Why Isn’t Elizabeth Warren Attacking the Student Debt Problem Head On?

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It’s hard not to notice the difference between Senator Elizabeth Warren’s posture on big banks and student debt. She came hard and fast out of the gate in her initial Senate appearances, making deft use of the highly constrained and artificial hearing format to get the issue of still untamed too big to fail banks back in the national focus. It was fun to watch her pin obfuscator-wannabes and wring answers out of them on basic questions. She’s done ever better with the biggest asset she has as a legislator, that of a bully pulpit, than even many of her fans imagined.

It’s thus puzzling to see her pull her punches on another pressing issue for middle class families, that of student debt. As readers no doubt know, she launched a bill that elicited favorable commentary in what passes for the left-leaning media for its catchy high concept, that of letting students borrow at the same rate as big banks. But in fact, her first bill is a narrow, technocratic fix to a particular problem that had been ignored, that interest rates on most student loans were set to jump sharply.

Now there’s nothing wrong with short-term patches as long as you set them in a bigger context. And Warren could have clearly used her bill as a way put the spotlight on the student loan debt slavery the same way she has with unreformed and unaccountable banks.

But if you look at her speech introducing her bill, you don’t hear an iota of questioning the underlying, destructive system of having students borrow large amounts of money to pay for college and grad school that has led to wildly escalating higher education costs with no noticeable improvement in the actual product. Worse, the colleges themselves have become loan-pushers, selling the less and less true with every passing day line that this is an investment that will pay off. As any market participant will tell you, an overpriced asset is a bad investment. For too many young people, higher education has become every bit as big a liability as 2007 subprime mortgage.

It’s no longer possible, as it was when I was in college, for students to work their way though college. And I don’t mean state schools. I’d guesstimate that a full 1/4 of my class at Harvard was work-study, and I later met people who went to other well regarded private schools (Ivy and equivalent) who’d paid their way through college as well as good grad schools.

Reader Paul Tioxon listened in on and wrote up a MoveOn briefing tonight with Warren on her student loan bill. As I read the call, she focused on the interest rate issue and discussed the broader issue of crushing levels of student debt only when prodded by questions. And even then, she said there needed to be a mass movement. Why isn’t she willing to be in the fore here? She’s one of the top bankruptcy experts in the US. It would be a natural for her to call for a rollback of the 2005 bankruptcy law changes that made it virtually impossible to discharge student debt in bankruptcy. Not only are student protests on this front rising, but student debt is increasingly recognized as an impediment to household formation, home buying, and other spending and investment by young people. It’s not hard to imagine that a lot of real economy players would also support relief to student borrowers.

By Paul Tioxon, a long-standing contributor to the NC comments section

First, a little context on the livestream briefing tonight, June 3,2013. The following is from Bill Moyers’ website yesterday. There is more information available there for people who want to know more because they have kids or are students heavily in debt. First, there is a larger unreported student week of action due this time at the traditional graduation rite of passage. Poor job prospects coupled with high debt burdens will be coming due now that people can not defer interest payments once they graduate. With degree in hand, it is time to pay the piper his due, but there are few jobs and even the ones available do often do not pay enough to allow graduates to service the debt and live independently by setting up their own household.

Nearly 200 students, parents, community members and union leaders rallied at Sallie Mae’s annual shareholder meeting in Newark, Delaware, last Thursday. On the agenda: first, demand that the nation’s largest private student loan lender meet directly with students to discuss their crushing debt burden; and second, introduce a shareholder resolution calling for disclosure of the corporation’s lobbying practices and membership in groups such as the American Legislative Exchange Council (ALEC).

Outside of Sallie Mae’s corporate headquarters, the activists were met by “dozens of police, blockades and K-9 units,” according to participants. Sarita Gupta, executive director of Jobs with Justice – American Rights at Work, urged the crowd to confront Sallie Mae executives and board members “about their role in America’s student debt crisis.”

More than 38 million people now owe over $1.1 trillion in student debt; Sallie Mae owns approximately 15 percent of that debt, or $162.5 billion. Students owe an average of $27,000 when they graduate from college and many have a debt load several times greater than that amount. Nearly one in ten will default on their loans within two years.

Gupta noted that Sallie Mae “spent $16 million on federal lobbying from 2008 to 2012 and has more than sixty state lobbyists.” The corporation has lobbied at the federal level “to block student loan reform,” and at the state level “for reduced public investment in higher education, forcing more students to rely on private student loans.”

Tonight, Anna Galland, National Executive Director of MoveOn.org, hosted a Civic Action on Livestream. Senator Elizabeth Warren (SEW) was the main speaker, along with three other guests who addressed the student loan debt issue. Starting at 9:06PM SEW gave a basic overview of her “BANK ON STUDENT LOANS FAIRNESS ACT”. She described this as an emergency measure to keep Federal Stafford Loans, subsidized college loans from the government, from increasing the rate of interest charged from 3.4% to 6.8% for the fiscal year 2013-2014, that begins this July 1, 2013. This is a bill that addresses the profit-making student loan portfolio held by the US Government which stands to double the profits when the rate doubles in 4 weeks. Instead of that rate, she proposes the Federal Reserve Discount Window rate, the overnight rate charged to banks of .75%. This does not affect private loans via SallieMae, only Stafford Subsidized Federal Loans, the vast majority of all student lending since the government takeover of college lending a few years back. This does not address the entire student loan crisis, this is a campaign to keep loan rates from automatically rising and to also lower them for the fiscal year of 2013-14. That’s all.

The host said that there were over 10,000 people on line from MoveOn, and several thousand more college and high school students as well. SEW was questioned by a guest from The Oregon Working Families Party, Tom Leedham, from Teamsters Local 206. He asked point blank about getting debt free higher education, because college debt affects entire families, not just the student matriculated in college. Their website shows that student debt is one of their main issues as an organized political party in Oregon.

SEW replied that we need to invest in people to get them a good education just as we invested in financial institutions during the financial crisis. SEW said there is push back against this larger crisis of out of control student loan debt. She says that there are elected officials who like the $51 billion profit center for the government. However, I can not see how the Norquist anti-tax pledge can stand for revenue enhancement by interest rate charges as anything other than money coming out of the students’ pockets and going into the government treasury. If Chained CPI is seen as a clear tax increase by raising revenues over the years, how is increasing the interest rate and the money collected by the government as profits doubling not a tax increase as well? Over and over, SEW makes a clear, rational argument as well as a clear moral argument against the interest rate increase. Not only is it wrong, according to her, unfair and unjust but it is a drag on our economy, crowding out home ownership, household formation, car purchases and ancillary demand that goes with the discretionary income, now being channeled into college loan debt service. It would seem that at least some Republicans and some Democrats, who may be fiscally conservative can see this is a back door tax hike. Maybe enough to pass the emergency bill to lower the rates.

2 more questions were addressed:

Does this affect private loans. SEW: No. Not now. The total cost of college has to be attacked head on, but this is a singular campaign for the next few weeks for an emergency matter. I read her bill, four pages long, and it just changes a few words, an amending of current law that will direct the Fed via the Treasury to offer the Discount Window rate.

Is anyone in Washington listening to us about this at all? The banks and the universities are ignoring us about the rising costs and bills we have to pay for college.

She has some co-sponsors, but SEW says that a grass roots movement needs to make an organized push. She can’t do it by just talking to colleagues herself. Outside pressure needs to be brought to bear.

And then, at 9:29PM, she signed off and the outside pressure was introduced.

Apparently, as the above referenced Bill Moyers piece indicates, there are a lot of students as well as others, well aware of the issue directly affecting them and they have been and are planning to do something about it.

Finally, two more younger guest spoke up as well. The first a college student from Oregon, the leader of the US Student Association by the name of Alexandra. This is a crisis that is mobilizing students to act in public civil disobedience, protests at graduation ceremonies and work this week in conjunction with Moveon to deliver to the offices of Congress reps and senators their horror stories of crushing student debt, joblessness all the while watching states disinvest in higher education while offering tax breaks and loans to relocate factories and offices of corporate America.

Robert Applebaum spoke about forgiving student debt as a bill he helped write as a congressional aid. Huffpost has a lot more linked material about this.

Lastly, Anna Galland from MoveOn launched a campaign of theirs, in coordination with many other groups that will deliver the stories of how student debt is crushing the lives of people as well as being a dray on the economy. You can listen for yourself here. Their promo:

On Friday, June 7th, thousands of MoveOn members will take our student debt stories to local congressional offices to call for passage of the Bank on Students Loan Fairness Act.

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  1. vlade

    don’t see much into US political process, but in general it’s better to focus at one problem at a time as opposed to spread your efforts.
    Not to excuse Warren, but if there are two large problems to fix (banks and student debt), and she thinks best she can do is most effort on one and some effort on the other (and hopefully get someone else to pick the batton)…

    That all said, I’d say we (as in western countries) need to re-think our approach to education in the first place. Student debt is crushing, and something needs to be done about that. But a more fundamental question is whether the “college education for everybody” is the right thing to do or confusing cause and effect. The starting with an observation “college education=higher income”, and then making an assumption that if we get everyone college educated income of everyone will go up. Assuming some degree of meritocrary, I strongly believe the reality was more of college education was higher income because it was an efficient pre-commitment filter for companies (on willingness to put in effort, discipline etc. – and the actual knowledge gained being only secondary or tertiary to that). That worked only when college was actually elitist – filter is filter only when it produces small samples from a large set.

