American Culture Writing

INTRODUCTION

Over the last 30 years, the cost of college tuition has more than doubled. Over the same period, inflation-adjusted worker wages in the United States have “barely budged” (Desliver). Additionally,  the number of people attending college has increased by nearly 50%

https://www.statista.com/statistics/183995/us-college-enrollment-and-projections-in-public-and-private-institutions/

That can only mean one thing–student debt has gone way way up. Since 2001, total student debt has risen from  $340 billion

https://www.federalreserve.gov/econres/notes/feds-notes/student-loan-debt-and-aggregate-consumption-growth-20180221.htm

to $1.5 trillion today.

In many ways, the student debt crisis crystallizes a number of contradictions in American society. Income inequality has grown, making a college education seem more like a necessity than a privilege. But it is not treated like a right, as K-12 education ostensibly is. What’s more, if a college education feels like a necessary step to achieve the American Dream, the cost of getting a college education can actually make that dream more difficult to realize. The average college graduate can expect to earn $50,000 in their first year on the job, a decidedly middle-class income. However, the average college student can also expect to graduate with $37,000 in debt and to pay around $400/month, reducing their income by 10%, and edging them closer to the lower-middle class bracket. These pressures are even greater for people of color. Data suggests both income and wealth gains from higher levels of education are lower for non-white families than for whites (Emmons & Ricketts).

But even beyond these numbers, student debt exposes contradictions in what it means to be a citizen and an American. Should college students go to school to be trained as workers? Should they go to learn how to be active democratic citizens? To find themselves? If college is only a training program, it makes sense that institutions should make a business of it, charging whatever the market will bear, whatever the consequences. But if college is something more, then the calculations about what it should cost, and the consequences if it costs too much, are more than economic.

Complicating all of this is the fact that student debt is a unique kind of debt. First, more than 90% of student loans are issued by the United States government, meaning that the U.S. Treasury is the beneficiary of interest on the $1.5 trillion dollars in student debt. Should the U.S. government, which must assure the right to a quality K-12 education, profit from the higher education and the student loan burden that Americans carry? Second, since 1978, federal student debt has not been dischargable in bankruptcy (private debt was excluded in 2005), meaning that a borrower must face extraordinary and persistent hardship, over and above that which would allow debt to be discharged in bankruptcy, to receive relief from student loans. Even when this is the case, many borrowers still have their Social Security Disability benefits garnished to pay student loans, although one group of nine disabled borrowers recently successfully sued the Department of Education to return those benefits (Berman). Should student loans be more difficult to discharge than mortgages, credit cards or car loans?

Finally, student debt is already preventing or delaying life cycle events like marriage, homeownership and parenthood for Millennials. If college is a necessity for the American Dream, should it cost so much that it prevents the realization of that dream? In this module, you will learn about who borrows to get a college education, who is most affected by student debt, and what laws and regulations have been passed to try to address the student loan crisis. You will also learn about the long term consequences for Millennials, also known as “generation debt”, of the high student debt they carry. Lastly, you’ll consider potential solutions to the student loan crisis and, given what you’ve learned in this course, decide which you think is best.

Berman, Jillian. “Student-loan Borrowers With Disabilities Will Be Reimbursed After Their Social Security Checks Were Needlessly Garnished.” MarketWatch, June 17, 2019,

https://www.marketwatch.com/story/disabled-borrowers-whose-incomes-were-needlessly-garnished-to-repay-student-loans-will-get-23000-back-2019-06-17

DeSilver, Drew. “For Most U.S. Workers, Real Wages Have Barely Budged In Decades.” Pew Research Center. 7 August 2018

https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/

Emmons, William R., Ana H. Kent and Lowell R. Ricketts. “Essay 1: The Financial Returns from College across Generations: Large but Unequal” in “The Demographics of Wealth: How Education, Race and Birth Year Shape Financial Outcomes,” The Federal Reserve Bank of St. Louis, February 2018,(HFS_essay_1 2018.PDF)

Learning Objectives

After this module, you will be able to:

Recognize the reasons students borrow for college

Analyze the social impact of generational student debt

Evaluate potential policy solutions to the student debt crisis

Topic 1: Why students borrow

When lending for higher education began in after WWII, it was originally designed much like the post-Depression mortgage market. The Federal Family Education Loan Program or FFELP was originated in 1965 to encourage private financial institutions to lend to families for higher education by subsidizing and guaranteeing their loans. The subsidizing part meant that the government would pay part or all of the interest on the loans, at least while the student was still in school, making the loans attractive to students. The guarantee part meant that banks could be assured the debt would be repaid, making them an attractive to lenders.

