Ending the Secrecy of the Student Debt Crisis

Yves here. This article describes how the stigma of struggling to pay student debt is a burden in and of itself. I wish this article had explained how little it take to trigger an escalation into default interest rates and how punitive they are. The piece also stresses the value of activism as a form of psychological relief, by connecting stressed student debt borrowers with people similarly afflicted.

But the bigger issue is the way indebtedness is demonized in a society that makes it pretty much impossible to avoid borrowing. One reader recounted how many (as in how few) weeks of after tax wages it took to buy a car in the 1960s versus now. Dealers don’t want to talk to buyers who want to pay in full at the time of purchase. And if you don’t have installment credit or a mortgage, the consumer credit agencies ding you!

It goes without saying that the sense of shame is harder to endure due to how shallow most people’s social networks are, which is another product of neoliberalism.

In keeping, the New York Times today ran an op-ed by one of its editors on how student debtors are also victims of the crisis, reprinted from a longer piece in The Baffler (hat tip Dan K). Key sections:

Because of the loans’ disgracefully high interest rates, my family and I have paid more or less the equivalent of my debt itself in the years since I graduated, making monthly payments in good faith — even in times of unemployment and extreme duress — to lenders like Citigroup, a bank that was among the largest recipients of federal bailout money in 2008 and that eventually sold off my debt to other lenders. This ruinous struggle has been essentially meaningless: I now owe more than what I started out owing, not unlike my parents with their mortgage….

Many people have and will continue to condemn me personally for my tremendous but unexceptional student debt, and the ways in which it has made the recession’s effects linger for my family. I’ve spent quite a lot of time in the past decade accepting this blame. The recession may have compounded my family’s economic insecurity, but I also made the conscious decision to take out loans for a college I couldn’t afford in order to become a journalist, a profession with minimal financial returns. The amount of debt I owe in student loans — about $100,000 — is more than I make in a given year. I am ashamed and embarrassed by this, but as I grow older, I think it is time that those profiting from this country’s broken economic system share some of my guilt…

[At my commencement in 2009] Mrs. Clinton then echoed a fantasy of boundless opportunity that had helped guide the country into economic collapse, deceiving many of the parents in attendance, including my own, into borrowing toward a future that they couldn’t work hard enough to afford. “There is no problem we face here in America or around the world that will not yield to human effort,” she said. “Our challenges are ones that summon the best of us, and we will make the world better tomorrow than it is today.” At the time, I wondered if this was accurate. I now know how wrong she was.

By Daniela Senderowicz. Originally published in Yes! Magazine

Activists are building meaningful connections among borrowers to counter the taboo of admitting they can’t pay their bills.

Gamblers and reality TV stars can claim bankruptcy protections when in financial trouble, but 44 million student loan borrowers can’t. Unemployed, underpaid, destitute, sick, or struggling borrowers simply aren’t able to start anew.

With a default rate approaching 40 percent, one would expect armies of distressed borrowers marching in the streets demanding relief from a system that has singled out their financial anguish. Distressed student debtors, however, seem to be terror-struck about coming forward to a society that, they say, ostracizes them for their inability to keep up with their finances.

When we spoke to several student borrowers, almost none were willing to share their names. “I can’t tell anyone how much I’m struggling,” says a 39-year-old Oregon physician who went into student loan default after his wife’s illness drained their finances. He is terrified of losing his patients and reputation if he speaks out about his financial problems.

“If I shared this with anyone they will look down upon me as some kind of fool,” explains a North Carolina psychologist who is now beyond retirement age. He explains that his student debt balance soared after losing a well-paying position during the financial crisis, and that he is struggling to pay it back.

Financial shame alienates struggling borrowers. Debtors blame themselves and self-loathe when they can’t make their payments, explains Colette Simone, a Michigan psychologist. “There is so much fear of sharing the reality of their financial situation and the devastation it is causing in every facet of their lives,” she says. “The consequences of coming forward can result in social pushback and possible job–related complications, which only deepen their suffering.”

