Prediction: a student debt jubilee would have a larger short run stimulus effect than predicted by its modest direct financial effects (correctly modeled as mainly an immediate reduction in debt service plus any immediate effects of the reduction in future debt service).

The reason being that weird cultural norms around debt plus debt aversion cause debt holders to - - to varying degrees - - forgo taking on additional debt, avoid making large life changes, avoid taking financial risks, and avoid making large purchases. The short run effect of

debt forgiveness thus is the straight forward financial effects + a bunch of spending associated with the rash of new big decisions being made (home and car purchases, home remodeling, job changes, migration, weddings, new businesses, etc.).

My best evidence: https://www.nber.org/papers/w25810 

Weird to cite at first glance because the debt and spending story I'm pitching isn't obviously present here, but the migration and job change story is. If you bear in mind the subpopulation is deeply indebted and delinquent on the debt,

it makes sense to me that they're likely not on the margin of making new big purchases (though they could be doing so, if their debt reduction would've been larger but for some other purchases they made b/c of treatment) - and yet even these people are delaying career changes and

migration, apparently because of debt! So, in a sample of people less indebted overall and not delinquent on their student loans, I'd expect even more big changes and for said changes to extend into things that involve lots of new purchases.

That said, I don't expect this effect to turn the multiplier on a dollar of debt relief into a dollar of cash transfer. But I do expect it to look measurably better than a dollar of tax relief.

@besttrousers @jdcmedlock

There's also more to say about long run effects. Obviously this argument gestures to the long run on some level (moving to a better job incurs some short run spend that can boost the multiplier, but the long run story is more important). I suspect if you could choose between a

debt jubilee and a tax cut bill with the same reduction in total payments to the government per year over the same time period from the same people, you'd prefer the debt jubilee. Related: https://scholar.harvard.edu/straub/publications/indebted-demand

Also, since people are talking about it, yes, a federal debt jubilee probably isn't distributively optimal, unless you galaxy brain your way into the fed buying lots of credit card debt from poor people and forgiving it or something. No real way of escaping that otherwise.

I think of student loan forgiveness as the lefty version of a tax cut. Better than nothing/equivalent tax cuts, suspiciously beneficial to its louder advocates, worse than other things you'd do if you could do them. But you play the hand you draw, not the one you wish you drew...