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.
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.
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.
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.