    Introducing “college for everyone” reduces the filter, removing its value in the progress. Incidentally, it’s also a really smart way of reducing youth unemployment AND to get them to pay for their benefits (at an extortionate rate) at the same time. I.e. people who would not normally be able to do college (and/or get any benefit from it, so they will end up unemployed after finishing anyway) take on lots of personal debts instead of being on gov’t dole.

    1. George Hier

      Everything about the student loan problem can be explained by Supply-and-Demand.

      Previously we had blue collar jobs and white collar jobs, and you could make a decent living on either one. Then we opened up the trade barriers, and started buying finished goods from countries with no safety net or environmental standards. Those goods don’t cost any less than they do to make in the US or Europe, BUT they are subsidized by every barrel of waste dumped in a river, every child laborer worked into arthritis, every toxic metal burned and left to drift across the land. No domestic manufacturer can compete when the playing field is tilted like that.

      So we got outsourcing, as every company realized they had to join the bandwagon or lose to those who did. So the blue collar jobs left. Now we had a large number of blue collar workers, and few blue collar jobs. Supply and demand: High supply of workers, low demand for workers, lowered wages across the board.

      So that generation of workers scrimps and saves and manages to scrape by, but they see the writing on the wall. And so they bring up their children appropriately, telling them “if you want to Make It In The World, you MUST get a white collar job.” And that means college. So they beat it into our little heads from the very cradle. Go to college, or else.

      So this new generation goes through school. The shop classes have been gutted for college prep and such, so everyone who’s mechanically-inclined or just not all that good at abstract memorization is just kind of hung to dry. Everyone else is trying their damnedest to get those SAT scores up, and score enough band/language/volunteer hour brownie points to make it into school.

      And hey, what do we see here? Supply and demand. Low supply of college entrance slots, high demand from every high school student trying to squeeze in. Naturally, tuitions rose. (It didn’t help that the public school systems had been gutted of public funding thanks to the anti-tax Reagan Revolution, but that’s a story for another rant.)

      So now kids can’t afford to go to school. Oops, time for the government to step in. Only, hey, we’ve got one side who wants to send the kiddies to school, and the other side who doesn’t want to spend the money. Hell, let’s make a compromise the likes of which only Washington can come up with in terms of sheer evil: We’ll cut the kids loans of any size, and they can just pay it back when they get out! Hurrah, a win for the left and the right.

      So now we’ve got a high demand of students trying to get into college, and an effectively-infinite supply of Free* money to get there with. Oops, that kind of breaks the supply and demand system, huh? So the colleges quickly adjust by packing their dorms, shoving 3 or 4 kids into what used to be 2-person rooms, cramming hundreds into auditoriums where you can watch a professor from 500 feet away give a briefing on Mandatory Core Filler 101. All that money sloshing around, hell, let’s build a couple new wings and so on. I mean, we can’t really hire new professors or anything, there’s really only so many of those available for hire, so instead we’ll focus on force multipliers. Hire post-grads as TAs and use them to teach the classes. Use electronic homework to balloon class sizes. Who cares? Its totally the same education, right? I mean, just because you can’t meet your professor in person, and there’s only enough time to take questions from 3 students out of 600 in a 1 hour class, its like you’re really losing any depth to your education, right?

      Hell, so let’s say you make it through the degree mill. Get out to the other side, with your shiny paper in your tight little fist… only to find millions of other dumbasses right alongside you. And all of you are fighting for the same jobs. See, all the kids who would have gone into blue collar jobs were forced down the college path, and now there’s everybody all competing for the white collar jobs. Supply and demand, fuckers! High supply of graduates, low supply of jobs.

      Only, wait, it gets even worse: The white collar jobs have been getting outsourced as well! Turns out Rahjeet in India can do the coding and help desk stuff just as well from 6000 miles away. Err, well not as well, but Close Enough for the CEO to cash in and run off to the next Fortune 500 company. Oops, so the supply of jobs shrinks even more.

      But wait, there’s more! Hey, the economy got fucking tanked, thanks to a little housing bubble of some sort or another. Something about letting everyone buy a house by cutting them loans or something. I’m sure the details aren’t important or sound familiar or anything. So anyways, turns out all the Boomers who thought they were going to be able to retire? Well, fuck, no, the pensions have been killed by a simple “declare bankruptcy, transfer your assets to a new company, and dump the liabilities on the taxpayer” switcharoo, and the 401K ponzi scams are in the toilet on account of the stock market imploding. So hey, now you’ve got the terrified Boomers hanging on to their jobs with whitened fingernails, and unable to sell their property due to collapse housing values, and unable to sell them TO anyone because the college graduates are neck-fucking-deep in debt and unemployed to boot! Fuck!

      We are all fucking fucked!

      ‘Course, we could just stop trading with countries with shitty environmental standards, nonexistant safety nets, and tax the shit out of the companies who’ve outsourced their product but still expect us to afford to buy their crap. But let’s not get crazy here. That sounds like Socialism.

      1. Moneta

        When my grand other was a child, they went to school until grade 7 max. They got 2 months off in the summer to help on the farm. Because she was one of the youngest, she got hand-me-downs. Often, the dresses were so worn out, she would unstitch them and sew them back up inside.

        She is still alive and that was life in the country across North America not so long ago. And the discrepancies between them and less developed countries were not what it became after the 2 world wars.

        In fact, the discrepancies in living standards have become so stark that it is quite obvious that the push towards arbitrage will be with us as long as the discrepancy in living standards exist.

        I don’t believe we have enough resources to give the same standard of living to the world’s 7 billion as what we currently enjoy in the Western world without completely destroying our planet. Therefore, there are 2 outcomes:

        1. Either the world’s resources get distributed across the planet, meaning a large percentage of the developed world’s population sees its living standards drop dramatically.

        2. Or the developed world creates a bonds to protect its way of life for about 1 billion people, making sure the developing world does not consume much of anything.

        IMO, the population in the developed world is so individualistic and entitled that it does not see any of this coming its way. Therefore, I doubt it will be able to protect itself against the global tsunamic forces of scenario 1.

        The human mind is very in tune with unfairness. the 99% might be pissed at the 1% in America but the they are still doing nothing and the 6/7 in the ROW are working their butts off to produce the stuff we consume. These discrepancies are huge and unsustainable. We can`t expect the ROW to keep on producing our stuff while we are productively printing money.

        The US should be the 1st to understand this, they revolted against it and detached themselves from England because of this same exploitation.

        1. jake chase

          I think the optimal choice would be returning to the Eighteenth Century: transport by horse and boat, candles for illumination, local, sustainable agriculture, small scale manufacturing of necessities, responsible pay as you go self government, unit banking. Don’t know exactly how we get there.

          Maybe, that’s the Seventeenth Century? No slaves, though.

          1. ambrit

            Mr. Chase;
            I’m sure that the much anticipated return to the “days of yore” will include a return to pre-industrial medicine and sanitation, etc.
            The caterwauling conspiracy nut inside me suspects that very aspect of the situation to be a feature, with lots of virulent bugs too.

          2. subgenius

            Yes, ambrit, it will

            And there is FUCK ALL you can do about it. In fact, you might want to investigate the baseline scenario from the LtG. Bang on for 40 years and counting.

          3. LifelongLib

            IIRC the reason steam engines were invented was to pump water out of coal mines, which were getting too deep for hand- or animal-powered pumps. Coal mines in turn were needed because of forest depletion leading to a shortage of charcoal. Evidently even 17th and 18th-century levels of technology are not sustainable.

          4. optimader

            Think of that missed satisfaction from a productive cough due to tubercular blood clots all the bobbin boys of yore got to enjoy ..

            Makes me misty eyed for the good old days.

            Hell, now all we have is maybe some unanticipated mutated DNA in our food and the occasional lung cancer thanks to errant alpha emitters from some unintended aerosol of manmade radioactive nucleotide that lodge in our alveoli.
            Not nearly as satisfying :o(

      2. jrs

        We don’t have a college education problem, we have an economic system not working for most people problem. We don’t have a college education problem, we have an economic system not working for most people problem.

    2. Leviathan

      Well said, on all counts. There is a good case to be made for learning a trade and starting your own business while in your 20s. Almost anything will pay off, with good timing, hard work and a bit of luck, over a 20 year period. You’ll have no debt and can begin to build equity in a business from day one.

      Debt kills. We have somehow convinced ourselves otherwise, but it’s true.

      We were designed to be a nation of smallholders and tradesmen. This can and should translate into the modern world. Independence is key.

