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How to be in debt


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If you're a student reading this, chances are you're in debt. A 65.6 percent chance, to be precise, according a 2007 report from the U.S. Department of Education, though it's certainly higher by now. Assuming you are indeed a student debtor, a 2011 study by the Federal Reserve Bank of New York predicts you'll owe, on average, about $23,000 in student loans when you graduate. There's about a 1-in-10 chance you'll owe more than $54,000.

There's also more than a 1-in-10 chance that you'll miss payments on that debt as you heroically confront the so-called "real world" after graduation.

Bottom line: The debt you accrue in college is going to stick with you. Americans 40 and older hold a third of all outstanding student debt, and there's a lot of it. While Americans are less in the red on credit cards or mortgages than we were when our debt-fueled economy imploded in 2008, student loans have continued to climb. The issue blew up at the end of last year, when total student debt passed $1 trillion.

But to call that a "turning point" is arbitrary, argues Robert Applebaum, who founded forgivestudentloandebt.com and gathered over a million signatures in support of a federal bill to do what his website's name suggests. While he labels the $1 trillion figure "a disturbing mile marker along the national track to poverty," he says the situation had already been bad for a long time.

Colorado College economics professor Kevin Rask calls that alarmism. "You've got to look at debt per student. That really hasn't changed much," he says. "[Total student debt] is so high because more students are going to college. As an economist, I would argue that's a good thing."

Which is it? Myriad discourses have emerged on the national level, each with its own interpretation of what skyrocketing student debt means for the future of higher education — and the future of the country. If anything is certain, it's that students shouldn't let anyone tell them they haven't yet reached the "real world."

In our strange financial universe, one that only seems capable of resolving a bursting credit bubble by replacing it with another, students increasingly find themselves at the epicenter of a dubious American political economy.

The system works ...

One school of thought can be thrown out right away: the one that casts the entire higher education system as a complete scam, designed only to take the money of more gullible, less responsible individuals.

"For many people ... a college education is required to enter the middle class," says Ann Larson of the Occupy Student Debt campaign, which is attempting to organize a large-scale debt strike wherein students mass-default on their loans.

"To say that is somehow a choice anybody makes, when the alternative is an unlivable situation, then that's ridiculous. It's a requirement in our economy to have a college degree."

Rask — who, it should be noted, is married to CC president Jill Tiefenthaler — agrees that a traditional four-year college degree remains a sound investment. Even while unemployment among bachelor's degree holders has doubled, he says that "it's doubled from, like, 2 to 4 percent." That's not only better than the current national average of 8.3 percent (much less the rate for those with only a high school diploma, which the U.S. Bureau of Labor Statistics puts at 8.7 percent for July), but also better than holders of associate degrees, at 7.1 percent.

Rask also cites a 2010 CollegeBoard study that shows premiums from a bachelor's degree — which is to say the comparative advantage in wages that it bestows versus that of a high school diploma — have steadily increased.

While acknowledging that tuition hikes, especially at private colleges, have consistently outpaced inflation, Rask argues that this doesn't necessarily punish the average student.

"Different schools are in different situations. The sticker price is one thing, but only a sub-portion of the student population ever pays the sticker price," he says. "Schools discount. How they discount, and how much they discount, really varies with the market position of the school."

Instead, Rask blames for-profit institutions for the skyrocketing debt statistics. For-profits like the University of Phoenix have recently faced criticism, with President Obama calling for regulations following a 2011 Department of Education report that 26 percent of all student loans go to for-profit schools, which then produce nearly half of all student debt defaults.

... except when it fails

So basically, "top-tier" colleges and universities with huge endowments tend to raise tuition for those who can afford it, while subsidizing the needs of those who can't. Provided, you know, that you get accepted into one of those institutions — which simply displaces the issue of privileged access onto college prep, and preexisting socioeconomic inequality in general.

Meanwhile, another chart in the CollegeBoard study shows that increasing premiums from a four-year degree come not from increasing wages of degree-holders (they've largely stagnated), but from decreasing wages of those who didn't attend college. This suggests that even if college remains "worth it" in a vacuum, its value is predicated on the exclusion of an entire class of Americans who face an increasingly harsh reality.

And God forbid you can't pay back those student loans. Unlike other forms of consumer debt, student loans, public and private, virtually can never be discharged via bankruptcy proceedings. Many debtors wind up paying many times their original balance to lenders who profit by repackaging that debt as tradable securities, leading a growing movement to label the entire setup as a predatory scheme.

Ultimately, it boils down to a question of values, both of where college education should be situated in society and how it should be funded. "Basic econ: You have something that's scarce — higher education — not everyone that wants it can have it," admits Rask. "If you're going to publicly provide it, you ration it ... with exams. [In the U.S.], to ration it, we make people pay."

That sounds a lot like injustice to activists like Applebaum.

"We've gone away from treating education as a public good, as an investment in our collective future, to an individual commodity. And that's not true," he argues, having worked in the New York District Attorney's office after graduating law school only to move to a higher-paying job in private practice after he couldn't pay the interest on his student loans. "All of society depends on a well-educated citizenry."

To that end, Applebaum supports across-the-board student loan forgiveness as a first step. He acknowledges it would likely ensure that lenders never again offer credit on such a scale, saying, "If I could put private lenders out of business, I would."

"I don't believe that education is a privilege reserved for the very few, but a human right," Applebaum says. "It should be afforded to every member of our society."

It's true: we've heard this line before. With financial and fiscal crises looming, however, it increasingly feels as though we'll soon be forced to make a choice on the role of higher education, and that something might finally have to give.



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