Crushing student loan debt: America indentures its next generations

If you’re wondering why many educated young folks are becoming part of the Occupy movement that is sweeping the nation, the horrible job market and crushing student loan debt make for a powerful motivation.

Perhaps this signals a long-awaited awakening. Maybe, just maybe, they are beginning to understand that preceding generations — having created an economy that sank under the weight of subprime loans and easy credit — are front loading the costs of further education and training onto their shoulders.

Human toll

In a segment for National Public Radio (link here), Jennifer Ludden tells the story:

With the nation’s student-loan debt climbing toward $1 trillion, it’s taking many young people longer than ever to pay off their loans. Two-thirds of college students now graduate with debt, owing an average of $24,000. But some borrow far more and find this debt influencing major life decisions long after graduation.

Ludden goes on to tell the stories of graduates who are dealing with debt so mountainous as to negatively affect plans concerning careers, marriage, and children. Escalating monthly payments of over $1,000 are not unusual, with some payment plans stretching out over 30 years.

Some of the culprits

Alex Pareene, writing for Salon (via AlterNet, here), aptly observes that members of older generations who attended college when it was more affordable just don’t get it:

They don’t understand that these kids accepted a home mortgage worth of debt before they ever even had a regular income, based on phony promises, and that the debt is inescapable, regardless of life circumstances or ability to pay.

Bankruptcy laws

Those who are unable to secure a decent job in this meltdown economy cannot look to the bankruptcy courts for relief, thanks to a federal bankruptcy law that was largely written by the credit card industry:

Thanks to the horrific 2005 bankruptcy bill, one of the most nakedly venal modern examples of Congress serving the interests of the rentiers and creditors over the vast majority, debtors cannot discharge student loans through bankruptcy. The government is shielded from the risk, and creditors are licensed to collect by almost any means they deem necessary, giving no one in charge any real incentive (beyond basic human decency) to fix the situation.

For-profit universities

Pareene also singles out a group of powerful, wealthy for-profit universities who are enrolling economically vulnerable individuals and saddling them with student loan debt in return for degrees of marginal value:

The impossibility of escaping student loan debt is why an industry sprang up to foist useless, overpriced degrees on vulnerable people. It’s a scam, but a profitable one, and respectable enough for major establishment players to feel comfortable making a killing on it.

(Without defending the avaricious business practices of some of the for-profit universities, I would add that many of the so-called non-profit schools and state universities are charging exorbitant tuition rates, also requiring students to go deeply into debt.)

A coming meltdown?

The human toll of these loans on new graduates is bad enough. But what happens if these indentured souls become largely unable to pay off their educational debts and start defaulting en masse?

More than a few banks have made out like bandits from the student loan industry. It’s not unlike how they and their brethren cashed in on the corrupt subprime housing market — until, that is, the bottom fell out. Are they — and we — about to pay for excessive profiteering from student borrowing?

For years, those in the know about higher education financing have suggested that college tuition and student debt are reaching unsustainable levels. I believe we have arrived at that scary and precarious moment. Stay tuned.

***

Oct. 26 update: Very coincidentally, the Obama Administration announced yesterday that in 2012 it will institute a cap on student loan repayments, limiting them to no more than 10 percent of a graduate’s income. Alister Bull reports for Reuters, here.

3 responses

  1. In my opinion colleges and universities deserve a lot of the blame for this problem. The higher educaiton machine pushes the “value” of more and more degrees that send people spiralling into debt for dubious or non-existant benefits. For example, librarians at colleges now need not one but two Master degrees ( the Masters in library science and a masters in a subject area) to work in a college library and for a pittance by the way. If you don’t have a PhD forget about being a library director. In this economy — if you graduate without a job, don’t worry they tell you — go to graduate school and get yet another degree — so that you can be in even more debt and as a bonus you will still be without a job. Education is important — vital to the country. I treasure my public library, without which, my continuing education would cease. But for our children’s sakes we need to decide how much if it is necessary and how much of it is just feeding a greedy machine that is not much different from the Wall Street banksters.

  2. I have often wondered what the unemployment statistics would look like if those students were not so busy accumulating largely useless degrees…and debts. Strange that the economy used to work better without such a highly educated workforce. The key to many highly compensated positions is still who you know…and many of us raised our children to believe that hard work and intelligence would be rewarded.

    I have also worked with individuals who spent a lot of time and money buying credentials that did not in the least qualify them for the positions they held in the working world. Seems for all their education they still didn’t think well…and didn’t have to. The hierarchical structure of the workplace ensured that they would never be held accountable to the standards outlined in their job descriptions.

  3. This is just another link in the long chain of hypocrisy. Let’s see…we can spend a billion+ dollars daily to maintain two military invasion occupations. Then spend many more billions investing in “restoration” of those countries.

    Yet, my government will come after me forever for a 10,000 dollar loan tacking on interest. Not to mention the fact the U.S. is the only country that maintains and drains tax dollars for over 700 military “occupying” installations and bases around the world.

    Are you aware any or all of these bases simply exist to feed the military machine called the arms industry which is BIG business. Billions that could be used to fund the education system. The trillion dollar debt of student loans is even shameful than the Wall Street bailout.

    I and others are starting a grassroots campaign to require Congress to pay for individual student loan debt before military and foreign investment. We know it’s an uphill climb giving the nature of the corrupt greed of the corporate banking beast and “his” paid for “Judases” in Congress.

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