      1. jake chase

        A young friend of mine has done this. He builds swimming pools and has more work than he can handle. His problems are finding responsible workers (and he doesn’t stiff them), bureaucratic regulation, chiseling customers, over commitment. I told him from experience: businessmen have no holidays. You need high standards for yourself and relaxed standards for your workers. You need to anticipate worker bungling, make customers pay sooner, not later. Small business is a way to turn your entire life into a job, but entertainment is overrated anyhow.

        I don’t think he will ever be able to afford retirement, but because he can fix anything his job in later life will amount to a profitable hobby.

        1. ambrit

          Mr. Chase;
          I think you’ve just described what the ancients would have called a “calling.” As a middle aged tradesman myself, admittedly not as successful as your young friend, the main impediment to even a decent standard of living I have encountered is the concentration of, if you will, economic power and influence at the local level in the hands of the smaller rentier class. This class squeezes out the true independents through various and sundry expedients: captured regulation, (residency requirements, competency ‘licenses’, insurance regulations, truck signage, etc.), public perception manipulation, (advertising,) extraneous costs, and good old fashioned human nature, (class snobbery, cliquism, ignorance.) Finally, there is plain luck. The role chance plays in the affairs of humans is vastly underrated. There should be a class in every high school in the land that teaches some form of meditation practice. We all need it, and I suspect that the up and coming generations will need a lot more of it than we have.
          Indeed, the prospects upcoming make the piety and religiosity of previous, less secure times more understandable. People need something upon which to base themselves. It’s no accident that one of the major prophets told his acolyte; “Upon this rock I will build my church.” Check various faiths and sects. That message is there, somewhere.
          Finally, lest I go off too ranty, I love the saying: “Everyone should have two vocations. One to feed the body and one to feed the soul.”

          1. Moneta

            I did my time. 15 years in the corporate world to get contacts and good experience. Saved as much as possible, paid off the mortgage.

            Now I’m building my business and yes, it’s a way of life. When entertaining business costs, I always evaluate then on a quality of life basis as much as if they make business sense. My goal is to generate multiple sources of cash flow and maintain them for as long as possible.

            As for education, I’m not sure I could tell my daughter to forgo university. She’s 11, I guess I still have time to make up my mind a few more times.

          2. Moneta

            Play snakes and ladders with children under the age of 10. They get it. They understand that luck is the number 1 thing in life… genes, family, country, etc.

            We squeeze it out of them by teaching them skills. Bad luck is so prevalent that you have to hone your skills in order to increase your odds. However, at some point we become deluded and think we control our destiny, especially in the Western world where we have been spoiled for a few decades now.

            Then, when people fail it becomes quite easy to convince them they deserve their lot in life.

          3. optimader

            “..if you will, economic power and influence at the local level in the hands of the smaller rentier class. This class squeezes out the true independents through various and sundry expedients:… (class snobbery, cliquism, ignorance.)

            Yes, local regulatory entities are now structured to crush competitors below a certain economic threshold. There is no doubt about this, and in my locality they hire crony “consultants” that increase costs and deflect professional responsibility for what is truly in their job description.

            “..Finally, there is plain luck. The role chance plays in the affairs of humans is vastly underrated…”

            I have concluded that being persistent yet recognizing failure and entrepreneurially regrouping is mandatory. In my formative corporate professional path, I was focused that it take me to a place where I could peel off and compete at a startup scale. When I was younger I observed many of my fathers colleagues get pounded once they were in their 50’s. Big lesson.

  2. Barbara

    In my state, a few decades ago, universities were funded 75% with government dollars and 25% with tuition. Now it’s 25% government and 75% tuition.

    I think the problem is more of the same. If we want nice things, we have to be willing to pay/fund them.

  3. George Hier

    Well, its quite simple really. If she makes too much of a fuss, she’ll never get the nod for president in 2016. Come on folks, this is straight out of the Sen. Obama playbook:
    1) Get elected to Senate
    2) Rant and rave and carry on about the usual things, apple pie, motherhood, raising the debt ceiling is bad, and so forth.
    3) Rest easy, as because you are a junior senator nobody listens to you and so nothing will actually get changed.
    4) Rally the Iowa youth with your passionate speeches from the Senate floor. Clearly you “get it”, its just all those fuddy-duddy old guys getting in the way. If you were elected President, well, obviously you’d be able to fix things up.
    5) Get the nomination, run on change and transparency in the general, get elected, and then promptly continue Business As Usual.

    1. jake chase

      This rings pretty true, but perhaps we’re unduly cynical about Warren. Meanwhile, perhaps the only positive thing about the student debt disaster is its potential for mobilizing actual people to actual protest in really large numbers. Don’t forget that this ended the draft and the VietNam war, even if it did take ten years.

      The only real solution to student debt is a government that awards scholarships and truly low cost loans for productive courses of study. Instead, we have a rentier faux solution in which government insured non dischargeable student loans bear interest as high as 9%. My wife is still paying on one of those incurred in 1994. Originally, it was set at 11% but she got a one time reduction and can now never get another one, still has another ten years of payments. I love the title of the servicer: American Education Services. Catchy, hungh?

      1. Leviathan

        You should look into a private loan to pay off the high balance student loan while rates are low.

        I don’t know about mass protests, a la Vietnam. What good would that serve? The problem for young people is shortage of good-paying jobs with a future. With jobs the loans are payable. Without, you’re screwed. That said, I know a lot of young people who don’t even bother looking for solid jobs because they think capitalism is itself the problem. I don’t even know what to say to them. When they see their peers with nice cars and houses it will sink in, but they may not be able to catch up.

        Low interest loans and scholarships won’t address the fundamental problem of higher ed which is spiralling, out of control costs. Of which the very highly paid former prof Sen. Warren is one. So how COULD she attack the student loan problem head on? She’d look like an incredible hypocrite, wouldn’t she?

        1. jake chase

          I haven’t looked but I suspect such a loan would require substantial collateral, even though the loan is guaranteed and the debt is nondischargeable. Every year I think about paying it off and then worry the servicer will screw up the paperwork and sell the loan to somebody else and cost me an endless fandango to stop the dunning and collection efforts.

          So I just keep making the payments which, fortunately, are not significant, but IMHO it should be a crime to collect 11% in this environment.

        2. Otto

          “You should look into a private loan while rates are low”? You are joking, right? This would be an unsecured long term loan. Unsecured long term loans do not exist.

      2. Nick

        What everyone is overlooking here is the incestious relationship between the Democrat Party and higher education. After all, most professors have jobs for life, paid for, by student loans and government grants. In turn, these professors fill the student’s skulls full of liberal mush. No different than the relationship between the Democrat Party and the labor unions.
        Me, an old fart who came of age in the late 60’s & early 70’s worked my way through college. I was too busy working 40 hours a week in a gas station and attending college as a full time student to join in the student protests of the day. I managed to graduate from a private university debt free.
        Today, I see these kids feeling it is a God given right to attend a top tier school. They haven’t got the “common sense” to see up front what having a 100k student loan debt when they graduate will do to their future.
        Tell you what. If I’m hiring a college graduate for an entry level position, I’m going to look much more favorable on a candidate from a State university or lesser known private university who worked their way through school graduating with no debt thatn I would a kid with 100k of debt from an Ivy League school. I’ll know up front the former will be a “go getter” and know how to manage his/her personal finances.
        Just my 2 cents.

    2. markar

      It’s a foregone conclusion Warren won’t approach the Presidency in 2016. Hillary is the heir apparent, and no junior Senator dare get in her way.

        1. Brooklin Bridge

          Without the blessing of the DNC, even someone with a funny name couldn’t do it.

        1. jonboinAR

          I nominate Markar, who’s irony was subtly expressed enough that y’all seem to have missed it.

  4. Chris Engel

    Radical proposals hit dead-ends.

    See Ted Kaufman.

    I’m sure Warren wants to get some relatively small wins as part of a longer-term strategy for more radical reform.

    It’s hard to be taken seriously if you’re constantly out there beating the drums about systemic reform.

    Her bill is barely being considered serious as it stands now (hell, Obama is struggling to even prevent rates from doubling, and that’s proving to be a task against the GOP). If she used any more radical rhetoric she’d be written off as a kook even faster than she unfortunately already is.

    1. Lambert Strether

      Why are you sure of that? Doesn’t Obama show the Democrsts are all about tiny reforms masking greater betrayals? Obama said a lot of nice things in 2003 and conned a lot of people. And MoveOn helped him run the con.

      1. Chris Engel

        Because I truly believe Warren has principles (unlike PBO).

        Warren is using the “give students the same deal as bankers” bill as a way to make systemic reform more digestible by the public.

        The difference between Warren and Obama is that Warren isn’t sacrificing anything by going for a relatively smaller win of making students get the same deal as bankers. She’s achieving one victory to progressive forward. Obama gives in completely and even steps backwards in many cases.

        Once the students are on par with bankers she can move into more reforms. I don’t see any betrayal in Warren’s _current_ strategy. If she comes out as being way too radical then her 2016 chances are gone, and I for one don’t want Hillary to be up in ’16, Warren would be way better.

