As a development officer at the University of Minnesota I was well aware that two-thirds of students enrolled in four-year colleges and universities nationwide take on student loans to help pay for their education. Each year I would soberly inform prospective donors the debt a typical student carries upon graduation, today nearly $30,000. The burden of such an obligation – especially for our grads in the College of Education and Human Development who generally enter careers at the low end of the salary range – was a good motivator for me to get up and go to work every day. I naively assumed that money I raised would really make a difference.
Now I recognize that our students are enmeshed in a system that is much more complex and resistant to meaningful reform. Here’s the harsh bind in which young people find themselves: Many wouldn’t be able to attend college at all without easy access to loans. Over the past thirty years the real cost of attending a four-year institution has at least tripled, far outpacing inflation. I saw this at the U of M and how available grants and scholarships just didn’t go as far as they used to. Besides, we fought an erroneous perception that as a “state school” costs at the U are relatively cheap and well subsidized by tax-payers. Not true! Combine all this with the fact that family income levels have been stagnant since the 1970s.
The squeeze placed on our young people ain’t pretty! An incisive article in the current issue of Commonweal [link] by Hollis Phelps reports that 38 million individuals now hold a combined total of more than $1 trillion in student loan debt. That’s four times what it was ten years ago, and it surpasses total U.S. credit card debt. In fact, when it comes to what Americans owe, student loan debt is second only to mortgage debt. And generally, these obligations are virtually impossible to discharge in a bankruptcy proceeding. While many are struggling to keep their heads above water, at least 10 percent of recent borrowers are currently in default, the highest rate in almost twenty years.
Hollis describes a typical situation: Students, especially those with the greatest need who sometimes graduate with double the average debt, aren’t necessarily poor planners or irresponsible borrowers, misinformed about the debt they are taking on to finance their college education. They just come from homes that couldn’t afford to put money into a college savings account. They already have part-time jobs, but a typical minimum wage doesn’t make much of a dent in current tuition rates. They know what it means to tighten their belts, since they’ve done so all their lives.
Most of us are well aware of these challenging realities. But Hollis article opened my eyes to a shocking truth: moralistically shifting all responsibility onto the individual borrower conceals the fact that student loan debt is, in one way or another, a highly profitable business. The Congressional Budget Office has estimated that the federal government stands to make $175 billion in profit from student loans over the next decade, and profits for loan servicers and lenders have continued to rise. Investors and speculators are also in on the action, as student loan debts, like risky mortgages, are bundled and sold as securities in financial markets. The Wall Street Journal has reported that investors want more, with demand as much as fifteen times greater than supply.
Then there are the schools themselves. There are campuses to maintain, faculty and staff to pay and fierce competition out there for bodies, especially among the huge number of schools that are dependent on student tuition for operating revenue. The simple fact is that many institutions would likely cease to exist, at least in their current forms, without the reality of student debt. As with too much in our Free Market economy, we have “commodified” our students.
Hollis correctly observes that higher education functions similarly to our current healthcare system: it’s a complicated market composed of numerous actors that operate at various levels to sell a product that individuals in some sense have to consume. Opting out of either system isn’t really much of an option, and individuals will go to great lengths, including taking on exorbitant debt, to use the services both provide, because both have direct impacts on livelihood. All the while, those who run the systems profit from our needs and desires.
It’s a big mess! I suspect we will not muster the energy to resolve the economic, social, academic and political challenges until we recognize our moral responsibilites imbedded in the current state of affairs and accept, in justice, the obligation we have to more than our own biological children.