Students Across the Nation are Planning Something Unprecedented to End Student Debt Forever

[Jim Lane]

90. You say it's not a problem from the point of view of the overall economy, but....

That doesn't answer creditors' objections.

The current debts are owed by, e.g., Gary Graduate to First Federal Exploitation Bank, N.A. How does that debt get canceled? If the government just declares the debt canceled, First Federal, which carries numerous student loans, is in effect being heavily taxed. A big chunk of its assets just went poof. That might not be constitutionally permissible, but even it is, it would be widely perceived as unfair. If you say that First Federal is rich, well, so are Microsoft and Merrill Lynch and GM and a bunch of other companies. There's no reason that a handful of companies should each take a big hit while most companies and individuals play no role.

The only fair thing would be for the federal government to buy these debts from the creditors at their fair market value (which might be less than face value, depending on prospects for repayment) and then cancel them. That would be hugely expensive.