However, as higher education grew, both in number of students and cost, student lending changed. To protect against the need to back up their guarantee of paying off student loans even if the student did not, the government made it illegal to discharge federally guaranteed student loans in bankruptcy in 1978. In 1990, the federal government began directly lending to students, initiating the long decline of the FFELP, which would eventually end for good in 2010 due to the financial crisis. Finally, in 2005, even private loans became illegal to discharge in bankruptcy.

However, the biggest influence on the student loan crisis–the ballooning level of debt now held by students–is actually the boom in for-profit colleges. Vocational training has long occurred in the U.S., alongside public and private traditional college. However, as income inequality began to grow in the 1980s, for-profit colleges marketed themselves as a way for struggling workers, particularly minorities and women, to retrain themselves for the changing workforce. Since the mid-1990s, these institutions have enrolled millions of students. For-profit colleges offer degrees and certificates just as non-profit public and private universities do, however they are on average more expensive, less selective and therefore often of less value on the job market. Additionally, since these colleges often draw from low-income and minority demographics while being more expensive, their students end up with proportionally more debt.

As the Brookings Institute video assigned for this topic shows, the majority of the actual “crisis” in student debt is concentrated in for-profit college students. For-profit colleges admit low-income students regardless of their ability to repay student loans, help them fill out student loan paperwork, and then directly collect the loans to fund the student’s tuition and fees, treating federal student loans like an ATM machine, where the student is the card.

In 2015, the Department of Education implemented a number of new rules to address this problem. The gainful employment rule dictated that for-profit college programs had to lead to gainful employment and debt-to-income ratios of less than 20 percent of the student’s discretionary income or 8 percent of his or her total earnings for those colleges’ students to qualify for federal aid and loans. After this rule went into effect, several for profit colleges, including Corinthian College, lost access to federal student loan dollars and subsequently closed. However, many students who attended these colleges still had to pay off their loans for degrees from now defunct colleges. The borrower defense to repayment rule, enacted in 2016, allows students to petition the Department of Education to have their loans forgiven if they can show a school used illegal or deceptive tactics to persuade them to borrow money for college (what_to_know_about_bd_factsheet.PDF)  The vast majority of loan forgiveness petitions are filed by for-profit college students.

The student debt from for-profit colleges exposes the worst abuses of the U.S. higher education system. For-profit colleges exist for the same reason payday lenders do: poor workers need resources, and are charged more for them than wealthier people are. However, less than 20% of student debt is held by for-profit college student. The majority of the $1.5 trillion in student debt is held by students of traditional colleges and universities. If politics is broadly about resource distribution, exclusion from participation, and the legitimacy of authority, the student debt crisis should inspire us to think about how student debt transforms the distribution of wealth and status, the ability of Americans to participate in society, the legitimacy of the federal government as lender and of institutions of higher education as recipients of student loans. Seth Frotman helps us begin to answer those questions. He points out that “one recent study projected that a typical household headed by two college-educated adults with average student loan debt balances loses out on more than $200,000 in accumulated wealth over a lifetime” (824). Is that an appropriate penalty for being born into a poor family in the United States? What does that shortfall prevent students from participating in? Internships? Marriage? Children? And should a college education be like K-12 education in the U.S., at least in principle guaranteed as part of the equal opportunity promised to Americans, especially if some of the cost for doing so could be covered by reducing or eliminating federal aid and loans for students attending for-profit colleges?

