Student Loan Debt, an Economic Emergency

Student Loan Debt in the US has become an Economic Emergency

It seems like so many years ago that I was first told that a college degree would be important, nay, imperative to my success. Before I knew it, I was attending a local university. Without a thought, I talked myself into tens of thousands of dollars in debt and I still have very little to show for it over 13 years later—except this ever-growing feeling of impending doom. As it turns out, I am not alone. Student loan debt in the United states is an illness resulting from political, social, and economic conditions, becoming the center of an ever-worsening crisis for the American people.

This crisis has been developing for years, and at its core lie several wrongs. Firstly, and most importantly, public policy has shifted to favor the interests of profit as opposed to economic success. In the past couple of years, the GOP has been looking to implement new policy dubbed the PROSPER Act. Under the excuse of reducing the federal deficit, it would cripple the already insufficient program known as the Public Student Loan Forgiveness Program, compromising future entry into public service careers (Palleschi). Looking not too far into the past, other legislation allowed for the Federal Government to assume the profitable industry of financing education (Ross 24). Why does this matter? Well first the federal government assumes the job and the profits of financing education, and now has come full circle to further prevent loan forgiveness, allowing for increased profit as student debts continue to accrue interest. Indeed, if this new proposal were to be passed into law, it would not be the first time that our government has blocked Loan Forgiveness. Obama’s own Vice President, Joe Biden had taken action during his time as a senator to be “the major force behind the bankruptcy reform bill that made it impossible to discharge private student loan debt in bankruptcy” (Farrington). Politics has not only had a heavy hand in the Student Loan Debt Crisis, it is the heart of the matter.

Unfortunately, the crazy ride doesn’t stop here. The actions of politicians and private financiers have largely created the greatest economic bubble of the new millennium—and it could become unimaginably worse. According to Andrew Ross in his article “Mortgaging the Future: Student debt in the Age of Austerity” this bubble and the Student Debt Crisis surrounding it could very well be a key trigger in a debtor’s movement to refuse illegitimate debts (23, 28). In 2016 it was noted that “40 million Americans are indebted for their passage to the new economy. Too poor to pay their way through college they now owe lenders more than one trillion US dollars” (Samuel). As of 2019 that debt has increased to $1.5 trillion dollars. “One and 12 zeros. That’s a lot of money,” says Jill Schlesinger who advises people to be realistic in these modern times. Schlesinger goes on to suggest that parents should forewarn their children that an Ivy League school across the country may not be a possible option, as it is the parents and grandparents who have been assuming most of that debt.

Speaking of the Economy, we are currently in a very precarious position with regards to our economic standing. With the cost of living on the rise, and the huge debt levied against students’ future earnings, how can one expect the economy to survive? Furthering the crisis and its impact on the economy is its impact on the job market. Regarding lower-paying careers that require graduate degrees becoming less and less attractive to the students who would otherwise fill those positions, Amanda Palleschi quotes Andy Cornblatt saying, “Everybody wants to make sure that the ability to attract these kids is not compromised.” With more and more money going to pay off debts, the increasing “costs of upskilling”, and the promise of college being a “hedge against falling below the threshold of employability”, modern student loans have become “debt traps” (Ross 23). It is therefore understandable why Sanjay Samuel speaks of Student Loan Debt like unto indentured servitude. In an oddly relevant comparison, Eric Levitz pointed out that in 2017 the GOP passed a $1.5 trillion tax cut for the super-wealthy and their corporations. Wait—haven’t we heard that number before? Levitz continues by citing research from the Levy Economics Institute of Bard College that points out that this debt, complicated by the rest of the growing costs of modern life, has “depressed the purchasing power of a broad, and growing, part of the labor force.” How is it that we could afford to keep earning profits, if no one can afford to even buy essentials? How are future students going to afford a car, or a home? Simple answer: they can’t.

It is also important to discuss the more social aspect of the Student Loan Debt Crisis we have in America today, and that is of racial and class inequality. The Middle Class is largely affected, carrying the highest amount of student loan debt. African Americans graduate with the highest average debt of all racialized groups (Ross 25). Levitz confirms these statements in a comparison of statistical data illustrating that while student loan debt has increased about equally in White and African American households, the difference is in the “cushion”. After subtracting student loan debt, “The Median Wealth for White Households Aged 25-40” was just above $40,000, while “The Median Wealth for Black Households Aged 25-40,” was falling just below $4,000. That’s a difference of over $36,000! Levitz goes on to quote Marshall Steinbaum in saying “Scarce jobs are allocated to the most credentialed applicants, which triggers a rat race of credentialization, and that rat race is worst for minorities.”

Finally, one would be amiss to neglect the role of colleges and their finances in this crisis. Robert Farrington briefly mentions the story of Amy Klobuchar, a Senator from Minnesota who’s been working to have loans forgiven for students who were “defrauded by predatory for-profit colleges”. This type of financial predation is not unique to Minnesota, or even for-profit colleges. In fact, college administrations like to double-dip:

Student debt is profitable. Only, not on you. Your debt fattens the profit of the student loan industry. The two 800-pound gorillas of which – Sallie Mae and Navient – posted last year a combined profit of 1.2 billion dollars. And just like home mortgages, student loans can be bundled and packaged and sliced and diced and sold on Wall Street—And just colleges and universities that invest in these securitized loans profit twice. Once from your tuition, and then again from the interest on debt. (Sajay Samuel)

The scary part is that this is all perfectly legal. Doug Webber points out that “colleges are partially insulated from basic market forces.” He goes on to point out that because schools get paid the same, irrelevant to the success of the student, some have engaged in outright "bad behavior,"mentioning the same colleges that caused Amy Klobuchar to take up arms in Minnesota. Among the number of issues that Webber points out he suggests that “most significantly, schools can focus on helping students to complete their degrees.” As students who don’t complete degrees often have the hardest time, which is understandable considering that degrees are essentially a prerequisite for a majority of gainful employment in modern-day America—especially when you have a loan to pay.

The U.S. is sick with a financial flu. From short-sighted and negligent public policy to outright theft, the social, economic, and innumerable personal struggles caused by student loan debt are pushing this country’s economy towards what seems to be an inevitable collapse. Andrew Ross put it best in saying “if the United States is to have any kind of durable middle class in the twenty-first century, it will have to match those countries that provide free public education at the tertiary level” (27). While people have a variety of opinions on what the perfect solution would be, it seems rather well-understood that that we need to find one soon, because Student Loan Debt has not only become a crisis—but is waxing quickly into a behemoth of an emergency.

Farrington, Robert. The 2020 Presidential Candidates' Proposals for Student Loan Debt. 24 April 2019. Online Article. 5 January 2020.

Levitz, Eric. We Must Cancel Everyone's Student Debt, for the Economy's Sake. 9 February 2018. Online Article. 5 January 2020.

Palleschi, Amanda. Student Loans Are Too Expensive To Forgive. 27 March 2018. Article. 10 January 2020.

Ross, Andrew. "Mortgaging the Future: Student Debt in the Age of Austerity." New Labor Forum 1 January 2013: 22-28. Digital Document.

Samuel, Sajay. A solution to student debts in America | Sajay Samuel | TEDxPSU. 4 April 2016. YouTube Video. 5 January 2020.

Schlesinger, Jill. "The Cost of Student Debt." The Indicator from Planet Money. Stacey Vanek Smith. National Public Radio, 18 March 2019. Podcast.

Webber, Doug. To Ease The Student Debt Crisis, Hold Colleges Responsible. 6 April 2017. Articles. 10 January 2020.