Thursday, October 20, 2011

Student Loan Debts Crush an Entire Generation, Occupy Wall Street

Crushing Debt

Alex Pareene (@apareene) makes the following observation on in an article titled "Student Loan Debts Crush an Entire Generation".
"Some people have noticed that “student loan debt” comes up a lot among the Wall Street Occupiers and the members of the 99 percent movement. Often, older people, who either attended school when tuition was reasonable, or who didn’t attend college at all in an era when a high school diploma was enough of a qualification for a stable, middle-class career, tend to think this is all the entitled whining of spoiled kids. They don’t understand that these kids accepted a home mortgage worth of debt before they ever even had a regular income, based on phony promises, and that the debt is inescapable, regardless of life circumstances or ability to pay.
"Thanks to the horrific 2005 bankruptcy bill, one of the most nakedly venal modern examples of Congress serving the interests of the rentiers and creditors over the vast majority, debtors cannot discharge student loans through bankruptcy. The government is shielded from the risk, and creditors are licensed to collect by almost any means they deem necessary, giving no one in charge any real incentive (beyond basic human decency) to fix the situation.
"In other words, this is unprecedentedly awful for an entire generation of young people just entering adulthood."

Pareene identifies most of the list of OWS culprits: Congress, Banks, For-Profit Colleges. He omits, for some unknown reason, public and private Universities and the students that take on the debt.

There are many symptoms to the problem. But at the root... Government price supports are generally created to benefit their supporters (supporters of the government official that is). And, whenever the government guaranties a price the product will be over-produced. This rule applies universally to corn, or milk, or cheese, or houses, or college classrooms. 

NPR asks the question "Why is College So Expensive?"

"If you are a veteran of a public university, the jump in tuition at your alma mater might be downright jaw-dropping. Tuition at the University of California, Berkeley, was about $700 a year back in the 1970s. Today, U.C. Berkeley students have to fork over around $15,000 per year. That's a 2,000 percent increase.
"There's a simple explanation, according to Sandy Baum, who teaches at George Washington University. "States are paying less of the cost than they used to," Baum says. She adds that as state budgets shrink, the students' share of paying for education goes up.
Competing for Talent
"Berkeley's tuition increase is unusually large, but most public schools, which educate 80 percent of all college students, have seen dramatic increases. Private schools don't rely on state subsidies, and their prices have gone up more slowly in recent years. But they are still rising faster than inflation.
"In the past decade, tuition and fees at public four‑year colleges and universities increased at an average rate of 5.6% per year beyond the rate of general inflation. Costs at private schools, adjusted for inflation, have actually decreased."

Bottom Line 

Emerging Myth: Gaining a College degree is a ticket to the good life. 

The Government has morphed from direct subsidizer of schools, to primary lender -- with no escape clause for the borrower. The government has been managing the ability for students to pay the price (for a college degree), but not the cost (to finance the degree). 

How gracious of our government to remove the banks from the Student Loan process - why cut-in a middle man on such a sweet deal?

This Faustian Bargain has a Very High Cost

Handcuffs created by government, supplied by banks, slapped on by the Universities... subjugating those that voluntarily take on the handcuffs, the yoke, the chains and shackles of student debt. Voila, the creation of a voluntarily indentured class.

More on the Occupy Wall Street - Student Loan discussion (Link and Link)

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