Getting Started Loans

With all the discussion of bailouts and stimulus that has been going on, it may be valuable to consider alternatives for helping to power our economy that are more targeted at some of the people who could use the help most.

I'm not talking about CEOs, or Wall Street or even homeowners. I'm talking about people just starting out in life (as it were); people who just graduated college or are just looking to move out of their parents' house for the first time. This population has the hardest time saving, and is the best bet for actual recovery of loans in the long term, as evidenced by the repayment rates of Federal Student Loan programs. This population would get money and spend it, stimulating the economy, and we the taxpayers are more likely to see that money paid back than the hundreds of billions already spent on financial firms who have no obligation to return that cash.

My proposal is to create a governmental small-loan program for young people (18-29) looking to buy their first car or rent their first apartment. The loan program would max out at $2500 each and require repayment within 24 or 36 months. It could only be used once per taxpayer and only to buy a first car or rent a first apartment. The loan would be used for the car downpayment or the rental deposit. (Depending on complexity, perhaps the program could be structured to pay of credit card debt in some cases, but only if there were some way to get credit card lenders to help fund the program.)

By providing this population with a small loan that they repay quickly, young people will not only build up credit, but also become familiar with the processes involved in buying cars and renting and eventually buying places to live. The money would go into two of the hardest hit sectors - housing and automobiles - without bailing out those industries directly. On the contrary, this program would benefit individuals first, but is a lot more targeted than mailing every tax payer a $300 check.

Best of all, our exposure as taxpayers is small, compared with many of the other proposals on the table. There are no more than 50,000,000 eligible borrowers, so the total possible exposure (and these are loans, not grants or direct investments) is $125 billion, at most. We know that not everyone will take the loan (My wife won't for example!) and again, these loans are likely to be repaid, given how small they are and how short their timeframes are!

In summary, this plan would target the sectors in trouble, help a population likely to make the most of the help, and have a good likelihood of getting paid back in the long run, all for a cost much less than many of the other ideas bandied about.

Give young people small loans to get started, that's my modest proposal to help our economy, and each other.