A few weeks ago I was sitting in the kitchen of some friends while they made me dinner. They had recently joined a food co-op so they could buy more organic and local foods cheaply. They had also recently decided to stop paying their student loans.
The two facts are connected. My friends, in their 30s, with B.A.’s in hand as well as a combined debt of over $100,000, just don’t make enough money to pay their Brooklyn rent, pay their student loans, AND buy food. A choice had to be made. They chose to default. And who can blame them? Why were they ever given so much debt for degrees that were never going to translate into high levels of economic capital? Student loan debt is just one of the many ways wealth was transferred upward in the past 30 years leaving a generation of young people saddled with debts they cannot pay.
By now the whole “debt for diploma” piece of the neoliberal economy is old news. We all understand that a variety of forces led students and their families to take on bigger and bigger loans for a college education. Those forces include the deregulation of banking making more credit available to more people, the incredible rise in the cost of tuition partly fueled by the incredible rise in salaries at the top of university hierarchies, and the decrease in federal monies available to students. The results were predictable: large student-loan debts and half of the students with loans not finishing their degrees.
But here’s the news: Student-loan debt is getting worse, not better. According to a Pew study, more college students are borrowing and they’re borrowing more than they were 14 years ago. In 2008, 60 percent of graduates had borrowed money compared to 52 percent in 1996 and they were borrowing more than $23,000 on average compared to $17,000 back then. At community colleges, the rate was $12,600, up from $7,600.
Some of this increased debt for diplomas is the result of yet another effect of neoliberalism: the for-profit university. Over half of the students at for-profit universities borrowed more than $30,000 in 2008. This compares with 25 percent at not-for-profit private institutions and 12 percent at public universities. As with most debt, this sort of student-loan debt is not randomly distributed throughout the population. Instead, it targets populations willing to take a huge financial risk in exchange for the promise of upward mobility. Students at for-profit universities are more likely to be female, older, racial/ethnic minorities, and have children of their own. Think subprime mortgage of the educational market.
But the truth is we can’t blame the student debt load on the rise of for-profit universities alone. Debt levels are going up for not-for-profit schools as well. And the result is a growing number of students are deciding to not pay back their loans. We’re not just talking the students who had to drop out of school because they needed to work. We’re talking even the ones who were “successful” are still unable to pay back the cost of their education plus interest. Apparently 20 percent of elite business-school grads are not paying back their loans. That 80-percent repayment rate was much better than the overall repayment rate for not-for-profit schools, which hovered somewhere around 55 percent. And at for-profit colleges, the repayment rate is somewhere around 36 percent. This incredibly poor repayment rates is leading some financial analysts to warn of the “looming crisis” of student loans that will wreak havoc on the economy.
In other words, paying for higher ed has never been a bigger mess and what is higher ed doing to respond? Not much. A recent report here in The Chronicle revealed that the number of university presidents making over a million dollars had risen from 23 to 30 in the past year. Tenured Radical points out that
Unlike students in Great Britain, who staged an impressive riot last week because of steep hikes in university fees, students in the United States have continued to fork over the money in sufficient numbers to allow this transformation to impede virtually unimpeded. Oh yes, they complain, but they still participate, because like Horatio Alger’s Ragged Dick they believe, despite all evidence to the contrary, in the virtues of free market models.
And it’s exactly this belief in free-market models that will allow for-profit universities to expand and debt for diplomas to rise. Because this country long ago stopped believing that higher ed was a public good and that knowledge should be accessible to all who seek it.
Unless of course large numbers of people refuse to pay off their student loan debts. And then this particular Ponzi scheme will collapse and the universities that have profited from debt will have to reimagine themselves as either a public good to be funded by the a federal government that abandoned them or as technical schools for large corporations that already fund much of their work.
Whatever happens, my friends are stuck with bad credit for bachelor degrees for the rest of their lives. But at least now that they’ve defaulted they can eat.