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Beware The 'Student Debt Bomb', says New Report
The amount of student borrowing crossed the $100 billion threshold for the first time in 2010 and total outstanding loans exceeded $1 trillion for the first time in 2011, according to a new report.
The report titled, The Student Loan "Debt Bomb": America's Next Mortgage-Style Economic Crisis? (pdf), was published the National Association of Consumer Bankruptcy Attorneys (NACBA), and paints a frightening economic picture of the world created by skyrocketing tuitions and high interest rates in a job market that continues to offer few jobs to graduates.
"How big is the danger to the US economy?" the report asks. Most worrisome to those on the ground during the 'mortgage crisis' that sent the world economy into a tailspin in 2008, is that the atmosphere and metrics around the student debt crisis feels much the same.
"As with the mortgage foreclosure crisis, the staggering amounts owed on student loans also will have repercussions for the broader economy," reads the report. "Just as the housing bubble created a mortgage debt “overhang” that absorbs the income of consumers and renders them unable to afford to engage in the consumer spending that sustains a growing economy, so too are student loans beginning to have the same effect, which will be a drag on the economy for the foreseeable future." And continues:
Most Americans see a college degree as the single most important factor for financial success and a place in the middle class. Post-secondary education and training have become essential not only to the individuals hoping to enter or remain in the middle class, but to the nation as a whole. It is widely believed that we need a well-educated workforce to create new opportunities in the United State and to remain competitive internationally.
But, as family incomes, available grant aid, and state investments in higher education have failed to keep pace with college costs, students and families increasingly are turning to student loans to help bridge the college affordability gap. [...]Americans now owe more on student loans than on credit cards, according to the Federal Reserve Bank of New York, the U.S. Department of Education and others. And, because there are fewer people with student loans than there are credit card holders, the debt burden on the individual borrower is considerably higher.
And Jon Christian, writing at Campus Progress, notes:
Part of the problem, according to the report, is that students are taking on increasing debt for degrees that are not particularly lucrative. And any number of traumatic events can results in students missing a payment, according to the researchers, which sets students up to spiral from delinquency to default.
Students aren't the only demographic caught up in the crisis, according to the report: Parents who took on debt for their children, many of them near retirement age, are going to suffer as well.
The Collegians' Stephen Keheler reports on student efforts to fight back against the rising burden of student debt:
[Earlier this week], thousands of students converged on the Capitol lawn in Sacramento to protest tuition raises and demand that state representatives increase funding for schools. They also protested the growing levels of student debt.
“That was one of our demands—complete forgiveness of student loans,” Asami, who was one of the leaders, said. “I have friends that are getting their bachelor’s degree now and they have 30 to 50 thousand dollars of student loans, so they are scared. They don’t know how they are going to pay and so they just keep deferring payments.”
A borrower can defer payments, but interest keeps building up and the debt just gets higher. Student debt has grown from 3 percent in 2000 to 7.5 percent in 2012. This means that recently graduating students aren’t able to buy big-ticket items that would help the general economy to recover.
“I can’t get a new car anytime soon and mine is not running very well now,” said Thompson.
Furthermore, graduates with a massive debt burden find themselves forced to narrow their job-search options. Many do not take entry-level positions in their fields of study because the pay would be too low to service their debts.
The protests in Sacramento are just part of growing movement by students to do something about the problem. At 2011’s Sundance Film Festival, “Default: The Student Loan Documentary,” was shown and then aired on PBS last November. The film humanizes the loan crisis, following several graduates in their struggles to pay back their loans.
In addition, a petition has been started at Studentloanjustice.org to return bankruptcy protection to all student loans.
Here's a clip from the film:
Default: the Student Loan Doc (Trailer)(old) from Default: the Student Loan Docume on Vimeo.
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Show AllIf a doctor say, fucks up, a wealthy person can easily sue the doctor. A poor person? Not so easily.
One trillion in school loan debt will have its day of selective default. Many debtors have no ability to repay. Sooner or later debtors will get fed up and stop paying at all. People are in the streets now in the US, Europe and the Middle East. To relieve pressure and maintain order, student loans will be allowed in bankruptcy - selective default.
Students invested in schooling for jobs that were outsourced so the plutocrats could make even higher profits. Payback is a bitch. Worldwide Selective Default will free us from the bonds of the past.
Does this sound unethical? Wake up. Corporate people go bankrupt and default on creditors and pensioners without skipping a beat. Banks try to shame homeowners from using strategic default in upside down housing markets. State and local governments are getting in on the act. States with (R) governors are planning to default on public employee pensions through bankruptcy - it's coming. The Federal government is out to default on SS by raiding/privatizing the trust fund.
Alabama's Jefferson County filed a $4.23 billion bankruptcy case, the biggest ever by an American municipality. The county spent massive amounts on sewer systems, ($3.2 billion debt), and is now using the bankruptcy courts to get out of paying for the improvements. The Donald would be proud.