        1. Chris Engel

          I want to point out that I do realize that the logic I’m using to excuse Warren not being more aggressive are similar to that used to excuse Obama’s behavior as a senator and presidential candidate. So no, the irony is not lost on me :>

          1. Lambert Strether

            Well, as you pointed out on Mary Jo White: “I don’t trust any of them until I see the actions. Hopefully she will surprise us.”

            That’s where I am with Warren.

        2. TK421

          “as a way to make systemic reform more digestible by the public”

          Right, because it’s the public that isn’t hungry for reform. Sure.

          1. Chris Engel

            What I mean is that it’s short and sweet — very marketable, it’s good messaging.

            If systemic reform gets a simple brand like that it’s easier for the public to not fall for bullshit propaganda against reform.

            Otherwise you get complex webs of deceit like Dodd-Frank and Obamacare that are labeled reform but are so voluminous that people don’t really “get it” and just know that they don’t see any changes in their locality…

      2. Leviathan

        Correct. Warren would probably do more than Obama but less than her starry-eyed fans imagine she would.

        Students will get the equivalent of HAMP sooner or later. Mods, but no forgiveness. Debt is the root of the modern economy. No one will just let it go.

      3. Cross Postin

        The US will go to war if Isreal does – voted for by Liz Warren.

        “Then there is Massachusetts’ celebrity Senator Elizabeth Warren. Many of her progressive supporters were uneasy over the boiler-plate pro-Israel language on her campaign web site, however there was little doubt that she was a genuine populist on other issues and would bring a rare progressive voice to the halls of Congress. This, in large measure, she has done. However, when push came to shove, Sen. Warren was persuaded to add her name as a sponsor to Senate Res. 65 – late to be sure (not until May 7) – and she joined in the unanimous vote in favor of the bill.” – Jeff Klein

        1. Massinissa

          Oh JESUS CHRIST, Warren is a hawk on Iran?

          Well, yet another democrat I wont vote for, ever.

          Actually I think that might be all of them now.

          Hype is hype, and the hype for Warren isnt all that different than the hype for Obama was.

  5. Pied Cow

    “I’d guesstimate that a full 1/4 of my class at Harvard was work-study.”

    Why is it that so many graduates of that obscene institution feel the need to remind everyone that they went there?

    I, for one, am not impressed. I see it as an elitist put-down of your readers.

    1. diptherio

      OMG, Yves named the university that she attended…and it was a fancy one!!!

      Come on man, get some perspective. She isn’t bragging, quite obviously, just sharing her experience, which happens to involve Harvard.

      Your (comical) over-reaction would seem to be more indicative of your own insecurities than of anything having to do with Yves.

      1. Pied Cow

        Oh, so my insecurities are the important point. Thank you for the evaluation. I’ll go talk to my shrink right away.

        As you rightly point out, “She isn’t bragging, quite obviously, just sharing her experience, which happens to involve Harvard.”

        Yeah; that would be just like me saying, for example, “I’d guesstimate that a full 1/4 of my class at Acme Correspondence School was work-study.”

        That wouldn’t be bragging, that would just be me sharing my experience, which happens to involve Acme Correspondence School.


        Yves could have made her point with equal effect without having mentioned that bastion of elite privilege. Most people don’t mention their alma maters in their writing unless the context calls for it. That she chose to, and her possible reasons for doing so, are worthy points of discussion, your pithy psychological analysis notwithstanding.

        Yves resorted to making mention of her alma mater because people tend to defer to it as a source of authority in and of itself. This is a tendency among alumnae of that horrid institution, and the practice can be seen time and time again.

        So maybe you’re right; perhaps it’s only my insecurities speaking. But I must point out that it wasn’t I who raised the point of insecurities.

        Perhaps we’re feeling a bit insecure about our elite institutions or of defending those who use such institutions as rhetorical buttresses for their arguments?

        Naw, it can’t be.

        1. Yves Smith Post author

          You are the one who is insecure, buddy, so you project it on to others (Google “projection”).

          When I was a kid, people from middle class families like me and lower middle class and poor families could and did go to top colleges. It was not a sign of “privilege”. In fact, this “privilege” meme is only about 10 or so years old and its rise in the lexicon ties almost exactly with big jump in economic inequality (top 1% share roughly doubling since 1979, and really rising in the last decade). I finished college right before big shift in incomes to the top began.

          I’ve never made my background a secret but I don’t make a big deal about it either. College was over 30 years ago. For people my age, no one gives a rat’s ass about where they went to college, in terms of accomplishment, what they’ve done since then is what matters. The reason for mentioning it is to illustrate how much the world has changed.

          1. Jennifer

            It’s an important point, because Harvard is one of the most expensive schools, so to say you could work your through it says a lot how much things have changed. Actually, even 20 some years a close friend of mine graduated from Harvard with about $20,000, in debt. Not nothing but I reminded her she did go to Harvard and I knew plenty of people who had gone to less prestigious places and had double that. She did extensive work-study, got grants etc. I thought at the time that was pretty good, wonder if today she could do it.

          2. Pwelder

            On the subject of how much the world has changed, let me recount some personal experiences in going through the same schools Yves attended about twenty years before she arrived.

            I had an academic scholarship worth $1500 per year. This was on the high side, but there were quite a few of these around if you came from a family with lots of kids and not much money (Catholics had an unfair advantage here) and if you could do a combined 1300 or so on the SAT’s. The reason for all this largesse was that we were in the post-Sputnik panic, when the foundations and the government funders really wanted to educate at least the right half of the bell curve to the limit of their capacity. There was what seems in hindsight to have been an overly simple-minded reliance on test scores, but if you were one of the many thousands of lucky winners you could live on campus and do an Ivy league education with no money from family and without doing an hour of paid labor during the academic term. The scholarships didn’t cover everything, but the summer jobs (caddying, truck driving, general labor) paid enough to make up the difference. Much of the money flowed through something called the National Defense Education Act, which my many siblings and cousins still remember fondly.

            So I graduated college debt-free, and immediately enrolled at a well-known eastern business school. There were scholarships available there, too, but I felt like I had already made out like a bandit and so elected to borrow the money instead. Also, I did a bit of clerical work during term for one of the university’s publications. So when I graduated in 1965 I had a debt load of – wait for it – $6,000, or roughly 30% of what I was making at my first job. Piece of cake.

            If the country could do that for so many of us simply out of fear of the Russians, there’s no good reason it can’t find a way to work out a better deal for today’s kids.

      2. jonboinAR

        And who cares if she is subtly boasting, anyhow? Let any of us try starting arguably the most interesting blog on the ‘Net.

    2. AbyNormal

      Resentment is like drinking poison and waiting for the other person to die. carrie fisher

      now fukoff peeved bovine and don’t ever speak for me again

    3. NotTimothyGeithner

      Besides her personal experience, pointing to kids working at a school in California in the 60/70/and even 80’s wouldn’t make the same point. There is a bit of hyperbole at work. Even if she didn’t go to Harvard but went to community college, 1/4 of a Harvard class getting through Harvard relatively debt-free doing work study as recently as “an undisclosed time ago” makes an important point about the rot through the system.

    4. Dan Kervick

      The institution is relevant. It’s important to understand that even the most elite of institutions once relied more on work-study.

      1. jake chase

        I seem to recall from the distant past that nearly everyone attending Harvard got serious financial aid from the University. Has that changed?

        1. Yves Smith Post author

          I can’t say how many did, since most kids didn’t talk about that, but my impression was most didn’t but a big % of the work study kids did get some to a lot of aid. Harvard did have a view then that no one who was admitted should turn the school down because they couldn’t afford it. And there WERE student loans back then too but my impression was schools didn’t encourage/expect them to be used.

          My father was merely middle class. He was an upper level corporate manager in the paper industry. We lived in hick towns, never had fancy vacations or clothes. He was able to pay for college for three kids (my youngest brother was out of state at UVA, which was also not cheap by the standards of the day).

      2. sleepy

        I attended a private Jesuit law school in the early/mid 70s. Tuition was $700/semester when I started, and $1000/semester when I graduated three years later.

        I drove an ice-cream truck one summer and worked as a clerk at a convenience store other times. Even at what was approximately $2.00/hr jobs, I was able to pay at least half of my tuition and support myself.

        Rent was about $80/month, utilities about $20, etc., etc.

        With the bills split 3 ways with 2 roommates, it was relatively easy. And while those jobs were just about minimum wage jobs, they were freely available to anyone–everybody was always hiring.

        BTW–that very same law school now runs well over $40,000 a year. Try paying that driving an ice cream truck.

        1. Moneta

          Did you go on s cruise during spring break?

          I think we have an education problem but we also have an entitlement issue.

          1. sleepy

            No, but to continue with my “shutup grandpa” stories, over Christmas break once I hitchhiked to San Antonio and then took a bus to Mexico City for about $100 total trip, lol.

    5. washunate

      I actually do sympathize with your gut reaction. One of the things I despise most is the Educated Liberal Putdown, as if rural America or high school dropouts or racist Republicans or lazy young people or whatever are responsible for the comfortable liberal class’ abdication of responsibility in checking the concentration of wealth and power.

