The student debt bomb

 

In May, 2018 we hit a historic milestone: according to Forbes, student loan debt topped $1,500,000,000.  More than 44 million Americans are carrying student loan debt and it tops all other debt outstanding in the country except mortgage debt.   

From a May report in CNN Money, 42%  of those who finished bachelor degrees had to go into debt with the average being $28,400.  Women hold on average 10% more debt than men and 2/3 of all the debt outstanding is owed by women.    

Courts have made it extremely difficult to get out from under student loan debt if it becomes too much to bear (SBLA).   This is driving some people to leave the country in an attempt to either escape their debts or work their way out from under them (Vice):     

It's a phenomenon that I'm quite familiar with actually," says student loan lawyer and author Adam S. Minsky. "In my experience, people leave because there's a sense of hopelessness and they see greater opportunities overseas, usually through a combination of higher pay and lower living expenses. They think they'll be better positioned to either pay their loans in real time, from abroad, or to save up and be in a better place to address the loans a couple of years from now.

Both of the major parties have tried to grapple with this problem but naturally each has a slant.

The Obama administration offered debt relief programs contingent on working for the government, becoming a teacher or putting in public service as well as some income-based relief (Nerd Wallet).  Their big focus however was going after for-profit institutions:

BDR relieves students of all federal loans if a school used illegal or deceptive tactics to persuade students to borrow money to attend. Gainful employment requires that action be taken — including possible expulsion from the federal student aid program — against vocational programs whose graduates leave with heavy student loan debt. Ninety-eight percent of the programs that officials found to have failed to meet those standards are offered by for-profit colleges.  A program is considered to lead to “gainful employment” if the annual loan payment of a typical graduate does not exceed 20 percent of their discretionary income or 8 percent of their total earnings, my colleague Danielle Douglas-Gabrielle explained here. Exceeding those debt-to-earnings rates means possible expulsion from the federal student aid program. Ninety-eight percent of programs found by department officials to fail to meet the gainful employment thresholds are offered by for-profit colleges.  (Washington Post)

(Which begs the question -  are there no predatory not-for-profit institutions?)

The Trump administration has scaled back the campaign against for-profit institutions, leading recently to:

The top government official overseeing the $1.5 trillion student loan market resigned Monday (Aug 31, 2018), citing what he says is the White House’s open hostility toward protecting the nation’s millions of student loan borrowers.  “The damage you have done to the Bureau betrays these families and sacrifices the financial futures of millions of Americans in communities across the country,” Seth Frotman said. (Huffington Post) 

Neither major party seems to accept that the central problem is a higher education system that forces prospective students into debt and is now fueled by debt peonage.

On both ends of the political spectrum, some recognize this.  Bernie Sanders says education should be tuition and debt free.   In a recent interview with the Wall Street Journal, George Gilder takes aim at vested interests which have profited from the current state of affairs and proposes a radical solution: 

The idea of a “completely providential government” arose in America, and a “whole generation of young people were given college loans in a fabulous national mistake, in which the Republicans participated.” These loans were used by the university system to “increase perks and tenured luxuries and ideological distractions”—all of which led to the “diversity campaigns and CO2 panics” that currently dominate university faculties.

The only way to undo this “vast blunder,” says Mr. Gilder, is to forgive student loans across the board and “extract the money from all the college endowments and funds that were used to just create useless departments and political campaigns.” More than $1.5 trillion in student-loan money is outstanding, according to the Federal Reserve. That money, Mr. Gilder says, “wasn’t deployed to improve education. Not a scintilla of evidence has been adduced that learning has been improved. It was used entirely to lavish on bureaucracies that, in turn, paid tribute to government and leftist nihilism.

Is it possible that the current system does little to make university or college education more affordable?   Instead, does it just raise the market value of higher education by feeding burdensome debt into university and college coffers?

The Modern Whig Party platform is that a public college education should be debt-free.

If you agree, why not join us?