Forgive all student loan debt: Interview with Robert Applebaum

[This is a series in which I talk with experts on the topic of student debt.]

What if we got rid of all student loan debt? This is the question Robert Applebaum posed to himself in the midst of the housing bubble and Great Recession. Robert’s answer: it would create millions of new consumers who could then stimulate the economy.

Among student debtors, his idea, needless to say, was popular. He had over 300,000 people join his Facebook group. Over 660,000 people signed his petition that expressed support for a loan forgiveness bill. He’s been featured in The New York Times, Huffington Post, and The Economist.

The idea has gained traction over the years and he’s been working with Representative Hansen Clarke (D-MI) who has recently introduced legislation to forgive student loan debt on the condition that the debtor pays 10% of his discretionary income over 10 years. If there’s any debt remaining after those 10 years, the rest of the debt is forgiven.

I recommend watching Hansen Clarke deliver his speech below, if just because it’ll make my interview with Robert easier to understand. (Clarke misspeaks when he says that only “federal” loans will be absolved; private loans, under this legislation, would be absolved as well.)

Here’s my interview with Robert [abridged transcript]:

Why did you start the organization, Forgive Student Loan Debt?

It was January 29th of 2009, a mere nine days after the inauguration of president Obama—a candidate who came into office on a platform of hope and change. And there we were, debating the Obama stimulus plan, which consisted of more tax cuts, corporate welfare and trickle-down economics. Frankly I got pissed at the terms of the debate. Here we were going back to the same failed policies that got us into the mess in the first place. It occurred to me that if the goal was really economic stimulus then I had a much better, more efficient way of accomplishing that goal. At the time my monthly [student loan] payments were about $500 per month. It occurred to me that if my student loans were forgiven, I would had $500 per month, every month, with which to spend on ailing sectors of the economy. And if you multiply that across the millions of people who have student loan debt, you have a recipe to a bottom up approach to rebuilding the economy.

On your website, you point out that the bank bailouts rewarded bad behavior and haven’t done much to encourage institutional change, but wouldn’t student loan forgiveness do the same?

I readily admit that there is a moral hazard inherent in what I proposed: that future generations would expect to get bailed out because we were bailed out. That is a perfectly legitimate concern. My point is that amassing massive amounts of debt and placing that debt on the shoulders of those who can least afford it is not the only way we can pay for education in this country. Inherent in what I proposed is a strong belief that we need to fundamentally overhaul the way in which we pay for higher education in this country; and what I mean by that is public education—public funding of higher education. Education is not a commodity that benefits only the individual. Rather it is something that should be viewed as a public good and an investment in our nation’s future.

In the case of my friend Josh—he graduated with $66,000 in student debt. Over the past six years, he’s paid off about $50,000. So let’s say, in a couple years, his debt is gone and we pass student loan forgiveness legislation… Would he get any compensation or is he just unlucky?

Well I wouldn’t say he’s unlucky because he has a job that pays enough to let him pay off his debts. In that respect, he is lucky. No he would not receive a benefit from [Hanson Clarke’s] bill. But he’s not the one who needs help the most. Is it perfectly fair? No of course not. But nothing ever is. I pay property taxes yet I don’t have children. I pay Social Security. Who knows if I’ll ever be able to avail myself of social security. There are lots of things that everybody pays with their tax dollars that they don’t directly benefit from. The point is that this would benefit the country as a whole…to get consumer spending back up again so we can restore our economy from the bottom up.

Do you hold out hope that legislation will be passed?

I have hope that we’ve been successful enough in raising awareness, so that members of Congress will see a need to act proactively…I’m cautiously optimistic that Congress will have gotten the message that this is something we need to attack proactively. We cannot wait for the bubble to pop the way we did with the housing market because we saw how devastating that was. Now… I’m a realist as well. I know that Congress doesn’t act unless they have to act, so chances are we’re going to have to wait for the bubble to pop before action is taken.

Previous installments of “Interviews with the indebted”

#1 Interview with $200,000-in-debt grad, Kelli Space. #2 Interview with Alan Collinge, student debt guru who wants to reinstitute bankruptcy protection for student borrowers