      However, like everyone else commenting, utilize a little reading comprehension. Your ire is simply misplaced; that’s not what Yves is doing here.

  6. petridish

    Elizabeth Warren notwithstanding, it is impossible not to conclude that what is happening here is BY DESIGN. The “tell” was making student loan debt nondischargeable in bankruptcy eight nauseatingly exploitative years ago.

    We continue to try to make sense of governmental actions under the assumption that we still have a government of, by and for the people when we know that corporatism has taken over.

    The creation of a desperate, financially indentured generation of citizens fits the agenda perfectly. Their feelings of helplessness and futility is creating a nation of supplicants incapable of rational thought about the future and easily managed. From the TPP to H-1B visas to suffocating “security” measures to “job-creating” tax and “entitlement” cuts, they will be in perpetual crisis and in need of any and all help “from above.” Forever.

    Take a look at the next link down to see where this is all headed. Endless programs and fixes and manipulations which just dig the hole deeper while purporting to “help.” Or look at the link from a couple of days ago, “Borrowed $44,000, owe $147,000.”

    And the student borrowers are not helping themselves where the “moralists” are concerned. Drinking, partying and sexing their way to an expensive degree in a worthless discipline on the taxpayer’s dime and then whining about having to pay the money back.

    IT’S A SET-UP, folks, and a damn fine one at that.

    But there is an IMMEDIATE way out, no governmental help needed. The PARENTS can and must take a stand against the financial exploitation of their not-so-adult offspring. Refuse to fill out the FAFSA. No FAFSA, no loan. No loans, no students. No students, no tuition income. AND NO CRUSHING, DEBILITATING DEBT. One year. Send your kids to take a few classes at the community college or to work at Burger King or to volunteer at the local animal shelter. Take the heat (and there will be HEAT!) Refuse to sell your kids to the debt collectors before they’ve had a chance to sell themselves.

    1. Dave

      Even public colleges have become businesses rather than socially responsible institutions of learning. An example is the fairly typical $500,000.00 yearly salary of the football coaches and the associated support system. Another example is the insistence that the student take many courses not directly related to his/her professional goal. Another is salaries and benefits of administrators, many of which are not necessary. So costs have ballooned far beyond the rate of inflation.

      These student loans are unsecured fairly low interest rate documents subsidized by the tax payers. The risk is high, and in many cases the benefits to society are low as the students often learn less than valuable “skills”. The probability of default is significant under these circumstances. It is entirely reasonable that these loans have a no bankruptcy provision.

    2. jonboinAR

      @Petridish: “Elizabeth Warren notwithstanding, it is impossible not to conclude that what is happening here is BY DESIGN. The “tell” was making student loan debt nondischargeable in bankruptcy eight nauseatingly exploitative years ago.”

      Even at that time, stupid and ill informed as I am, to me that was an obvious debt-enslaving move by the so-called 1%. It should be really high on the to-do list of things that must be changed ASAP, up there with corporate person-hood and limiting the $ that go into elections.

      Actually it’s way sexier than either of those latter. It’s probably where the long-dormant ’60’s revolution should have the reigniting spark put to. “Occupy” was a fair attempt but it seems to have died out. It set a good tone though.

      Alrighty then! How do we get a student protest movement organized? What’s the gimmick? Start burning loan papers?

  7. Crazy Horse

    “Impossible to earn your way through university in today’s economy?” Not so– there is always prostitution. For women there is the traditional form and for everybody there is employment in the financial sector running Ponzi and HFT schemes.

    No solution to the student debt problem? Not true. Simply create a new category of bankruptcy— let’s call it “Chapter S.” All student loans dis-chargeable, after four years wipe the bankruptcy off the records and let the graduates get on with their lives.

    Don’t like the prospect of loosing all those debt slaves, Jamie & Lloyd? Fine, we’ll just nationalize your damn banks and create a state-supported higher education system through the back door. With entry determined by merit rather than family connections. And while we are at it we’ll take over Harvard’s hedge fund and return Harvard to the business of education that now is a minor part of its operations.

  8. Susan the other

    Compared to the housing debacle, the student loan failure is not a big deal. If total student loans amount to 1.1 trillion (only 163 billion is owned by SM), why are we even agonizing about the 163 billion? It won’t do much to help the majority of the students. Looking at 1.1 trillion isn’t all that scary either. Just cancel all student debt quietly by letting the Fed buy up every dime of it, hold it till it matures at a negative interest rate, and pay the students the difference for having been optimistic enough to have even gone to college in the first place. It will help them get along until we “adults” can decide what we want our country to be when we finally grow up and control our own economy, and provide jobs for everyone. Elizabeth Warren sees another financialization train wreck coming down this summer – she want’s to save the banks. The banks.

  9. Dan Kervick

    I think the student loan issue is another place in which recent criticism has focused far too heavily on the credit and financial dimension of the issue and not nearly enough on the issues of (i) fundamental structural inequality in our society and (ii) the excessive privatization and individualization of economic functions that should be socialized.

    On (ii) first: College and university education is likely overpriced and inefficiently delivered, but it is still extremely valuable to the person who obtains it. Over time, our society has decided to place a larger share of the cost burden for educating our young people on the young person who is the immediate recipient of the education (and on private philanthropists who contribute to college endowments), and reduced the proportion of the cost that is distributed among the community as a whole and treated as a community investment in its future. This is a very unenlightened approach in my view.

    On (i) now: one way in which the plutocrats who manufacture the political culture have been able to sell this privatization of the cost burden – in addition to perpetuating the general malaise of insane distrust, alienation and distrust among Americans – is by driving up inequality. The result is that a large body of declining, pinched and flailing middle class people feel like they can no longer afford these public investments, and are driven to pursue a politics devoted to shaking off every obligation that doesn’t pertain to them personally.

    Also, by creating a grossly unequal society, we have a created a world in which the class status standard that comes with a college education is more valuable than ever, and in which anxious individuals are willing to pay through the nose over time to buy a ticket out of social status hell and lifelong penury and dependency.

    I think people need to stop focusing so much on the debt markets and start focusing a lot more on the larger structural pathologies of contemporary American society. The debt is a symptom, not the cause. Lenders have an interest in the existence of opportunities for profiting from debt, of course, but the lender isn’t the main party responsible for charging the student $120,000 to $150,000 for a college education – the college did. And the college isn’t the main party responsible for deciding that that sticker price would be paid through a combination of the students own resources and some private beneficence – that’s a general trend in our awful, ugly, fragmented and unjust neoliberal society.

    1. anon y'mouse

      I like your post. all I see above you is the student-debt variety of “buying more house than you can afford and then welching means that YOU are the bad guy”, blamethevictim nonsense.

      I want to know how many and what kind of jobs one can get without any kind of training or degree, how much they make and whether there is any future of advancement in such jobs or ability to “start a family” (childrearing is overrated and has gotten the world into this mess we’re in, so how about just basically the ability to move out of mom’s place and NOT have to share a 3 bedroom apartment with 6 other people, for starters as equivalent of the “household formation” stat). I want to know how many of these loans are being made to people who are going to community colleges and those other nasty for-profit places in order to basically pay for their own VOCATIONAL TRAINING.

      you know, back when we had industry that kind of thing was included in the high school environment. when I was attending a “technical” high school there was an entire unused auto shop, wood shops and all sorts of industrial machinery gathering rust in darkened wings of the building, while they insisted on crowding everyone into “pre health/pre engineering/pre college catchall” tracks and damning the more than 3/4 of their students who hadn’t a chance in hell of going to college (for both academic and family/financial reasons) to barely having the skills to get a job at burger king upon HS graduation.

      I do not understand where all of these “college is overrated” people come from, even if it is horribly overpriced. if college is so unnecessary and does not teach the skills Bidness wants, why do they keep asking for it as a requirement on applications and in interviews? just another barrier to keep the unwashed masses out, and because they can. what are the rest of us proles supposed to do? there is no “starting in the mailroom & working one’s way up over a lifetime” while training ON the job path available anymore. are we all just supposed to work at Starbucks for the rest of our lives, and be treated as 3rd class citizens by nearly every customer who was “smart enough” to go to college?

      one can barely afford metro-level rent in jobs like those, and please don’t tell me you have to be clever enough to pool resources with people who are living as unstably as you do. I’ve seen the nightmares of realizing that rent was due 3 days ago, and the rest of those nugs you live with having 1)just lost a job 2)just switched jobs and paycheck is still a week away 3)just had some other life emergency which prevents them paying their share. having roomates, even those you’re emotionally/romantically involved with is much like being responsible for a family where you are the only breadwinner at times, and is only embarked on dangerously by anyone who can’t cover a few rent cycles entirely on their own. which, if you can do so, why are you living with roomates in the first place?

      tell me where H.S. students can start out in a job that will eventually support them and train them up in skills. show me a society which really intends that every citizen will have the ability (not inclination, but ability) to get a self-supporting job upon release from the educational period of their lives. show me a society where those who have skills are actively apprenticing others who don’t, instead of forcing them to pay for classes. if you can’t show me a society that is ready to NOT profit off of the misery of its lowest, least favoured members and also refuses to leave them behind, then college might not be necessary. as it stands, I see no way around it for “most” people, and that includes the unwashed.

