Partial Readings: Student Debt
Partial Readings: Student Debt
Partial Readings: Student Debt
Dissent and Jacobin will host a panel at Left Forum (Pace University, March 16-18) on student debt. Last fall Occupy Wall Street brought mainstream attention to the issue, beginning to transform debt from private burden to political injustice. As panel participant Jeffrey Williams put it on this blog, ?College student loan debt is a defining political issue of the rising generation.? In
College student-loan debt has revived the spirit of indenture for a sizable proportion of contemporary Americans….Because of its unprecedented and escalating amounts, it is a major constraint that looms over the lives of those so contracted, binding individuals for a significant part of their future work lives. Although it has more varied application, less direct effects, and less severe conditions than colonial indenture did (some have less and some greater debt, some attain better incomes) and it does not bind one to a particular job, student debt permeates everyday experience with concern over the monthly chit and encumbers job and life choices. It also takes a page from indenture in the extensive brokerage system it has bred, from which more than four thousand banks take profit. At core, student debt is a labor issue, as colonial indenture was, subsisting off the desire of those less privileged to gain better opportunities and enforcing a control on their future labor. One of the goals of the planners of the modern U.S. university system after the Second World War was to displace what they saw as an aristocracy that had become entrenched at elite schools; instead they promoted equal opportunity in order to build America through its best talent. The rising tide of student debt reinforces rather than dissolves the discriminations of class, counteracting the meritocracy.
Mike Konczal?s blog, Rortybomb, is a great resource for those interested in the nuts and bolts of student debt. In a post last November, Konczal drew up a graph showing changes to student loan laws over the last half-century: the slow erosion of debtor protections until the loans were no longer dischargeable, had no statute of limitations, and allowed creditors to suck up money from Social Security payments. The next graph shows an elegant and simple solution: turn the legislative clock back to 1989! Konczal has also written posts on the idea of a debtors? strike and why student debt shouldn?t be a part of what Suzanne Mettler calls the ?submerged state.?
?The Project On Student Debt estimates that the average college senior in 2009 graduated with $24,000 in outstanding loans,? wrote Malcolm Harris is his n+1 essay ?Bad Education,? published last April.
Last August, student loans surpassed credit cards as the nation?s single largest source of debt, edging ever closer to $1 trillion….
Since 1978, the price of tuition at US colleges has increased over 900 percent, 650 points above inflation. To put that number in perspective, housing prices, the bubble that nearly burst the US economy, then the global one, increased only fifty points above the Consumer Price Index during those years.
Harris extends the comparison between the housing and student debt bubbles:
While housing prices are based on what competing buyers are willing to pay, postsecondary education?s price is supposedly linked to its costs (with the exception of the for-profits). But the rapid growth in tuition is mystifying in value terms; no one could argue convincingly the quality of instruction or the market value of a degree has increased ten-fold in the past four decades (though this hasn?t stopped some from trying). So why would universities raise tuition so high so quickly?
The answer, writes Harris, isn?t instruction; more and more classes are taught by underpaid part-time professors or graduate students.
As faculty jobs have become increasingly contingent and precarious, administration has become anything but. Formerly, administrators were more or less teachers with added responsibilities; nowadays, they function more like standard corporate managers?and they?re paid like them too?.And while the proportion of tenure-track teaching faculty has dwindled, the number of managers has skyrocketed in both relative and absolute terms. If current trends continue, the Department of Education estimates that by 2014 there will be more administrators than instructors at American four-year nonprofit colleges.
These administrators often push for capital-intensive projects, treating the university more like a corporation:
These expensive projects are all part of another cycle: corporate universities must be competitive in recruiting students who may become rich alumni, so they have to spend on attractive extras, which means they need more revenue, so they need more students paying higher tuition.
What do these ballooning universities look like? Another Left Forum panelist, Andrew Ross, explained recently how the student body has become a major and unwilling underwriter of New York University?s massive 2031 expansion plan. ?The amount of money that NYU?s spent so far in mounting its campaign to have the rezoning and other ordinances approved by the city council has come from the general operating budget?student tuition,? he told NYU Local. ?And since the administration will not provide any of its own accounting of how they?re going to pay for this $6 billion project, our reasonable estimate is that student debt will be the most likely source of the revenue. It?s the only revenue stream that NYU has that it can depend on.?
Sarah Jaffe (another participant in our Left Forum panel) has looked at the potential for this student debt bubble to burst.
The story is the same around the country. The economy is stagnant, the job market terrible, and graduates who used to believe their degrees would lead to good jobs are struggling. Meanwhile, the unforgiving student loan system continues to penalize them for their inability to pay.
?Student loans are not really comparable to housing loans, though? writes Jaffe: ?if you default on your student loans, there’s nothing to repossess. Instead, you?ll face a drop in your credit rating, and constant pressure from?collection agencies.?
Even if mass default isn?t likely to happen the same way mortgage defaults did?the cost of college and debt is already slowing the economy. ?As Americans grapple with high student loan payments for the first few decades of their adult lives, they’ll have less money to spend and invest,? [Daniel Indiviglio] wrote, pointing out that all the money going into colleges and the pockets of lenders in the form of interest is being funneled away from other places it could be spent. ?Of course, this would be a rather unfortunate irony: higher education is supposed to enhance a nation’s growth, but with such an enormous debt burden, graduates might not be able to spend and invest enough to allow that growth to occur.?
For a concrete example, see this recent Bloomberg Businessweek article on how student debt is ?stifling home sales.? ?Although housing prices have fallen by about one-third from their 2006 peak,? reports Bob Willis, ?young adults who are starting to move out of their parents? houses want to rent, not buy. While single-family housing starts posted their worst year since 1963 last year, multifamily housing construction has surged as more Americans rent.?
Jaffe has also reported recently on how the situation could get worse: ?Unless Congress acts soon,? she wrote last week, ?millions of college students could see the interest rate on their federal student loans double this summer?adding $5,000 to the cost of an education for students who pay off their loans in 10 years, and around $11,000 over 20 years.? Today, we were happy to learn that Congresswoman Lois Capps (D-CA) introduced legislation to keep interest at the lower rate. There is some other hopeful news: the Consumer Financial Protection Bureau has announced that it will begin scrutinizing unscrupulous lenders at for-profit and trade schools. Representative Hansen Clarke (D-MI) has also recently announced that he is drafting bills to relieve student debt, along with a ?student loan borrower bill of rights.?
Tamara Draut, Vice President of Policy and Programs at Demos, has written about some ways to address the growth of student loans. Demos also recently compiled ?The State of Young America: The Databook,? an essential resource on the economic troubles facing young Americans. For a more biting take on the state of the youth, read Connor Kilpatrick?s broadside ?Thirty More Years of Hell.? In it, Kilpatrick argues that student loans are just one of many obstacles facing the Millenial generation. His response evokes that slogan of 1968: ?Be realistic, ask the impossible.?
We Millennials have all the same ludicrous delusions of grandeur as our parents, but now, we?re ready to shuck capitalist gospel out the window. The Boomers call us spoiled, and ask us to do more with less, telling us to tamper our dreams. But the best thing we Americans have going for us is our entitlement, sans the free-market faith….
That?s what Occupy is for most of us–a guttural roar that capitalism will not do. The Boomers are right that it all smacks of entitlement. We are entitled. The world, and this country in particular, is awash in capital. With the billions floating in and out of this city every day, it?s amazing that you can walk around Manhattan and not end up with at least a grand worth of cash sifting around in your shoes like beach sand. The big lie is that the coffers are empty and budgets must be balanced.
