Tactics Against Debt Jeffrey J. Williams, EduFactory

What does student debt feel like?

By now, many of the facts and figures of college student loan debt in the U.S. are familiar. As of 2008 it averages about $25,000 for graduating seniors. Though it was barely noticed for a long time—we should be clear that it is not something new that arose as a result of “financial crisis,” but is the result of policy since around 1980—it has come to the forefront in the past couple of years. The U.S. was inventive in instituting the student loan system of privatized funding, which is packaged as “financial aid” but devolves to a student and his or her parents (in the form of PLUS and other loans). Of late, many European countries have started emulating the American model.

Beyond the numbers, what does student debt do to people? I’ve written about the way in which student debt, in its prevalence and amounts, constitutes a pedagogy, unlike the humanistic lesson that the university traditionally proclaims, of privatization and the market. (See “Debt Education,” which appeared in Dissent in 2006 and was abridged in the Edu-factory collection Toward a Global Autonomous University.) For now, though, I want to call attention to a project that recounts people’s experiences with student debt: StudentLoanJustice.Org. It was organized by Alan Collinge, who himself underwent a Kafkaesque experience with college student loan debt and has published The Student Loan Scam: The Most Oppressive Debt in U.S. History—and How We Can Fight Back (2009). StudentLoanJustice.Org is oriented around the rubric of consumer rights rather than a concerted political stance, but the strength of the project is that it provides a forum for people to tell their particular stories of student debt. Since 2007 it has gathered hundreds of stories, building a kind of ethnography of debtors.

For instance, if you go to the site, you can click on a state (StudentLoanJustice.Org/victims.htm; it is sometimes hard to access, and don’t confuse it with studentloanjustice.com, which a business site). I live in Pennsylvania, so I clicked there to find 30 entries. (It stopped putting up new stories because the site was overloaded.) They tell of draconian repayment plans; Seth, for instance, borrowed $7,000 in 1988, a total that, with interest and fees, ballooned to $110,000 in 2006. Jenny, a single mother with two children, tells of borrowing a modest $3,200, which has grown to more daunting $14,000. Others tell of insurmountable debt after disability or other life problems. One person reports contemplating suicide, which seems the best alternative to escape the crushing burden of debt, and another notes he’d prefer the security of prison to “student loan hell.”

Go to the site and see. Alongside our analyses, I think that we need to get our recorders, cameras, and laptops out, to collect these stories and find out how debt affects people in everyday life. Debt might define the philosophical tenor of contemporary life, but it also has teeth and a bite that affects and scars people every day. Typically such testimony is lost to history; one task is that we might build an archive and counter-memory of student debt.

Another way to think of this is building a bill of particulars, as in a lawsuit, of injuries. Readers of the American Declaration of Independence will recall, after its memorable philosophical pronouncements about the equality of man, the bulk of the document is taken up in complaints and injuries. StudentLoanJustice.org presents a bill of particulars of the injuries of the current U.S. system of student debt.

College student debt has also come to the forefront in the formal political sphere in the past few years, notably in the Obama administration’s implementation of the “Income-Based Repayment” (IBR) option and most recently in the Health Care and Education Reconciliation Act of 2010 (H.R. 4872). Since it was passed only in November, I want to look quickly at the Reconciliation Act. It represents the right principle but dubious practices.

The Reconciliation Act grafted a section on student loans (originally entitled “Student Aid and Fiscal Responsibility Act”) onto the contested healthcare act. Its most significant change is specifying that all student loans be direct loans originating from the federal government. Formerly, the federal government had paid a subsidy to banks to originate loans, so banks, without guaranteeing the loans, made a handsome fee with no risk. A portion of the discontinued subsidy will be rechanneled toward PELL grants rather than loans.

The shift to direct loans and the increase in grants are improvements. It had never been fair that banks collected such subsidies essentially for nothing (the banking lobby had no justification for their making this extra tariff except that it created jobs, and complained that the change would mean a loss of jobs for people in banking—therefore confessing that student loans are a welfare apparatus for those in banking). Direct loans cut out the middle man. Also, the better prospect of the system is that federal aid take the form of grants rather than loans, which are a questionable gift.

While an improvement in broad outline, there are however three problems that mar the Reconciliation Act. First, while it displaces banks, it still assumes debt as the basis of the system and the prime form of aid that a majority of students will receive. With the current administration’s push for increasing attendance in higher education, debt will almost surely increase. The goal should be the diminishment if not end of debt. The increase in PELL grants is a move in the right direction, but only a small one.

Furthermore, the stipulated rates for loans are not low, particularly at a time when the federal prime rate is almost non-existent. They are generally around 5%, and currently nearly 8% for PLUS loans, for parents. 8% is exorbitant compared to most home equity rates and even some charge card special offers. The rates should be tied to the federal prime; if banks can borrow at minimal rates from the federal treasury, why can’t citizens, especially for a public good like education?

Second, student debt, which has risen over 30% above and beyond inflation over the past decade, will rise even more sharply in the next five years because tuition will rise in response to cuts in state budgets, as we can see from the precipitous rise in fees in California. Though in some ways it is a public good to have wider access to student loans, it also provides a ready vehicle to shift the cost of public services from the public tax base to individual citizens. It masks the cut in public services: sign now, don’t pay until later!

Third, another danger is that there’s a good possibility that the longstanding subsidy of interest—the one benefit of the current system to students—will end. Currently with subsidized federal Stafford loans, the federal government pays the interest while a student is enrolled in college or graduate school (and for a short grace period after). However, the 2010 report from the so-called Commission on Fiscal Security, chaired by Erskine Bowles and Alan Simpson, proposed that the Stafford subsidy be eliminated in order to reduce the expense of the program. Thus interest would accrue from the moment one entered college and took the loan. This would have immediate effects, conferring higher costs on students as well as providing a disincentive for them to go to college. One of the most significant changes in the past twenty years has been the growing racial divide: contrary to our reaching a post-racial world, Black and Hispanic students are three times less likely to go to college than they were thirty years ago.

To talk about specific policies like the Reconciliation Act seems wonkish and solutions are incremental at best. However, we should remember there are real differences for the people who receive the loans. For instance, the IBR does have benefits, for one former graduate student I know keeping her payments to manageable levels and, since she teaches at a state university, with the benefit that the loans will be forgiven after ten years if she remains at a state institution. I think that it is our task to intervene in these policy debates and discussions. They should not be the only dimension of our involvement, but neither should we ignore them as merely reformist. In a socialist view, the state is the institution through which we effect equality, or not.