Student debt and tuition hikes: destroying the lives of America's children

In Rolling Stone, Matt Taibbi takes a long, in-depth look at the scandal of student loans and tuition hikes, a two-headed parasite sucking America's working class and middle class dry as they plunge their children into a lifetime of ballooning debt in the vain hope of a better, college-educated future. The feds keep backing student loans, and the states keep cutting university funding, so the difference is made up by cranking up tuition and shifting the burden to future grads. Meanwhile, the laws that prohibit discharging student debt in bankruptcy, combined with ballooning default penalties (your $30K debt can rocket to $120K if you have a heart-attack and are bedridden and can't make payments) and the most ruthless, unsupervised, criminal collection agencies means that tens of millions of Americans are trapped in a nightmare that never ends -- student debt being the only debt that can be taken out of your Social Security check. Matt Taibbi is a national treasure, and Rolling Stone does us all a service by keeping him working.

If this piece moves you and you want to learn more, Don't miss "Generation of Debt," an important pamphlet on the subject from UC students.

They all take responsibility for their own mistakes. They know they didn't arrive at gorgeous campuses for four golden years of boozing, balling and bong hits by way of anybody's cattle car. But they're angry, too, and they should be. Because the underlying cause of all that later-life distress and heartache – the reason they carry such crushing, life-alteringly huge college debt – is that our university-tuition system really is exploitative and unfair, designed primarily to benefit two major actors.

First in line are the colleges and universities, and the contractors who build their extravagant athletic complexes, hotel-like dormitories and God knows what other campus embellishments. For these little regional economic empires, the federal student-loan system is essentially a massive and ongoing government subsidy, once funded mostly by emotionally vulnerable parents, but now increasingly paid for in the form of federally backed loans to a political constituency – low- and middle-income students – that has virtually no lobby in Washington.

Next up is the government itself. While it's not commonly discussed on the Hill, the government actually stands to make an enormous profit on the president's new federal student-loan system, an estimated $184 billion over 10 years, a boondoggle paid for by hyperinflated tuition costs and fueled by a government-sponsored predatory-lending program that makes even the most ruthless private credit-card company seem like a "Save the Panda" charity. Why is this happening? The answer lies in a sociopathic marriage of private-sector greed and government force that will make you shake your head in wonder at the way modern America sucks blood out of its young.

In the early 2000s, a thirtysomething scientist named Alan Collinge seemed to be going places. He had graduated from USC in 1999 with a degree in aerospace engineering and landed a research job at Caltech. Then he made a mistake: He asked for a raise, didn't get it, lost his job and soon found himself underemployed and with no way to repay the roughly $38,000 in loans he'd taken out to get his degree.

Collinge's creditor, Sallie Mae, which originally had been a quasi-public institution but, in the late Nineties, had begun transforming into a wholly private lender, didn't answer his requests for a forbearance or a restructuring. So in 2001, he went into default. Soon enough, his original $38,000 loan had ballooned to more than $100,000 in debt, thanks to fees, penalties and accrued interest. He had a job as a military contractor, but he lost it when his employer ran a credit check on him. His whole life was now about his student debt.

Ripping Off Young America: The College-Loan Scandal [Matt Taibbi/Rolling Stone]

(Image: cooperunion_dec08_DSC_0195, a Creative Commons Attribution Share-Alike (2.0) image from fleshmanpix's photostream)

Notable Replies

  1. I'm repeating some of the points in the article in my screed here, but, I think the key issue from my perspective (I graduated from a top private university in 2008) is that if people of my generation had jobs in line with our level of education this wouldn't be as big of a problem - as the example included in the excerpt illustrates.

    In past decades, with my geology BS (and an MS too) with my specific interests and expertise I'd have been recruited right out of school to an oil company or similar where I would be making a lot of money even in entry-level positions (though actually I want to stay in academia, for the record) - according to professors and others who have been around for a while.

    My friends with their other science and engineering degrees would be in similar positions. Indeed though one or two are actually in that position, it's not that bad for everyone... except they are now engineers at defense contractors, which is not something I'd do personally...

    Instead we've had to beg and grovel to get anything, with only the luckiest getting jobs actually related to their education (or any job at all) - not to suggest that a job directly related to your education is something that's ever been super common... except that it is within STEM fields - and if they do it's at a salary far below what it's worth. And so those with loans find it difficult or impossible to pay them off.

    Honestly I can scarcely imagine how bad it is for most people, considering how bad it has been for all the STEM people I know.

    Actually... the other thing I glean from the article is that if we were able to get decent jobs, the situation would only get worse because they'd use that as a justification for increasing costs etc.

  2. One more key point - have a look some time at inflation-adjusted middle-class wages over 30-40 years. It's sickening, and it's the intentional result of policy choices, and we know how to fix it, but we'd rather elect guys who let us have all the guns we want.

    My niece will graduate soon with a quarter million dollars in debt. I don't have any good advice for her.

  3. While mentioned in the article, I think the inflation in the requirements to have a degree even to do clerical works needs more emphasis. At some level, an oversupply of college degrees compared to jobs for which a college education is actually needed has resulted in employers requiring college degrees for more menial work. The very idea that more people with degrees mean better earnings for everybody is the worst sort of confusion between cause and effect. And it has led to public policies that encourage a "red queen race" in education, where the current generation has to run much harder (get more degrees) to, at best, stay in the same place (get a halfway decent job).
    That is why I regard the student loan mess as more of a stealth pay cut than a stealth tax. Because the utility of a college degree is largely set by employers and not the government.

  4. I think the education system and the education industry need to be looked at radically. By this I mean we should be asking what purpose they serve, whether they are actually serving this purpose, or whether some other method or system for training and informing people would accomplish more for less cost. Credentials and and length of exposure to academic environments should not be confused with knowledge, intelligence, or competence.

  5. A classic argument - people will break the law, so there should be no laws. It gets applied to gun laws regularly, but I don't hear it often with regard to financial regulation.

    There actually is a perfect solution. Many nations send their young people to university for free. Financing is negotiated between the government and the institution in a way that guarantees quality education, without offering big profit margins. The same system works just fine at the K-12 level, which is why some people are determined to destroy it.

    Because it is Socialism and therefore evil.

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