Debtors are isolated, anxious, and in the worst cases have taken their own lives. Simone confirms that she has “worked with debtors who were suicidal or had psychological breakdowns requiring psychiatric hospitalization.”

With an average debt of just over $37,000 per borrower for the class of 2016, and given that incomes have been flat since the 1970s, it’s not surprising that borrowers are struggling to pay. Student loans have a squeaky-clean reputation, and society tends to view them as a noble symbol of the taxpayers’ generosity to the working poor. Fear of facing society’s ostracism for failure to pay them back has left borrowers alienated and trapped in a lending system that is engulfing them in debt bondage.

“Alienation impacts mental health issues,” says New York mental health counselor Harriet Fraad. “As long as they blame themselves within the system, they’re lost.”

Student debtors can counter despair by fighting back through activism and political engagement, she says. “Connection is the antidote to alienation, and engaging in activism, along with therapy, is a way to recovery.”

Despite the fear of coming forward, some activists are building a social movement in which meaningful connections among borrowers can counter the taboo of openly admitting financial ruin.

Student Loan Justice, a national grassroots lobby group, is attempting to build this movement by pushing for robust legislation to return bankruptcy protections to borrowers. The group has active chapters in almost every state, with members directly lobbying their local representatives to sign on as co-sponsors to HR 2366. Activists are building a supportive community for struggling borrowers through political agitation, local engagement, storytelling, and by spreading a courageous message of hope that may embolden traumatized borrowers to come forward and unite.

Julie Margetaa Morgan, a fellow at The Roosevelt Institute, recently noted that student debt servicers like Navient have a powerful influence on lawmakers. “Student loan borrowers may not have millions to spend on lobbying, but they have something equally, if not more, powerful: millions of voices,” she says.

A recent manifesto by activist and recent graduate Eli Campbell calls for radical unity among borrowers. “Young people live in constant fear that they’ll never be able to pay off their debt. We’re not buying houses or able to afford the hallmarks of the American dream,” he explains.

In his call for a unified national boycott of student loan payments, inevitably leading to a mass default on this debt, Campbell hopes to expose this crisis and instigate radical change. In a recent interview he explained that the conditions for borrowers are so bad already that debtors may not join the boycott willingly. Instead, participation may simply happen by default given the lack of proper work opportunities that lead to borrowers’ inability to pay.

While a large-scale default may not happen through willful and supportive collective action, ending the secrecy of the crisis through massive national attention may destigmatize the shame of financial defeat and finally bring debtors out of the isolation that causes them so much despair.

Activists are calling for a significant conversation about the commodification of educating our youth, shifting our focus toward investing into the promise of the young and able, rather than the guarantee of their perpetual debt bondage. In calling for collective action they soothe the hurt of so many alienated debtors, breaking the taboos that allow them to say, “Me, too” and admit openly that in this financial climate we all need each other to move forward.

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  1. Jane

    How much are the interest rates on student loans there in the USA? Here in India its 11.5% if you want to finance studies abroad. 8.5 for some select institutions.

    1. rd

      Are student loans in India discharged in bankruptcy? The big issue in the US is student loans are often relatively high interest rates but you can never discharge them in bankruptcy. Even Social Security can be garnished to pay for old student debt.

      So interest rates are set at rates indicating high repayment risk but there are more mechanisms to get principal, interest, and fees repaid over the years than other unsecured loans. The high interest rates themselves create much of the repayment hazard.

      1. Alan Collinge

        Agreed. The real driver of inflation and exploding debt levels is the absence of standard bankruptcy rights, as well as statutes of limitations. This gives the lending side carte blanche to pile every penalty, fee, etc. onto loans. It also gives the green light to the schools to raise their prices.

        The Founders called for UNIFORM bankruptcy laws AHEAD of the power to declare war, raise an army, a navy, coin currency, and create a judiciary when they gave congress its powers in Article 1, Section 8 of the Constitution. This predatory lending system is certainly what they wanted to guard against.