      1. Susan the other

        Here’s a slice of history that could pertain: In 1933 there was a large group of artists in NYC that were out of a job. They had been teachers, artists, graphic artists, etc. They all got together and wrote a proposal to FDR to fund them to do government art projects (since FDR had already pushed his WPA into existence – Obama could do the same). NYC unemployed artists got a grant especially for them to do art projects, it fell under the PWAP, an offshoot of the WPA, blahblahblah. THe point is the president can do this. Obama could employ every unemployed or underemployed college grad and create a new industry in the process. Green jobs of all varieties, because Green can become the basis for an entirely new economy. Just have an organization speaking for all college students submit a proposal to Obama to create a new Works Project Administration and give them a grant to create an entirely new and viable economy. That would be cool. And pay them well so they can pay off their student loans, capped at .075%.

        1. subgenius

          That was to the mouse…

          Susan, I would posit the concept of “economy” as currently formulated IS part of the problem, and as such, NOT part of the solution. Create a whole new industry? When has that EVER been a long-term plus?

      2. washunate

        Agree with the rant. It cracks me up that educated liberals who should know better espouse nonsense like there is no inflation. They clearly have not tried living on most of the jobs that are available in our country.

        So, I want to ask about your first paragraph. I agree that mortgage debt and student debt is primarily predatory. But it’s not just blame the victim – we have a system of political economy premised upon property rights and the centrality of the individual.

        Are you advocating state ownership and distribution of real estate and education? If not, what responsibility do you think individuals have in making financial decisions? No one right answer of course, just curious what you think.

        1. anon y'mouse

          how about I come back at you with some questions instead. or really, questions to anyone/questions to the universe in general.

          what is the purpose of government? is there a reason that every human endeavor must be turned to the profit of someone else? why is anyone making a profit off of prisons, sickness, poverty and other forms of misery? isn’t there something a bit wrong with the attitude that, no matter how bad it is for individuals or society, it keeps the money flowing to someone (generally someone else)? if the government is not there to protect the “little guy” and obtain goods that should not be market-based, then what the heck is the gov’t for?

          I would argue that these are non-normal goods where the idea is that gov’t arranges to provide these AT COST rather than private companies which have a built-in incentive to rob you blind and give you no service to show for it: Utilities, health, education and retirement. things that all of us can not live without and for which we–individuals and society–need maximum service at minimum cost, which precludes most profit-taking endeavors, but hell—if you insist on sending little johnny to private school for 3x cost so he doesn’t mix with us common mortals, I guess no one can stop ya, etc. just don’t form up in groups to codify your pretensions by denying the rest of us a first rate ed. through think-tank tomfoolery because you don’t want to pay taxes. little jimmy might get robbed and raped by those mooks you failed to educate in deliberately degraded public schools someday.

          if you are thoroughly of the belief that profit and markets are necessary for every single thing that human beings do, then perhaps let us all install air monitors and begin charging every breath we take from day one, and just privatize that too. a society which requires that all life-activities are billable is one i’d argue is not sustainable long term. are we to present the newly-born child with a bill for service (we do the parents, but perhaps the hyperbole sheds light on what I mean here). are we to start charging kindergarteners for a full school day, or do we allow them to take recess without charge? well hell, the school has ongoing liability and facility depreciation during that time, so why let them off?

          if you start seeing money everywhere, that’s all you will see until even husbands will start charging wives when they, on the off chance, scrub the toilet. i’ll leave you with this, which is a thought I stole from somewhere but I can’t remember where: any society that does not care for its old or its sick has no honor, and any society that does not care (which includes instructing them for the future they’ll inherit) for its children is one with no future.

          1. washunate

            Sure. I’m not a socialist – that makes me pretty far right compared to many younger folks :)

            I think government’s role is to set the rules, referee the game, ensure the basic safety and soundness of the stadium.

            The primary failure in our system is wealth concentration – the stagnation of wages accompanied by increases in prices over the past few decades, particularly accelerating over the past decade and a half or so.

            This means addressing market failures like the tragedy of the commons and expensive bargaining and externalities and imperfect/asymmetric information and moral hazard and inherited wealth and so forth.

            In general, if you want a level playing field for outcomes that have some sort of social good, direct government payments to individuals (social insurance) is far superior to tax incentives and public/private partnerships and loan guarantees and other forms of government support.

            So long as we have a system that allows homeowners, as a group, to be far wealthier than renters, and more educated people, as a group, to be far wealthier than less educated people, it isn’t victim-blaming to point out that borrowers are participating in the system. To say otherwise is to assume the burden of advocating an entirely different system, one where gains accrue to the public rather than the individual.

  10. Godwin

    She also didin’t mention the campaign to save the Gay Baby Whales For Jesus. Obviously the perfect is the enemy of the good.

    1. Yves Smith Post author

      So tell me how much her narrow fix does to solve the student debt problem? We have serious delinquencies NOW running at close to 30% once you back out the proportion getting deferrals. One year of low rates does nothing to fix either higher education costs generally or the principal that student borrowers have to pay off.

      She brought up the issue (unlike gay baby whales) and pointedly avoided talking about any meaningful aspect of the underlying problem.

      1. John

        Well more then half the country is bat shit crazy so sometimes you can’t come out and say, this is the problem and we need to do this to fix it.

        She is sly taking this route. It’s going to back the Repbulicans into a cornor and they are going to lose ALL college age voters.

        As for a year, that’s what the last fix that is expirig was for. And I see no problem fixing it and letting the Republicans fight against it in 2014 when they are running again.

        1. Yves Smith Post author

          No the thing with fixes is you let them expire. Clean hands. This was a Dem fix, so a Dem problem. Like Obama using the sequester, remember? It’s now seen as his doing.

  11. Really Tor

    Tear down the best weapon of the rentiers? No way. In case anyone is history deficient, the 70s were the beginning of wrath. There would have been no housing “crisis” if for example, the “poor laws” of the code gave the same advantages that the wealthy use all the time. Cannot let the proles go before a judge and prove that they need a break on their biggest, most important possession/shelter.
    The only way fairness is going to come about is with a rebellion.

    “She’s one of the top bankruptcy experts in the US. It would be a natural for her to call for a rollback of the 2005 bankruptcy law changes that made it virtually impossible to discharge student debt in bankruptcy”

    1. Really Tor

      Special shout out to Joe Biden, Orrin Hatch and the rest of our beloved plutocrats who keep pushing it in our faces.

  12. tracy coyle

    Note: It was Clinton that signed the law that made Student Loans non-dischargeable back in 1998. BARF, or the 2005 Bankruptcy Reform Act didn’t change much except to make it harder to discharge debts if you actually earned a good wage. Right now, if you file a Chapter 13 (repayment), student loans are treated like credit card debt and get repaid at the same rate (usually considerably less than 100%) – however, unlike remaining credit card debt balances that are zero’d out when the 5 year repayment plan is over, student loan balances become due again.

    Making student loans dischargeable in bankruptcy, especially under the 2005 law, would make sense – those that could repay, would be required to.

  13. mk

    ” And even then, she said there needed to be a mass movement. ”
    Remember when someone said from the floor of the Senate or House that the banks own the place?

    Why hasn’t Obama kept his campaign promises?

    There is something missing and Warren has identified it, there is no mass movement pushing back and creating the pressure needed for elected officials to break away from lobbyists representing banking/corporate interests.

    Just because we elected people to office who appeared to represent our interests, citizens’ responsibilities do not end there. Once in office, we have to pressure our elected officials to protect citizens interests to meet and beat the pressure of the lobbyists.

    There must be a peaceful mass movement and I wonder why US citizens can’t organize with people all over the world who have the very same concerns. I don’t think anything can change without the pressure of a worldwide mass movement.

    1. jrs

      A youth movement could be built around student debt maybe, not a mass movement. Most of the country still doesn’t have a college degree. Do you really expect the person working at Walmart for life to identify with those lucky enough to go to college? Really why should they? Unless their is evidenced that those people also support say … the Walmart strikers.

      1. anon y'mouse

        I would posit a guess that most of those who work at walmart (well, perhaps not that behemoth, per se but any of their retail counterparts) are either attempting to work through school themselves, or have kids who are struggling to do it.

        besides, everyone in college outside of the business school(hey, looka there! PROFIT$$$) is thoroughly aware of the evils of walmart.

      2. JTFaraday

        “Really why should they? Unless their is evidenced that those people also support say … the Walmart strikers.”

        Good idea. Because unless those student loan debtors can get Elizabeth Warren to discharge not only their student loans but the all rest of their bills in serial hipster bankruptcies, then they’re still going to need their plantation overseers to start sharing some of the profits.

        And Walmart is the biggest low wage plantation– right after US FedGov.

