The Underreported Story: A demand to forgive student loans
Demands are beginning to surface in the Occupy Wall Street movement, and many protesters are calling for student-loan debt to be forgiven. Those opposed to debt forgiveness have called the demand greedy and misplaced. But student-loan debt is soaring, and in the current economy higher education is no longer the same cushion against economic difficulty it once was.
A path to the American Dream
A college education is one step in the American Dream; work hard and do well in school and you'll succeed. In this economy, it can seem even more crucial. Workers with a bachelor's degree earn more -- in 2009, the median salary for a young adult male with a bachelor's degree was $51,000; a man with a high-school diploma had a median salary of $32,900.
But it's about more than just the wage gap. Recent numbers show a ratio of 4.6 job seekers per job opening, giving employers plenty of room to hold out for the most qualified candidates. The rise of globalization has meant a shifting of blue-collar jobs -- jobs that once were able to provide someone with a high-school diploma a chance at a solid middle-class life -- overseas. A bachelor's degree is now a ticket to the middle class, but not a guarantee.
The cost of an education has risen dramatically. In 1980, the annual sticker price for a public, four-year university was, on average, $2,550. By 2009, it rose to $15,014. Two-year institutions, often held up as a more affordable alternative, also jumped from $2,027 in 1980 to $7,703 in 2009. With states slashing education budgets in the recession, the cost of attendance is continuing to rise. Budget cuts mean schools are proposing much higher tuition hikes, at an average of 8.9 percent.
Education for profit
Beginning in 2006, another factor came into play: the deregulation of for-profit colleges. House Speaker John Boehner pushed through a few lines in the 2006 budget bill that eliminated rules aimed at protecting students and fueled growth of the for-profit education industry. The 50 Percent Rule had previously limited enrollment at universities with online course offerings, opened the door for the growth of for profit education, and Wall Street took notice.
Companies like Goldman Sachs got into the game, partnering with players like Education Management Corp., who increased high-pressure sales techniques aimed at boosting enrollment and collecting student-loan dollars. Employees told The Huffington Post reported they were directed to pressure students to enroll even when the program wasn't a good fit, or they seemed unlikely to be successful (for-profit universities have lower graduation rates than other institutions) in order to get aid dollars. Student loan burdens fall entirely on students, with colleges receiving their revenue up front, making them a low-risk growth opportunity for firms like Goldman Sachs.
Student loans are meant to allow access to higher education, but in reality they often leave graduates saddled with crippling debt. In 2010, consumers began to owe more in student loans than in credit card debt. Student-loan debt has skyrocketed; estimates from the Department of Education put outstanding student loans as high as $805 billion at the end of June 2011. With the unemployment rate for 20- to 24-year-olds much higher than the national average, at nearly 15 percent, delinquencies for student loans are also rising. Rising costs mean students who can't finance college on federal loans alone are turning to private lenders whose loans may come with variable interest rates and less forgiving terms. The picture is particularly bleak for students at for-profit colleges, who are less likely to graduate and more likely to default on their loans.
Although it's often classified as "good" debt, student-loan debt can be a burden that is nearly impossible to escape. Unlike a house or a car, you can't turn your diploma over to the banks and get a student loan forgiven. Since 1978, government-issued student loans have been unable to be discharged in cases of bankruptcy. Thanks to the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act, all student loans are now protected, including private loans. Unlike federal loans, loans from private lenders are not eligible for repayment assistance, forgiveness or relief programs in the event of financial hardship. So just how difficult is it to escape student loan debt? Even death isn't a guarantee. Private lenders are not required to forgive loans in cases of death or permanent disability and co-signers are obligated to take on the debt.
Why it matters
Those with a college education have fared better in the recession than those with a high-school diploma. Jobs continue to be increasingly split between unskilled, minimum-wage jobs and those requiring higher education, making college that much more valuable. Yet the skyrocketing cost of college is leaving graduates with a burden of debt that may far outpace their earning potential.
Those who say that the demand to forgive debt is unreasonable should consider that affording college is not the same prospect it once was. Undervalued by the public and government alike, education budgets are being slashed and tuitions is rising, while the recession makes it even more difficult for students to afford college, leaving loans the only way to make up the difference. The deregulation of for-profit colleges has also opened the door to abuses and fraud, preying on the desperation of job-seekers and leaving many students with all of the debt and none of the benefits. Graduates are starting the game already behind; if the U.S. wants a healthy economy, the choice to pursue education shouldn't come with a shadow of debt and the threat of financial ruin.
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