Student Debt Bubble Should No Longer Be Ignored
America’s bubble economy is on the verge of another crisis. At a total of $870 billion, the student debt bubble puts the housing bubble to shame and has already surpassed the nation’s collective $693 billion credit card balance. One doesn’t have to be one of the millions of students and graduates submerged in debt to recognize that this bubble is a ticking time bomb for the entire economy. As for the students who have amassed such onerous loans—their financial future is bleak.
Just as the housing crisis trapped millions of Americans in suffocating mortgages, student debt is preventing millions of college graduates from attaining a basic level of financial security and achieving a decent standard of living. Like the toxic no-asset, no-income loans that sparked the economic crisis in 2008, banks hand out huge loans to students, despite grim job prospects that leave little opportunity for repayment. And as the bubble hones in on $1 trillion, private loan agencies continue to rake in the profits. It’s crony capitalism at its very finest.
The statistics are astonishing: college seniors who graduated in 2010 owe an average of $25,250 in student loans, according to data from the Project on Student Debt. Those who take out these outrageous loans are entering an economy with historically high unemployment levels for recent graduates. But while there are some very minor signs of economic recovery, there is no indication that the upward trend in student debt will reverse anytime soon.
Unfortunately, the political class doesn’t have the interests of students at heart. In July, the interest rate on federally-administered Stafford loans is scheduled to double from 3.4 to 6.8 percent. Democratic members of Congress and the Obama administration— ostensible allies of students—have been far too silent on the matter and must begin to aggressively lobby against the interest rate hike. Given the outrageous levels the bubble is hitting, it is inexcusable not to act.
But apart from the minor reforms, it’s clear that the broader education system that perpetuates student debt is unsustainable. For future college students, a university education will increasingly depend on a willingness to assume heaps of debt, transforming what was once a guarantee of financial success into an economically unrewarding endeavor. Misguided critics say that college students who protest the need to amass massive levels of debt ought to keep quiet and appreciate their university degree. But in today’s world, a college degree doesn’t make the difference that it used to, and college graduates facing both a lousy job market and years of loan payments are right to seek reform.
Students need to continue to air their grievances, ensure that the forgiveness of student loan debt remains a core value of the Occupy movement, and in the meantime, pressure their elected representatives to make minor reforms. Hopefully, by addressing the underlying problems of the student loan industry, we can eventually force a conversation on the more ambitious and meaningful question—whether or not higher education is a public good altogether.
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