  14. Pat

    American universities are a cartel. Those at the top (Harvard, Yale, Stanford, maybe MIT & Princeton) set the prices, including the annual higher-than-inflation price increases, and everyone else follows suit. The other Ivies price 1-2% below, eastern elite schools 5% or so below, and so on down the line, to the public universities, which charge about a third of those at the top.
    This is an absurd situation, since the top schools are price-resistant and don’t really even need the tuition money. Stanford has so much money from its endowment that they don’t know what to do with it. A few years ago they started giving free tuition to any student whose parents made less than $100k. Why should these super-rich schools cause all the students in the university system to pay such exorbitant prices?
    The best way to address the tuition problem is to have the government drag the presidents of Harvard, Yale and Stanford into a room and “encourage” them to drop tuition prices 10-20%. If they did so, all the other universities would follow suit, since (almost) nobody is going to charge more than Harvard.
    I doubt that lower tuition income would affect the basic mission of the schools. Over the past 20 years universities have turned into glorified summer camps that provide all sorts of extraneous programs and bright new shiny buildings. (My Ivy league former school flies the Ultimate Frisbee team across the country for a weekend tournament.) There’s a lot of fat there that could easily be trimmed- and should be.

    1. frank

      Agreed. Warren has to stick with the basic program as today’s universtiies can only survive with massive student loans and Pell Grants. The cost ofthese institutions can be slashed. Actually, the only people at universities that haven’t benefitted from the spendathon are the faculty. With the increase in adjuncts, the real cost of faulty may have fallen.

    2. Ms G

      “… and “encourage” them to drop tuition prices 10-20%. ”

      Good idea — exactly what Robber Rubin did with Long Term Capital Management, putting the Big Swinging D***s of Wall Street in a room and forcing them to “play ball” so as to “save the markets.”

      However, I do not agree that the mission should be a 10-20% drop in tuition prices. The percentage slash in tuition should be far greater — at a minimum, is should correspond to what the tuition would be if it followed the curve of wages and salaries since the 1970s; which is to say, no college should be charging tuition that is not affordable without borrowing to the average american household whose incomes have stagnated or dropped precipitously in the past 40 years (not to mention since 2008).

      (Same formula needs to apply to (1) Health Care [Insurance Companies would bow out of business, which would be great because Single Payer could move right in.] (2) Rent on apartments; (3) the price of electricity, gas, heat; (4) the price of public transportation; (5) the price of oil.

      Nobody anymore can say with a straight face that prices of everything in our advanced Kleptocracy are “fair” or “market based.” As has been pointed out, they have reached a predatory level that is robbing everyone of autonomy and security (never mind reward for working for a living).

      Warren seems to be panning out exactly as the more cynical amogst us predicted once she popped into the Senate. Her pro-citizen (pro-consumer) crusade has been reduced to a paper costume. Inconceivable as that may seem from a woman so intelligent who seemed to care so much about what mattered.

      Read more at http://www.nakedcapitalism.com/2013/06/why-isnt-elizabeth-warren-attacking-the-student-debt-problem-head-on.html#mAccxTVjrY3Wd1PS.99

  15. Thomas | Your Daily Finance

    You can borrow 50k with no credit check and no job and they wonder way people aren’t paying loans back. I agree we need help we as people we need to look at do we need to go to schools that are so expensive.

  16. washunate

    This is a great article.

    One point that might be worth adding to all the great comments is part of what makes student debt tricky is that there is virtually no public good in higher education as presently constituted. It’s almost all private benefit (for a variety of various actors).

    It makes this quite the predicament. Treating the symptoms actually makes the disease worse. But not treating the symptoms causes further suffering.

    In Warren’s defense, too, it might be worth pointing out that she’s not some lifelong leftist marxist whatever failing to lead the revolution. She’s actually a recovering Republican. If memory serves, her research into two income households led her away from the GOP. Unhappiness with her says a lot more about the catatonic state of the Left than it does about her specifically. In fact, she perhaps personifies quite literally the rightward drift of the Democratic Party – it’s where the reality-based wing of Republicans have migrated!

  17. F. Beard

    Money that is lent into existence must necessarily be repaid and with interest that does not necessarily exist sans even more debt.

    OTOH, money that is spent into existence does not necessarily have a finite lifetime and can thus accumulate in an economy resulting in overall increase of EQUITY.

    Two money forms that can be spent into existence are fiat and common stock. Between these two, what real need do we have for money forms such as credit, that are lent into existence for usury?

  18. C

    Having been in and worked at Universities for a decade I think that this problem has been broadly mishandled. Like the lack of jobs this is a larger scale problem and, to be blunt, most of the diagnoses that have been offered have been short-term solutions or have focused soley on one symptom.

    Firstly, while it is true that the cost of college has risen there are a number of factors for that. State and federal support for universities has fallen off as, in some cases, has the availability of scholarships. As a result more of the actual cost of school is being borne by the students. Keep in mind that a generation previously you had students coming out the draft. As such they qualified for the GI bill in larger numbers than our all volunteer force does now.

    Additionally universities are now saddled with new costs required to improve quality. When entered undergraduate few universities had high-speed data networks, wifi, webmail services and virtualized clusters. Now that is required for any quality institution and universities have been compelled to spend large on that just to keep themselves providing a modern education. Thus it is wrong to assert, as many “reformers” do that the quality has not improved it has but unless you have been at a university long enough it isn’t apparent.

    This isn’t to say that there aren’t areas for costs. Over the past decade administrative costs have ballooned while faculty salaries have often remained stagnant not even keeping up with inflation. Linda Katahe the chancellor of UC Davis, for example makes a seven figure salary. It is not clear what she does for all that money since she couldn’t even manage a peaceful protest on a college lawn without pepper spray. That topic, like out of control CEO salaries however, doesn’t seem to be in the Overton Window.

    At the end of the day the debt is high but more of it would be manageable if students were graduating into an economy that provided good middle-class jobs. Since however many of the students are graduating to be at best a barista or worse unemployed this is much more horrific than it needs to be.

    I personally think that the reform of debt laws allowing bankruptcy to discharge student debt would be a major improvement. As would having state university systems take a long and hard look at their administrative staffing. I suspect that there are a number of people that could do Linda Katahe’s job as well as her for less allowing us to hire a handful of new faculty. The same could probably be said of a number of institutions. The same could also be said of things like the PAC12 and “College” football and basketball which seem to be taxpayer-funded gifts to ESPN. I’ve been told that they make money for the university however I’ve yet to see that money make its way out of the sports department.

    1. Ms G

      ” … I think that this problem has been broadly mishandled.”

      Don’t you think this was a deliberate “strategy” by forces who not only did not see skyrocketing tuition in another stratosphere than what people have been making in the economy (i.e. skyrocketing student debt) as a “problem,” but au contraire, have helped this situation come about as one of the prongs of a strategy to create a nation of indentured debtors existing solely in fear of destitution, i.e., ready to bow to any indignity imposed by the government?

      I don’t think it is a coincidence that public universities are being taken over by highly overpaid people like Katehi who come from MBA/Management Consulting backgrounds — i.e., lackeys of Kleptocracy — and whose mission is specifically to monetize and profitize and privatize the entire public infrastructure in this country (including the great state university systems).

      Same thing is happening at CUNY here in New York. It is a massacre.
      Read more at http://www.nakedcapitalism.com/2013/06/why-isnt-elizabeth-warren-attacking-the-student-debt-problem-head-on.html#OwxyAiZBCaJW05oi.99

      1. C

        Yes and no. While I don’t see a broad conspiracy to destroy things I think you are right about the process. I think what drives it is groupthink. Matt Taibbi at the Rolling Stone has talked about this some how people in these positions talk to other people in these positions and they all agree with each other about the benefits of privatization because they make a big sale and move on. Unfortunately the solution only seems to be replacing their bosses as D.C. did with Fenty.

        What’s happening at CUNY is sad just like California’s obsession with MOOCs as if the answer to top-heavy underfunded universities is less actual teaching.

    2. charles sereno

      C says: “Over the past decade administrative costs have ballooned while faculty salaries have often remained stagnant not even keeping up with inflation. Linda Katahe the chancellor of UC Davis, for example makes a seven figure salary. It is not clear what she does for all that money since she couldn’t even manage a peaceful protest on a college lawn without pepper spray.”
      It is clear. She’s paid not to manage it. :)

      1. C

        No not before the “crisis” during or even after it. If you haven’t seen the video of her attempting to interact with students afterwards you should. It’s like she just doesn’t understand how she is responsible and can’t interact with them enough to find out.

  19. Tim

    Cheap loans caused this problems. Even cheaper loans (lower interest rates) will not help make education a good investment again.

    The only thing that will help this situation is if the system is revised in such a way that the creditors must lend directly and must share the risk of the loans not being paid back, rates would go up, less loans would be made and college prices would drop allowing college to become a good investment again.

    1. Ms G

      I disagree. The solution is forcing universities to charge tuition that is affordable without borrowing a penny to the average middle class family — and if the average salary is $40,000, then tuition needs to be affordable for households with that income.

      Otherwise you simply preserve the disconnect between the increasing downward economic spiral of US households and the price of everything, including higher education.