Read

“Politics” (KACS), Chuh (193-196)

Frotman, Seth. “Broken Promises: How Debt-Financed Higher Education Rewrote America’s Social Contract and Fueled a Quiet Crisis.” Utah Law Review, no. 4, 2018, pp. 811-846, (Broken Promises_ How Debt-financed Higher Education Rewrote Ameri.PDF)

Watch

Watch “The Facts Behind the Student Debt Crisis.” The Brookings Institute,

https://www.brookings.edu/bpea-articles/a-crisis-in-student-loans-how-changes-in-the-characteristics-of-borrowers-and-in-the-institutions-they-attended-contributed-to-rising-loan-defaults/

Topic 2: The future of student debt

As the financial crisis gave way to a recession in 2009, state legislatures responded by reducing the funding to state universities. Colleges and universities increased tuition on students to make up the shortfall.

The Occupy Wall Street protests that began in 2011 raised awareness of the student loan crisis. Participants in those protests also began to propose and experiment with potential remedies. One Occupy activist, professor Andrew Ross, suggested that student debtors needed to come together to form a “debtors’ movement” (23). This movement would advocate for student loan forgiveness and free college tuition. The movement for loan forgiveness, known as Strike Debt, carried out protests, and even bought student debt on the secondary markets–where it is often sold for pennies on the dollar to collections agencies–and instead of collecting on it, just forgave the debtors it belonged to. The free college tuition movement is based on the idea that tuition to public 2 and 4-year institutions isn’t actually that expensive: “On a rough estimate, it would only take $70 billion of the federal budget to cover the tuition costs at every two- and four-year public college. This happens to be the sum that the Pentagon wastes annually in “unaccountable spending,” according to a recent audit” (Ross 26-7).

However, free college has not become a reality. Instead, since 2016, things have actually moved in the other direction. The rules put into place in 2015 and 2016 to protect student borrowers have been weakened and repealed. The gainful employment rule will officially end on July 2020, after

https://www.insidehighered.com/quicktakes/2019/07/02/devos-issues-final-repeal-gainful-employment Over the next 10 years, the Department of Education will spend over $6 billion on aid to for-profit colleges that would not be able to pass the gainful employment standards if the rule stayed in place.

The department also delayed the implementation of the borrower defense to repayment rule until a court injunction forced it to do so at the end of 2018. At that time, the Department of Education agreed to forgive $150 million in loans. However, it is currently proposing a new weaker rule to replace the former one. In 2019, a judge went so far as to

https://www.npr.org/2019/10/25/773334681/devos-held-in-contempt-of-court-ed-department-fined-100-000-in-student-loan-case

of court for continuing to collect on loans that should have been forgiven under the rule.

Today, 2020 presidential candidates, including incumbent Donald Trump and Democrat challengers, are all proposing changes to federal student loan policy, ranging from reducing opportunities for forgiveness further to making public tuition completely free. Making tuition free for public universities is actually the simpler issue. It would cost $70-80 billion dollars a year. The government already spends more than  $100 billion on higher education grants and loan interest

https://www.educationnext.org/edstat-every-year-federal-government-spends-100-billion-higher-education-mainly-form-grants-subsidized-loans-students/

but currently that aid goes to non-profit, private and for-profit colleges and universities.

The outstanding $1.5 trillion dollar student debt is a much larger and more complex problem. In the reading for this topic, Miller et al. take you through various proposals and their pros and cons. In your short essay assignment, use what you’ve learned in this module to make a judgment about which of these proposals is best, and what challenges it would face if someone tried to implement it.

Ross, Andrew. “Mortgaging the Future: Student Debt in the Age of Austerity.” New Labor Forum, vol. 22, no. 1, 2013, pp. 23-28.

Read

Miller, Ben et al. “Addressing the $1.5 Trillion in Federal Student Loan Debt.” Center for American Progress, June 12, 2019,

https://www.americanprogress.org/issues/education-postsecondary/reports/2019/06/12/470893/addressing-1-5-trillion-federal-student-loan-debt/

Assignment

In a 3-4 page double-spaced essay, select one of the options offered by Miller et al. that you believe is the best proposal for tackling the student debt crisis. Compare and contrast it to the other options and offer evidence from the module to support your choice. Conclude by explaining what challenges your chosen proposal will likely face, using evidence from the module and outside research.

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