        There is a bipartisan bill RIGHT NOW in the House, HR. 2366, that will return the standard bankruptcy rights that should never have taken away. It has 36 cosponsors, and a thin chance that it could pass this session.


        Come to StudentLoanJustice.Org to find out more…


        1. run75441


          A little intro for you.

          For those at Naked Capitalism, Alan is the founder and leader of the Student Loan Justice Organization. He has been advocating for students in debt, delinquency, default and with no where else to turn for years. Student loans have little or no recourse. and you are indentured to a lifetime of payments extending into the garnishment of SS. Our businessman president has had the ability to discharge debt through purposeful bankruptcy many times over, a right denied to holders of student loans.

          If you have an interest in changing the laws of this country governing student loan debt, you may wish to support his efforts in whatever way you can. I have known Alan for years and have taken up his organization’s cause in my articles.

    2. Utah

      There is no standard. Interest rates depend on the type of loan and when the loan was taken out. I have some subsidized federal student loans and my interest rates are between 3.5-4.6% though I know some people with interest rates that are much higher because they are graduate school loans or unsubsidized loans.
      The problem starts when you can’t pay. Interest rates go up, you get penalty fees, etc.

      1. Jason Boxman

        And the Democrats nuked subsidized Stafford graduate loans under Obama. Last I looked, it was a shocking 6.8% for such a loan. This year it’s 6%.

        1. Roxan

          My student loans were 10% from the start, and they had no problem garnishing my tax returns, pay checks and, later, SS. I finally scraped them off by filing for Disability, a three-year-process full of hidden rules and pitfalls. First, you have to ferret out who your Student Loan Advocate is, locate who actually has your loans. Sallie Mae had mine but had divided itself into a number of pieces with other names. However, after enough research I realized they all were in the same block, probably the same building. Google Earth was useful! It was difficult to even discover how much I owed. I was told outright lies, bullied, abused, etc. All efforts to refinance became hopelessly ensnared in red tape. I finally got disability when I told them I knew where their office was, related the address and that I would come sit on their doorstep with a sign. I used to live nearby and often went by that building. Oddly, I learned the process for filing disability from an IRS clerk I told about my problems. Maybe she had loans of her own!

    3. Richard Kline

      Student debt in the USA has been turned into legal debt slavery. It isn’t called ‘slavery’ because the peonage is done at secondhand, i.e. you owe one party permanently but are compelled to work for a different party.

      A debt strike would be superb, but would require political support. Credit agencies and employers can pick off participants singly and in handfuls, so legal support and political action would be necessary in tandem. And highly educational for the body politic.

      It wasn’t always this way. Student loans used to be a small portion of financing college education. The amounts were small relative to future earnings, interest rates very minor, forbearance near automatic, and punitive sanctions for late or non-payment unheard of. The transformation of college funding from a neutral financial bridge into a radioactive 180-lb. slave collar was an insidious and deliberate process, one of the ugliest stories of the last thirty years. Who started us on that path? Bill Clinton, of course. Look under the manure pile for the first ‘brick’ in any of our main problems, and you’ll find that it was extruded by a Nude Democrat as a payoff to some unethical corporate rent seeking constituency.

      A jubilee is needed, and the student debt issue is a great place to start.

      1. run75441


        Why not throw your support to Alan Collinge and the Student Loan Justice Organization? If you want as jubilee, the guy is on this thread. He could use your support.

        To add to your commentary.

        Loans were dischargeable up to 1976. The 1978 US Bankruptcy Code made discharge available only after five years of payment. In 1984, the Bankruptcy Amendments and Federal Judgeship Act made private loans from all nonprofit lenders excepted from discharge. In 1990, discharge only could be had after 7 years of payment.

