By Aaron Foley
Can lessening the amount of student loan debt really help to stimulate the economy?
It's a billion-dollar question -- maybe a trillion-dollar one -- that several lawmakers think they have the answer to. Last week, President Obama put forth an initiative that would allow some federal student loan borrowers to lower their payments or consolidate their loans.
U.S. Rep. Hansen Clarke (D-Detroit) had been pushing for more attention to the amount of student loan debt millions of Americans carry. When Obama visited Detroit on Labor Day, Clarke told the thousands in attendance that he had met with Obama one on one about not only student loans, but also job creation and other issues facing Detroiters.
Speaking to MLive by phone, Clarke elaborated on why student loan debt has to lessen, how it can be done and the potential long-term effects.
What's the link between student loan debt and the economy?
"I introduced the resolution in the House that took the lead on asking Congress to cut student loans, to forgive certain student loans as a way to create jobs in economy. You've got these very people, college graduates, who want to buy a home, start a business or make an investment, but who can't do any of that because of this student loan debt that's burdening them. I actually launched the initiative as a way to help promote financial security so they have money saved up in case of an emergency. Many college graduates won't even go to graduate school because they can't afford the tuition because of the debt they have."
"I was happy to see that the president is listening to what the people wanted. My idea came from the manufactured federal debt crisis that we had right before Congress voted to increase the debt ceiling. Congress was on the verge of collapsing, but when I talk to people here in Detroit, they're saying 'federal debt is not a concern of mine. It's that mortgage I have to pay next month.' It's not just brining jobs to Detroit. It's helping people who are working right now keep their money so they can spend it."
What made you go after legislation to help borrowers better pay off their student loans?
"In my opinion, the student loan debt has made a mockery of the American Dream. They tell you to go to college, and that if you did all that sacrifice and work, it will pay off for you. But no, it won't."
You've proposed that student loan debt should be discharged in bankruptcy. Could you elaborate on how exactly that would work if such a measure would pass?
"The legislation I'm working on right now, it would allow student loan debt to be discharged in bankruptcy, but it would be much more than that. We're also going to be looking at a way for the federal government to use savings to transfer much of the student loan financing to a grant-based way of funding education. We're also working on a package of bills that would provide comprehensive relief for people struggling to pay their debt right now and those who have fallen behind."
Won't there be an upsurge in bankruptcy filings if people could discharge their student loans?
"No, I don't think so. It's very hard to declare bankruptcy now because the bankruptcy laws have changed. But people do make choices. I say stop spending money on things you don't need, and stop using credit cards. We do have a culture right now in this country that in order to be fulfilled in life, you have to buy more things. That does have to change. That's due to excessive marketing. As a guy who was the first in family to go to college, it was a burden for me, but it was an opportunity. It will cost someone twice as much now to get the kind of education that I got."
Do you have any student loan debt right now?
"No, I paid them off -- I carry no personal debt. I did that deliberately after I won the primary. I decided that I would live what I'm preaching, and promote that type of efficiency. I used to use [loans and credit cards] heavily, I understand the culture -- that living for today. But debt is a crippling burden on us."