the terms of the debate over the proposed ‘Obama Stimulus Plan’ in January of 2009. A mere nine days after the inauguration of a man ushered in on a platform of hope and change, and there we were talking about more of the very same corporate welfare/tax cuts/trickle-down economics that anyone with the ability to read a graph knows full well has been an abysmal failure for the middle class … You want to stimulate economic growth? Great — here’s a better, more efficient way of accomplishing that goal rather than handing over trillions of dollars to the very financial institutions that cause the economic mess in the first place.” –Robert Applebaum
There are three things that deeply annoy me about Robert Applebaum’s arguments for forgiving student loans as stated in his interview with Brett Greene (I prefer Cryn Johannsen’s approach of calling it a “jubilee” since “forgiveness” makes student debtors sound like sinners).
(1) ARRA was not TARP. How is giving $500 million to Indian reservations for health care or $53.6 billion to local school districts to prevent cutbacks “more of the very same corporate welfare/tax cuts/trickle-down economics that anyone with the ability to read a graph knows full well has been an abysmal failure for the middle class”? Was $40 billion to extend unemployment benefits until the end of 2009 “handing over trillions of dollars to the very financial institutions that cause[d] the economic mess in the first place”? $70 million for the education of homeless children? $150 million to refill food banks? True, a good chunk (too much) went to tax cuts, but a lot was a stopgap measure to prevent state and local governments from firing teachers, firemen, and police officers, and then filing bankruptcy. It did not re-TARP Citigroup as Applebaum implies. The stimulus was much too small to do any lasting good—and President Obama squandered an opportunity to be the FDR voters hoped he’d be—but canceling teachers’ student debts won’t keep them their jobs if there’s no tax revenue due to mass unemployment, especially if we need teachers irrespective of the economy. Indeed, many municipalities are now starting to file Chapter 9 bankruptcies, such as Harrisburg, PA, and now Jefferson County, AL, which is the largest municipal bankruptcy to date. Arguably, ARRA delayed these. It’s bad enough to have a lifetime of permanent student debt for a degree you won’t use, but it’s another thing if corrupt and incompetent local government mismanagement costs you your pension that you worked for and you’re too young to collect Social Security.
(2) Applebaum provides no evidence of how much direct stimulus a student loan jubilee would have over what time period. Sure, existing student loan debt was north of $600-700 billion in 2009, but that was expected to be repaid over ten to 25 (to never) years. The $787 billion ARRA was mostly spent within the first few years after it was enacted. The amount people would save from monthly payments on student loans over three years would likely be less. Applebaum also doesn’t tell us what the multiplier effect would be, since that’s the standard for measuring the effects of a stimulus on consumer spending. I suspect it would be higher than that of the tax cuts in the ARRA, but without the numbers, Applebaum can’t say that his is a “better, more efficient way of accomplishing that goal.” Speaking of which…
(3) Activists should not be dropping their trousers and bragging, “My single-issue stimulus idea is better than yours is.” (No, I’m not doodling that.) Doing so is really bad advocacy because it tells people who’ve also suffered from the same disastrous economic policies that their problems are secondary to yours when they need relief too. The goal should be building a coalition around unredistributing the wealth, not browbeating potential allies with your preferred stimulus package.
Reader: But LSTB, I scrolled through all 650,000,000,000,000 of Applebaum’s petition’s signatures, and your name (I’m guessing it’s yours) is on there.
LSTB: Yup. I signed it. That doesn’t mean I seriously believe a student debt jubilee would resurrect the economy overnight and usher in a permanent era of prosperity as the petition implied.
Reader: Fine, but that’s not what’s important. You are obviously on paper agreeing with student debt reform—up to and including ordering the Treasury to mint hundreds of billions of dollars in platinum coins to cancel out student debt—so why are you criticizing a student debt activist? Certainly you’d personally benefit from what he proposes, and it’s not like he’s completely wrong or making an eight-figure salary after dumping biotoxins into our drinking water.
LSTB: Those are good points, but there are a few reasons. (1) A student debt jubilee is not an easy sell, as we’ve seen. The Fundamental Attribution Error is strong in American political culture, and unless you’re morally pure (i.e. a rich boomer law professor like Elizabeth Warren who appears to favor restoring bankruptcy protections to student loans), anyone who points out student debt is a problem is considered an angry, bitter, unemployed, promiscuous, moronic hedonist who wants a free lunch. The arguments supporting it have to be better than good, and Applebaum’s strategy is worse than good because on paper it alienates almost everyone except other student debtors. Claiming, for instance, that student debt is morally fraudulent is a significantly stronger position, as is pointing out that unredistributing the wealth also benefits the “hard workers” who forewent student loans and worked twelve 190-hour-per-week part-time jobs to pay for their educations, etc. (2) As far as I’m personally concerned, I won’t say what my debt is or what repayment plan I’m on, but in the age of IBR, I’ve already been bailed out. At this time, I should add that I did zero work in college, never attended any classes, nearly pickled my liver due to alcohol overconsumption, proliferated bacterial VDs, sold overpriced, cut-to-whack heroin to my classmates, scammed the foreign students to pay off my gambling debts (I discharged the first batch when I was nineteen), and bribed the administration into letting me graduate with honors; while I was in law school, I served with distinction on the Campus Hookup and Acquaintance Rape (CHAR) House of Delegates, and in 2005 I cut my writing chops in an editorial titled, “Why Students Are Doing Themselves a Favor by Campaigning to Make Student Loans Permanently Non-Dischageable in Bankruptcy,” in the Rent-Seekers Digest. (3) As the Gimein and Wirz articles show, the long-term default rates are ridiculously high and cosigners will be stuck with a lot of student debt, and this problem must be—and will be—solved because the government won’t want to waste money on college administrators forever.
Reader: Ha ha, very funny, but if you’re already safe from permanent debt servitude, then you have no reason to be angry at Applebaum at all.
LSTB: Honestly, I bought a gallon of locally produced milk, and it was bad when I opened it. It didn’t even have the “NYC Sell By” date on it as it’s supposed to according to Title 24 § 111.33 of the New York City Rules. (No lawyers, I’m not Bluebooking that.) Dumping it down the drain brought me to the breaking point, and reading Robert Applebaum’s contempt for working class Americans put me over the edge. Happy?
Reader: No, I think you’re a hypocrite.
LSTB: *sigh* … Whatever. As a peace offering, here’s a milkshake.
Reader: Cheers mate, thanks … UNGH! GROSS! God! This is fucking rancid! You said you dumped it down the drain! I hate you!
Agreed: I was one of those students that worked full time and went to classes on nights and weekends to finish my undergrad and grad degrees. Of course I envied my classmates conspicuous consumption, either through Mommy and Daddy or from their student loan refund checks. But whatever, I was a man on a mission to finish school so I kept my debts low. Even with work, I still had $20,000 in Stafford loans. Now its down to like $15,000 but I am on track to repay, just as I planned. I’m glad you are not just jumping on the forgiveness band wagon, it’s not a real solution to the problem.
I worked too and went to school, graduating in ’06, and recently paid off my loans. What’s bothered me is this idea that absolutely everyone who takes out student loans ends up in trouble. That’s really not the case, though it may be the case for certain schools and in certain programs, like law. I didn’t join Applebaum’s cause because of the reasons you specify here. But I think that bankruptcy protections should be reinstated, and something done about the insane rising costs of going to college. But the idea that everyone who either has gone to school or is currently going should have their student loans completely wiped clean, even if not one single payment has been made, that’s bothered me.