The Next Bailout: Student Loans

There is a Facebook group, Cancel Student Loan Debt to Stimulate the Economy. In fact, a few of you have already joined the group. The basic premise to the group is that if the government really wants the economy to be stimulated forgiving student loan debt would have an IMMEDIATE stimulating effect on the economy.

I'm torn on the issue and part of the reason is that I agree with Michelle Singletary, Color of Money personal finance columnist for the Washington Post. She wrote a column a few weeks ago about people whining about the fact that they were financial responsible and because of that they weren't eligible for any of the government financial bailout programs. I get how everyone thinks that because so many companies, banks and people are getting helped by the government that we should all get help. BUT I agree with Michelle that people that aren't getting bailouts should be HAPPY they aren't in a position where they need a bailout.

So because of this I'm torn on if the government should wipe the slate clean on my student loan debt. Of course I would love the additional money BUT I only pay $176.50 a month on my student loans. And the interest rate is 3%. The debt is really not a burden for me. My credit card debt is a much bigger problem.

The founder of this facebook group says people would be more inclined to spend the money they now put towards student loans. He also says it would be more successful than the 2 stimulus checks we received in the last 4 years. Most people either saved their stimulus check money or put it towards a credit card debt. So for me, if the government was to forgive my student loan debt I would do just that. Put $76.50 a month more in to my savings or Roth IRA and $100 a month more towards a credit card bill.

But on the flip side I get how some people, particularly people with advanced degrees, who pay a hell of a lot more a month in student loan repayments might be more inclined to spend. I can only imagine how much a month a lawyer, doctor, MBA, PHD, etc. pay a month for their student loans. So let's say a person is paying $1000 a month in student loans and their student loan debt was forgiven. Even if they put half in to savings that would still leave $500 that they would probably be more willing to spend and thus stimulate the economy.

If you go to the group or check out a blog post on the idea on U.S. News & World Report you can see the various comments and they go both ways.

Would I like some economic relief? Absolutely. Do I necessarily think the way to do that is to forgive my student loan debt? I'm not sure. I'm the type of person that believes you should pay what you agree to pay. When I signed on the dotted line on my student loans I knew what I was getting myself in to and if I'm going to be a financially responsible person it is my duty to pay it back, as I agreed too. But I don't know because I could be one of the people Michelle Singletary scolded in her column. I don't like that my hard earned money is bailing other folks out but we live in a democracy and things aren't always fair.

What do y'all think? If your student loan debt was forgiven what would you do with the additional funds? For those that joined the group on Facebook, why did you join?