Economic Stimulus: Cancel Student Loans by Executive Order!

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Trillions could be injected into the economy with no tax money needed, and nothing added to the national debt.  


The President needs new ways to stimulate the economy.  After having spent trillions to this end- including $500 billion in business loans that don't need to be repaid-  Wall Street has bounced back stronger than ever, but tens of millions of our citizens have lost their jobs, and many of those jobs will not be coming back.  This is hitting young people and other vulnerable populations particularly hard.  The President has very few stimulus options left, and all actions being discussed will require more tax money, or will increase the national debt...


The President could immediately issue an executive order cancelling all federally owned student loans- about 85% of all student debt. Nothing would be added to the national debt, and no tax appropriation would be needed.  This is the least expensive, and most expedient way to inject trillions into the economy.

CONGRESS CANNOT EFFICIENTLY CANCEL STUDENT LOANS. All congressional loan cancellation plans require raising tax money or cutting other programs to "pay for" them.  Also, the Department of Education has proven itself entirely incapable of, or unwilling to actually cancel loans. Only the President- by executive order- can actually cancel these loans cheaply and efficiently.

Before the pandemic, this was a CATASTROPHICALLY FAILED lending system.  The default rate for 2004 borrowers is 40%, and these people were borrowing less than a third of what today's students are borrowing.  According to the recently resigned Chief Operating Officer of the lending program, 80% of all borrowers were never going be able to repay their loans...before the pandemic!

Unlike all other loans in this country, student loans have been stripped of fundamental consumer protections like bankruptcy rights, statutes of limitations, and others.  Without these protections, student loans have been weaponized against the very citizens they were supposed to help.  

The Result: Lives and livelihoods are being wrecked en masse.  Young people aren’t getting married, starting families, businesses or buying homes.  Older people are being forced to cash in their retirements. Families are being torn apart.  People are fleeing the country.  Some are even committing suicide

This is not right.  This was never right.  

Analysts have predicted that cancelling student loans will increase GDP by about $100 billion for the next ten years, but they do not take into account the borrowing capacity (and thus spending) that such a move would free up. This would be another $1 Trillion injected into the economy in the near and medium term.  Some experts even believe that debt cancellation is the only way to avoid a depression!


President Trump has decried the fact that the government was making so much profit on the loans.  The President should create a far more efficient higher education financing system that doesn’t wreck the citizens, hyper-inflate the price of college, and enable a national threat such as what the Department of Education and its financial partners have become. 

Rest assured, the taxpayers will be fine.  The federal government has been profiting wildly on this lending system for ten years running. Many years of White House Budget data confirm that the Department of Education is- astonishingly- even making a profit on defaulted loans!  While no one can say with accuracy how much of the $1.5 Trillion in outstanding federal loans is interest vs. principal, it is clear that the former is significantly larger than the latter.  So on balance, the taxpayer could more-than break even when these loans are cancelled.

Bureaucrats, lobbyists, and other defenders of the lending system in and around the Department of Education will surely oppose and protest such a move, but 40 million citizens who are being crushed under the weight of this unconstitutional and predatory debt will cheer, and the economy will flourish.

This is an historic opportunity for the President to cure a recession, drain the swamp, create a better higher education financing system, and strongly endear himself to tens of millions of voters who would otherwise have, by and large, opposed him this coming November. 



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-Alan Collinge

Alan Collinge is founder of StudentLoanJustice.Org and author of The Student Loan Scam (Beacon Press)   

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