Seth Wenig/AP Photo
A major category of debt not included in the recent bailouts is the $1.65 trillion in student debt.
The Federal Reserve is buying about $9 trillion worth of all manner of corporate and Wall Street securities in order to pump up the financial part of the corona economy. In the course of doing this, our central bank has bailed out trillions of dollars of bad financial bets, and is even creating new asset bubbles. The Dow is up about 6,000 points from its recent low.
A major category of debt not included is the $1.65 trillion in student debt, which was destroying the prospects of two generations of young adults even before the virus struck. A lot of this debt has been securitized, in the same manner that subprime loans were securitized in the run-up to the collapse of 2008. In the corona depression, a lot of student debt will go bad, as new graduates enter an empty job market.
Before the pandemic struck, both Bernie Sanders and Elizabeth Warren had proposed canceling all or most student debt, and paying for that cancellation by raising taxes on the very wealthy. The benefits are macroeconomic as well as generational and social, as this study by Sanders economic adviser Stephanie Kelton and colleagues demonstrates.
The Sanders plan is still a good idea; but if we are tax averse, here’s another one. As long as the Fed is going on a spree of asset purchases, why not have the Fed buy up all of this student debt, declare a jubilee, and just keep the debt on its own balance sheet indefinitely, as it is doing with so much Wall Street debt?
Those saddled with crippling student debt are disproportionately lower-income and people of color. Some 69 percent of last year’s graduating class had to take out college loans. But the affluent had tuition covered by their families. As the economy keeps cratering, it’s inevitable that there will be more bailouts by the Fed. The question we should be asking is: Which bailouts and for whose benefit?
