news blog | October 19, 2011 | 16 comments

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. 

Sticker shock
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.

Crushing debt
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.

No escape
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.

Have a story you think isn't getting enough attention? Send us an email at feedback@current.com, ATTN: Underreported Story.

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16 comments // The Underreported Story: A demand to forgive student loans

  • crob80231
    • 0
      crob80231  

    • College tuition has risen 900 percent in the last decade! So you're telling me that the "value" of education has increased 900 percent? No? Then, yes, it is a rip off.

      Also, we want to increase our global ability to compete -- so pricing 50 percent of the population out of the game doesn't make smart financial sense. Can the neo-cons explain the "strategtic advantage" of having 99 percent of our college students turn 22 and immediately have $40,000 in debt? Walk us through - step by step -- how a) freezing 50 percent fo the population out of critical jobs training improves ou rability to compete in a global marketplace against countries like Denmark and France were higher education is provided by the State and explain (in detail!) how immediately saddling all graduates with a $30-$80,000 DEBT improves our economy and increases consumer demand for goods and services.

      You can't explain the "logic" in doing that? Didn't think so ;-)

    • 1 year ago
  • AutifK
  • beebop3000
  • Eric_Wilkinson
    • 0
      Eric_Wilkinson  

    • Finally paying off my student loans last year is something I am quite proud of. I went through a lot to pay off over $70,000, including interest. I have never made more that two grand a month, either, and I still don't. This took me eleven years to become debt-free. I don't think of student loan debt as being the result of fraudulent practices, and therefore I don't believe it should be forgiven. Sure, the economy sucks and getting a job to pay it all back is real hard, but there is no direct connection between the student loan and the lack of jobs. I would support a public works program where loans are paid off while working, similar to the military's (and other federal agencies') student loan repayment program. That would be a win:win situation - gainful employment, benefitting the country, giving work experience and paying off the debt.

    • 1 year ago
  • mhaarts
    • 0
      mhaarts  
    • Eric_Wilkinson:

      there is no win win in that situation, I feel that is the militaries catch- cast the net out and fish for mid/low income, young men and woman who want to go to school...don't have the money to pay it off... fighting in a war/wars for what? One big scam if you ask me.

    • 1 year ago
  • MauriceLacunza
  • sss0226
    • +3
      sss0226  

    • This humors me: "what is there name hu??" Did you really go to school? "Stupid" is a great user name for you, apparently. I have a hard time believing that, or perhaps you did not take an English course. Just a refresher, so you don't feel that your student loans were in vain - "t-h-e-re" refers to a place; "t-h-e-i-r" refers to a person. (I teach 7th grade and my students know that!)

      Let me tell you why else the name Stupid suits you. When most students went to college, they anticipated a better job market or at least a raise in salary. (Or at least the knowledge of the difference between the words "there" and "their.") In many cases, such as my own, I graduated with a masters and received a $12--per-month raise in pay and a $476 raise in student debt. According to the projected salary schedule for my position, I should have been earning $700 more per month. With state budget cuts leading to furlough days (that means days you don't work but you don't get paid, either, to be clear, Stupid) and decreases in annual salaries, the debt is not manageable.

      It is unreasonable to think that the banks and lenders should continue to rake in the interest when the employees/former students are not making any money. Remember, deferment is only for those who are unemployed, and it is temporary. At the very least, the interest could be dropped and former students could be allowed to pay on the principal only.

      I do actually have a child, and he is very well raised. He is three and can spell and construct a better sentence that you are able to do. We teach him common sense, compassion, and not to ever call himself "Stupid." My advice to you is to change your outlook, your poor spelling and your all-too-appropriate user name.

      Oh...and by the way - karma is real. I've seen it.

    • 1 year ago
  • JChiron18
    • +1
      JChiron18  

    • As a current student I can speak for many when I say that walking away from school with over 100k in debt is the new norm. I don't even own any credit cards! Every single penny of debt I have is for my education.

      If they're not forgiven I will probably pay more than double that amount back to the government or whoever it is that holds these loans. I'm suspicious since my loans have changed hands several times in the last 3 years and are currently with Sallie Mae of all places!!

      It will take me years to pay off these loans and potentially ruin my chances of leading a fulfilling life.

      Having a car, home, family, savings & travel is starting to seem like an unattainable dream.

    • 1 year ago
  • stupid
    • -3
      stupid  
    • JChiron18:

      seriously...how about taking ownership of your situation. you flipping liberals always are looking for a hand out and feel entitled to something for free. news flash...life isn't fair. look, you made a choice to go to school because you believed in the worst lie of all..."go to school, get a good job...blah, blah, blah." look, i come from a poor family, i went to school and graduated and have tons of debt too. but guess what, that was my decision and I own it. who forced you to sign the promissory note??? what is there name hu?? you could have lived off campus, worked and paid as you went. that is a much more affordable way. that is how i got my master's. but no...you lived on campus, partied your ass off, probably worked little if at all. now you are done and you don't want to pay. that is what is wrong with Amerika. No accountability. you were brainwashed into thinking college was the way to and that is on you. so what, you incur a debt and now you don't feel like paying for it so you don't?! little advise, god forbid you ever have kids, that would not be a good lesson to teach them.