Real Estate in Las Vegas has been hit really hard. There is a lot of default goin' on. If you step back and look at what really happened it is much like the free sewer system in Alabama. LV has been developed but not paid the bill. The development is still intact. When the smoke clears, locals will make money in Vegas. Just like locals in Alabama are using the courts to get a free sewer system that other cities could not afford.
It's time to use the system the plutocracy has established to redistribute their wealth. Don't feel guilt about defaulting on your school loan. Fight for legislation to give student loans the same rights that corporate people have - the ability to get a 'fresh start'.
*. The US assumes that the benefit of education is to rent one's will for currency or credit.
*. The US assumes that the benefit of education goes completely or almost completely to the student.
*. The US assumes the primary work of education is done by the professionals who work at schools and universities.
None of these are correct. None are almost correct.
Education, crippled and laden with propaganda though it be, enables people to have something of a voice. Where resistance is fomented, schools are centers of resistance and targets of obvious, violent repression. One can hardly touch a history of Latin America without shaking out examples.
I am a teacher, but let's leave the "thank a teacher" bumper-stickers behind for now: the day you find yourself rolling on a stretcher looking up at a hospital hallway roof, the hero will have been a student (I am hoping for one who stayed awake!) It is hard to imagine anything more short-sighted, self-centered, and self-serving than a well-to-do person who pays for services and imagines that students are the primary recipients of the benefits of education.
I put in a lot of unpaid time to try to teach well, and that is the general character of the profession: it is expected. But I do not live like most of my undergraduate students do. It is likely that I could not do so at my age if I had to. They work, raise young families, and study. They are overworked, underslept, under-respected, charged as much as several hundred dollars each for a textbook that could more easily be delivered as a .pdf file, and then billed for the experience over a decade or more, frequently for more than the cost of a home.
A couple of decades ago, I spoke with a good friend, a politically involved Republican and a banking CEO. He said that students would have to be charged more money to force grads to devote their lives to people with money. The problem, as he put it, was that if students were allowed to graduate without substantial debt, they would be able to choose their professions according to whatever ideas about the world they might have about helping people or the world or doing rewarding work rather than being forced to sell themselves to the highest bidder to "repay their debt."
A couple years ago, the nurses' locals went on strike for shorter hours, and one of the schools I teach at turned away over a thousand students for the nursing program at the same time to avoid paying teachers, even while construction continues apace on new classrooms because the public passed local initiatives for funds earmarked for construction. This semester I turned away more students from classes those I am paid to teach.
When the administration cut wages, benefits, hours, and classes, the letter read, "You deserve better." I would like to think so. But why do so many people imagine that students do not?
thank you for this well thought out post. excellent comments especially....
{The problem, as he put it, was that if students were allowed to graduate without substantial debt, they would be able to choose their professions according to whatever ideas about the world they might have about helping people or the world or doing rewarding work rather than being forced to sell themselves to the highest bidder to "repay their debt."}
the powers that be do not desire an educated public capable of addressing our societal needs. they want to perpetuate the myth that only people with resources are capable of helping others. creating debt slaves - creates the illusion (ergo the construct of reality) that only those with resources can participate in positive social change that doesn't require financial compensation. debt slaves must look after their own selfish interests to survive.
...peace...
That wealth of knowledge and culture is about the only wealth worth anything that our civilisation created - and we use it so that dead labour can enslave and leech upon the living. What right do we have for it? Especially looking at how capitalism handled the actual innovators, inventors and scientists - not the bullshit psychopathic fakes like Jobs or Gates or the rest of the evil fucks, widely admired among ignorant liberal dumbasses? In addition, our selection process for who deserves and what kind of knowledge is just absolutely sociopathic: it is about who could expand concentrated power and private wealth the most, who could deskill workers best, who could take power of individuals, and individuality itself and turn it into a commodified product most efficiently. And of course in the service of these very worthy goals, we don't give a flying fuck about the amount of resources wasted. "Waste" is only important when it's about "wasting" labour.
The timing is particuarly fucked up: that we think we have the right to burden new generations with the immediate cost of acquiring the intellectual tools to handle the shit we created for temporary material wealth (that our generations may have been the last to enjoy) and then are throwing young people into is just...I can't find the words. Anyone who enjoyed to some degree the historically unprecedented levels of material wealth of the past few decades and can even dimly see what the actual costs of that will be for future generations should be able to understand this I think.
This is my honest opinion. And honestly, I have no fucking sympathy, despite being somewhat civilised in responding to their opinion (which usually isn't even an actual opinion, just regurgitated propaganda shit they don't even understand very clearly), for people who think it's OK to make young people pay throughout their lives for knowledge produced by society through its history. And of course the situation is even worse: it's not about making them pay, it is about *controlling* them, deciding what they can do with their own future - all based on irrational bourgeois fake "economics" - a worthless piece of shit ideological pseudo-science.