Sweater Recycle - Tip in comment section: When knitters cut fabric they first stitch close to where they want to cut with a zigzag stitch to secure that the fabric doesn't unravel. This might make it less stressful when cutting into your sweaters.
You can easily make this from a t-shirt. The fringe is the bottom portion that has been cut in strips, (from side to side so it will stretch), and then sewn onto the top part. Fun and easy.