      Basically this country needs a reset of all prices to match the actual wealth/poverty of its people. The need to borrow (or to incur debt) for anything involving food, shelter, transportation, education and health care needs to be blown up and forgotten. I realize this means the end of the One Percent Global Economy based on making money of of lending money. It’s about time.

      1. washunate

        I hear your point, but the problem in higher education is that, overall, it serves little public purpose. It is mostly consumption, not investment, from bloated administrations to fancy buildings to professional sports leagues to research projects furthering the national security state and corporate welfare. The vast majority of the gain is siphoned off by individuals – the employees and students – rather than serving the public at large.

        It is the product that has to be changed, not the pricing. Or to say it differently, if the price mechanism is what you are going to target, then the standard has to be free. Requiring a middle class standard of living to afford college entrenches inequality; it doesn’t ameliorate it.

  20. DSB

    I am struggling with the notion I read in many of the comments regarding this article and the limited stance taken by Elizabeth Warren. Maybe she sees the complete abdication of personal responsibility as not only a loser but morally wrong.

    If the person who incurred the debt of their own free will is unable to repay a student loan at a subsidized rate of interest – exactly who should pay for it, the taxpaying citizens of the United States? I am well aware of the affordability issues surrounding higher education. All you have to do is look at a graph of the overall CPI and the education segment side-by-side to see the cost side of the equation. But really why should I pay for someone who took out student loans totaling 6 figures to get a degree in trombone? If you think I am exaggerating then listen to the stories about student loan debt on NPR, read the articles in the New York Times and what you find by and large are people who chose poorly. I don’t want to bailout a TBTF bank, the US economy or someone who got the wrong degree, from the wrong school in the wrong economic environment. And don’t get me started on what they spent the loan proceeds on.

    There is already a program in place called the Income-Based Repayment Plan geared toward making repayment of government guaranteed student loan debt more manageable. A link is copied here https://studentaid.ed.gov/repay-loans/understand/plans/income-based.

    What I see advocated here is a complete abandonment of personal responsibility for the decisions people make. Where were the parents, the counselors and adults in general when these people were racking up the debt? If you can get into school, shouldn’t you be able to research that going to an Ivy League school to become a social worker means you will be financially broke the rest of your life? You will have psychic income though.

    My family has played by the rules. We have had the good fortune to make a deal with our children and keep it. The deal was we would set aside money to pay for their college education at a state university in our town and they could live at home while they attend college. If they want to live on campus or go away to school they would pay the difference through scholarships, work, etc. We have been fortunate and saved enough – no lavish vacations, iPads or the usual extraneous consumer crap – and our children will be debt free with college degrees of their choosing.

    Why can’t the rest of America do the same, with the added support of needs based scholarships, subsidies of all kinds and repayment plans that take into consideration income?

    Maybe Elizabeth Warren isn’t dumb is the answer to the question posed.

    1. jonboinAR

      @DSB: You said:
      “If the person who incurred the debt of their own free will is unable to repay a student loan at a subsidized rate of interest – exactly who should pay for it, the taxpaying citizens of the United State?”

      Well,… yeah! Government, federal and state, used to heavily subsidize college education, and it was a system that worked excellently. The only downside was that millions graduated not as debt slaves forever, but as free and educated citizens, so a class system of a few overlords and many terrified peons was not perpetuated thereby. Sorry. But,… I congratulate you. Y’all are winning at the current time, quite handsomely. Good show!

      1. Jack Montage

        I give people on the side of the road a buck or two if they are asking for it. I also give to charities, drop some in the basket if I happen to be at church, give a friend some cash, buy lunch for people, give gifts, donate food, clothing, old tools, building materials, an old car once, volunteer. Completely irresponsible if I ever hope to get really really rich.

    2. anon y'mouse

      how nice for you and your children. I applaud you.

      but what about

      people who came from such a poor background that they have no support, must leave home at 18 or lose their sanity forever, have no one paying their way, and so on. what do THEY do?

      what does someone do who needs to retrain lest they be stuck in low-paying jobs for all eternity? what they make barely pays the bills now. how do they obtain educational services?

      everyone did not have A#1plus parents like you obviously are. also, do we really need any more MBAs in society? with the figures that this website is always pointing to on unemployment in various sectors, do we really need any more chemistry or engineering majors? is college JUST for work-training, or is it for LIFE training? are we just supposed to improve our skills, or improve ourselves?

      spending 4+ years on job training alone sure seems foolish, with the rate of job/industry destruction and all and everyone needing to do it every 5-7-10 years. if you’re going to devote that much time to it, ought it to be something that makes you better, as a whole? do you believe that people making themselves better makes society better?

      can you tell one student what they should study so as to guarantee that they will get, and keep, a job in this economy? if all the students do this, won’t they automatically drive down the remuneration and availability of such jobs?

      and, see my comment above. how and why do we expect highschoolers to be able to support themselves without GIVING them the tools to do so? most college attendance is probably junior college/vocational programs. how do you earn money with no education beyond a high school degree? please, tell us so as to enlighten us. because I WILL spread the word, once I become an academic advisor.

      if a bachelor’s degree is still the breakaway point for not having your parents station in life determine your own eventually station (according to sociological research) then isn’t it damning most people to a life in the permanent underclass to NOT provide at least up to the Bach level (or some similar vocational one)? do we really need more burger flippers in this society?

      1. DSB

        By making student loan debt easily discharged as some propose we require less responsibility for the decision of the student borrower. We would do that at precisely a time of dynamic change in education, if not the institutions themselves.

        The Income-Based Repayment (IBR) program I provided a link for is woefully under utilized today. Why don’t we see if we can’t make a program designed to make loan repayments affordable based on income and family size work. I believe the debt is forgiven after 20 years regardless of how much is still owed. Isn’t that a more responsible way to deal with the problem of student debt? So instead of letting the guy who incurred $300K+ in student loan debt to get a law degree get bailed out (by you and me), let’s make him pay something toward it.

        If as a country we start forgiving large amounts of student loan debt the outcome will be a backlash against the program(s). You will lose lots of educational funding, have fewer people complete higher education and have a less “better society”. You will get the unintended consequences we experience so often from legislation.

        I was at a charity meeting today where we discussed raising millions of dollars this year. One of the programs we will fund hopes to provide a leg up to grade schoolers in a disadvantaged neighborhood. A stated goal is that every kid graduate high school and college too. While good intentioned, we are telling the class of 2025 what they should do. We should be helping these kids with logic and reasoning so they can make better decisions for themselves. Not defining success as a college degree and the debt that goes with it.

  21. Anonymous

    Ah SHIT! And I was actually beginning to hope that Warren would run for president. Looks like she’s nothing more than another Ivy League stooge selling out to the top 0.1% once again!

    1. John

      Maybe we should win a battle or two before we fight the war.

      Don’t be fooled that doing something that gets done is worse then doing everything that never gets done.

    2. A Real Black Person

      People who graduate or attend high ranking colleges and major in
      marketable subjects tend to come out in suppport of the status quo.
      People who graduate or attend high ranking colleges and major in
      marketable subjects tend to come out in suppport of the elite.
      College has deep elitst roots and as many people will note, it’s “not for everyone”, roughly, only 10 percent of the population.

      The problem is that the top 10% has waged war on the bottom 90%. The tio 10% has waged war against the bottom 90% by voting for unequal distibution of funding for schools, b insisting on socioeconomic segregation, by agreeing with politicians who want to offshore work and by not taking a stand against illegal cheap labor, and by supporting other measures that decrease options for anyone outside the Professional Class who wants to work.

      It’s not just the 1% vs the 99%. It’s the uppity upper middle class and up suburban vs. the lower classes.

    3. A Real Black Person

      People who graduate or attend high ranking colleges and major in marketable subjects tend to come out in suppport of the status quo. People who graduate or attend high ranking colleges and major in marketable subjects tend to come out in suppport of the elite. Many highly educated workers are members of the elite, were sponsered by members of the elite, or will work directly for the elite. Most of them are smart enough not to bite the hand that feeds them their status and high salaries. College has deep elitst roots and as many people will note, it’s “not for everyone”. College was designed for only 10 percent of the population; the top 10% in cognitive ability and the top 10% in income. The expansion of access to college has diluted the orginal purpose of college, and the majority of academic education;to sort out those who deserve to be in elite from the general population.

      In addition to the proliferation of colleges with lower, egalitarian standards,there’s a related phenomenom of the top 10% waging war on the bottom 90%. The top 10% has waged war against the bottom 90% by voting for unequal distibution of funding for schools (decreasing the value of a high school degree), ,by agreeing with politicians who want to offshore work and by not taking a stand against illegal cheap labor, and by supporting other measures that decrease options for anyone outside the Professional Class who wants to work. It’s not just the 1% versus the 99%. It’s the uppity upper middle class and up versus the lower classes.

      They know they vast majority of the bottom 90% aren’t will never become world-class engineers and doctors, but it’s very very profitable to mislead the average person into thinking that he or she is above-abverage or can become above-average.

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