    • 1 year ago
  • JChiron18
    • +6
      JChiron18  
    • Image
    • stupid:

      I appreciate your response, but I have to call you on your vitriol. There's no need for it. You don't know me or my situation. I go to graduate school, in NYC for alternative medicine. The cost of living here alone is very expensive. I work part time and go to school full time and commute an hour each way. No one forced me to sign the promissory note, this is true. However who told the government to unregulated education costs and allow schools & banks to make a racket from it?

      In less than 15 years the cost of education has rising 511% (http://www.theatlantic.com/business/archive/2011/08/chart-of-the-day-student-loa...)
      How do you justify that one? Oh its the student's fault for believing our parents, our educators our Presidents for telling us to go to school, better ourselves & become contributing members of society? Its our fault too for living in a world where schools are willing to charge obscenely just to get an education.

      This is all about money, how much money? $805 Billion dollars worth. And it going to continue to grow.

      The point is this: gone are the days of working part time and being able to work your way through school. Tuition costs ranging anywhere from $5,000 to $15,000 per semester and that's not even including transportation, rent & food. We're looking at a country where soon you'll have to be wealthy just to further your education. Its not about the happiness, health or education of this country's citizens anymore, its all about how much money can we make off of these idiots who sign this promissory notes because they have no choice. Either sign, or don't go to school or take 8+ years just to finish one degree.

      What worries me more are people like you. I wonder how much you'd be willing to take from this government. How much corruption are you willing to witness. How much more crushing debt, cuts & increase costs are you willing to carry before you finally get mad?

      And please, act like an adult, keep your insults & childishness off the board. Its unnecessary and beneath you.

    • 1 year ago
  • stupid
    • -1
      stupid  
    • JChiron18:

      again typical liberal looking for a handout. it's a shame.
      i know dozens of people who work full-time, go to school and pay as they go. and what little loans they take out are paid back during the summer. I would rather go to school for 1 or 2 more years than be someone else's debt slave. i am as tired at the govt as you are if not more. the difference between us is I own my situation why u look for excuses and handouts. U act like banks are not supposed to charge interest off of a loan. Obama recently passed a law that banks can't even do educational loans independently any longer. they are all derived from the Federal govt. Yes, it is the students fault for not thinking for themselves and different ways to get an education without becoming a debt slave...yes absolutely. i am tired of excuses and people not wanting to own there circumstances. you have an excuse for everything.
      I am, however, glad to see you are studying alternative medicines. I hope by that you mean natural and holistic and not the death trap of western medicine.

    • 1 year ago
  • nardo1224
    • 0
      nardo1224  

    • Why not also reduce people's mortgages by half to remedy the predatory mortgages that were issued when the bankers knew they would default!

    • 1 year ago
  • stupid
    • 0
      stupid  
    • nardo1224:

      @nerdo...predatory loans. lets get one thing straight here, there is no question that there were loan officers who did unethical things such as income manipulation...which is on them and shame on them for that. if a product is available and a customer accepts it...that is ON THEM. It's because of a-hole elitists like Barney Frank that such bad programs even existed because he thought every should own a home...another BS entitlement. (life isn't fair or equal. but everyone has an equal opportunity.) Barney Frank in cahoots w/Fannie and Freddie ensured that interest only, neg AM, Arms and other bad loans including no income verification even existed. that is where the blame goes as far as your "predatory lending" argument goes so let's get that straight. and now, these same people want loan forgiveness and put lenders who played by their rules out of business.
      The biggest point here is that at the end of the day, consumers had to agree to the terms. they had to sign. even after signing, they had a 3 day right to cancel in most instances. That is there decision and they need to live it...not have debt forgiven. Do a short-sale, deed in lieu or foreclosure if needed but that is there choice. I can't tell you how many people I worked directle with over the years that said..."i will take an ARM loan because i can afford the payment now and by the time it adjusts I will refi." well that time comes and now they can't refi. Well again, that was there choice. they didn't have to take the ARM.
      Nerdo...news flash...life isn't fair. Stop feeling so entitle.Sheep like you are leading the charge of a lazy, entitled, pathetic with the share-the-wealth mentality. Your breed is so busy looking for handouts that you are blind to the inne corruption destroying this country.

    • 1 year ago
  • nardo1224
    • 0
      nardo1224  
    • stupid:

      I usually do not choose to converse with idiots like you so please do me a favor, do not comment on any of my posts because your intellience level is to low for me to respond,

      However,

      It's called manipulation dingbat. As long as realtors knew they would get their commission, they gave less than a damn about the consequences of the inability to pay. They often encouraged people to sign on the dotted line just so that their commission check would be there. No-one is asking for a handout and if you would get your head out of Bill O'Reiley's ass you might just be able to have a cognizant thought for once and actually see what is happening here.

    • 1 year ago
  • Charles9
    • 0
      Charles9  

    • Ya know? It's actually a win-win situation if debt forgiveness occurred. Graduates freed from the monthly payments would be able to use their earnings on real life purchases and personal savings thereby saving the economy and the American Dream, and corporations would receive a tax cut for losses. What's the big deal?

      It would be true and genuine justice, though, if those corporations who created this business of debt got just that in return. It's only fair; after all, they are the ones who are ultimately responsible for pulling the strings that created this latest great recession in the first place. It's their turn to be turned out on the street into the gutters, especially since their wealth doesn't really exist. It's all debt.

    • 1 year ago
  • Vic_Romano
sgwhites
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