The amount of student debt has been more than the amount of consumer credit card debt for a while now and, in case you missed it, as of Wednesday the amount of student debt in the country is estimated to be at a trillion dollars. Student debt is the most pernicious form of debt because you can’t discharge it in bankruptcy. You’re a slave for life. Victims of the student debt crisis across the country referred to Wednesday as 1T Day and had protests calling for a cancellation of their debt.
In a classic out of touch moment, my favorite Mormon proposed a solution. Students ought to borrow money from their parents! Nice one, Mittens.
On the other side of the aisle, the Obama Administration has taken some positive steps (which Andrew Leonard has cheerled over at Salon): ending government-backed private loans and setting up income-based repayments at no more than 10% of income on loans that sunset after 20 years. I wouldn’t give Obama too much leeway for being “constrained by the political circumstances” as some have suggested, but these reforms are an improvement and we need to support Obama in his fight with the Republicans (who are evil) on this issue. That being said, there’s a ton of people who are still paying on privately held government-backed loans. And, as a general principle, someone shouldn’t haven’t to pay 10% of their income to the federal government for 20 years just to go to college. What’s more troubling, as Leonard notes, is how tentative the reforms are:
On July 1, the interest rate break included in the 2007 College Cost Reduction and Access Act expires, and the current Republican-controlled House has shown no interest in funding its extension. The recently released Ryan budget also calls for the repeal of Obama’s expansion of the income-based-repayment program.
There’s another problem. As AlterNet’s Sarah Jaffe points out,
[T]oo many of Obama’s solutions simply kick the can down the road. Income-based repayment might make it easier for students to meet their monthly bill, but as they pay smaller amounts each month, interest continues to accumulate and the overall bill gets higher. A one-year fix on interest rates isn’t enough, and even the permanent fix does nothing to shrink the size of the overall debt burden—it simply prevents it from getting even bigger.
So what do we do about this and how do we get there? Rep. Hansen Clark (D-MI) has a bill before Congress that would extend the income-based repayments and sunset the loans after 10 years. Given the current Congress, the bill has no chance of passing, but that would be a nice start. You can sign a petition to support it here.
We need a more structural change that though. The esteemed Ms. Jaffe reminds us,
It’s important to remember that the spike in student debt is caused by a spike in tuition rates—often at state schools, which have borne the brunt of austerity-induced budget cuts as well as years of ideological slicing and dicing. As a recent report from think-tank Demos noted, as state support for public universities has declined, institutions have picked up the slack by charging students more—which becomes more debt.
I like Mike Konczal’s solution. He suggests we make public education free:
Free public universities would function like the proposed “public option” of healthcare reform. If increased demand for higher education is causing cost inflation, then spending money to reduce tuition at public universities will reduce tuition at private universities by causing them to hold down tuition to compete. This public option would reduce informational problems by creating a baseline of quality that new institutions have to compete with, allowing for a smoother transition to new competitors. And it allows for democratic control over one of the basic elements of human existence—how we gather information and share it among ourselves.
(h/t Bhaskar Sunkara)
Of course, the government is controlled by powerful private interests and is certainly not going to cancel student debt and give us a free system of higher ed without a protracted fight. The Occupy Student Debt Campaign has proposed that debtors organize themselves and default en masse. There’s some criticism of this strategy. Because there’s no bankruptcy protection on student loans, it’s actually more profitable for lenders like Sallie Mae (and the government for that matter) when students default because they get additional interest and fees. Organizers counter that while individual defaults are profitable for lenders, if it’s done collectively it will give debtors power and leverage they can’t and won’t have otherwise. I leave you to draw your own conclusion.
A lot of ink has been spilled on the topic of student debt. It’s worth reading all of Sarah Jaffe’s piece over at AlterNet. And if you’re still curious after that, Bhaskar Sunkara has a good run down of the literature on the subject over at Uprising.