        In 1991, the Emergency Unemployment Compensation Act of 1991 allowed the federal government to garnish up to 10% of disposable pay of defaulted borrowers. In 1993, the Higher Education Amendments of 1992 added income contingent repayment which required payments of 20% of discretionary income to be paid towards Direct Loans and then after 25 years the loan could be discharged. 1996 the Debt Collection Improvement Act of 1996 allowed Social Security benefit payments to be offset to repay defaulted federal education loans

        1998, the Higher Education Amendments of 1998 struck the provision allowing education loans to be discharged after 7 years in repayment. 2001, the US Department of Education began offsetting up to 15% of social security disability and retirement benefits to repay defaulted federal education loans. 2005, the law change in the Bankruptcy field further narrowed the exception to discharge to include most private student loans. IBR and Repay plans were also added and have been largely a failure because they were difficult for students to manage.

        There was a lot going on to make student loan debt more difficult to pay back and discharge well before Clinton and subsequently afterwards. Why not ask Biden about his sponsoring the 2005 bill and Stabenow why she voted for it. I did.

        1. run75441

          Tax support for public universities has decreased over the years. I believe here in Michigan, it went from 60% to ~25%. With this occurring and the rising cost of getting an education (some point to this phenomena as being the result of the Baumol Disease effect), the avenue for many was student and/or parent loans.

          1. Paul P

            Decreased public funding for higher education and the resultant transfer of cost of college from government to
            students paying tuition is a cure for the “crisis of democracy”,
            that occurred with student activism in the 1960s and 70s.


            The Crisis of Democracy: On the Governability of Democracies was a 1975 report written by Michel Crozier, Samuel P. Huntington, and Joji Watanuki for the Trilateral Commission. In the same year, it was republished

      2. Amfortas the Hippie

        and Hilldog supported and voted for the last big bankruptcy “reform”, which made it all even worse.
        It’s cruel and all too usual, purposeful and malicious…and the broader taboo about speaking openly about one’s financial problems is a neat trick to prevent folks from commiserating and getting together to agitate about it.
        I’ve never had student debt, but I’ve had other debt…including medical(and wife’s recent cancer diagnosis promises more)…but the taboo applies across the board.
        Just about everyone below a certain class level knows that it’s increasingly impossible to “make a living”…but the stigma has a life of it’s own.
        what level of pain is necessary for some critical mass to just stop paying?
        Reckon that would get the attention of the parasite class.

  2. JVR

    I wonder if the media’s obsession with “millenials” isn’t primarily a way to try to divide people with shared interests, above all around the topics of student debt and the job market and to make the problems seem like they have shallower roots than they really do. The individuals mentioned here are older than that 24-37 age cohort, one of them much older.

    1. Epistrophy

      There is definitely a concerted effort to put generations at each other’s throats. Takes prying eyes away from the real culprits. Sadly some are falling for the propaganda.

      The truth is that the elderly are being destroyed by negative real interest rates and the youth are being destroyed by student loans. The middle class, for what it is worth, is shrinking. Do we see a common element in all this; something to do with banking and government, perhaps?

    2. anon

      It certainly appears to be the strategy (and for quite awhile now). I’m surprised I could even find this 2017 article:

      Baby boomers and student debt — the problem no one is talking about — The number of borrowers over age 65 losing out on a portion of their Social Security check to pay off student loans is up 540%

      As the ranks of older Americans with student debt has grown so have the challenges these borrowers face in coping with the debt.

      Borrowers in their 60s struggle to get into the student loan repayment plan that best fits their needs and face hostile debt collection tactics among other challenges, according to a Consumer Financial Protection Bureau review of complaints from older student loan borrowers between 2012 and 2016.

      The findings add to a growing body of evidence that student loan debt is putting baby boomers’ financial health in jeopardy. The number of borrowers over the age of 60 with student loan debt grew from 700,000 in 2005 to 2.8 million in 2015, according to data [PDF file – anon] from the Federal Reserve Bank of New York cited by the CFPB. The number of older Americans with student debt is growing faster than any other age group, according to the CFPB, and it appears they’re struggling. Nearly 40% of federal student loan borrowers over age 65 are in default, the report noted.

      “These borrowers do exist,” said Persis Yu, the director of the Student Loan Borrower Assistance Project at the National Consumer Law Center, a Boston-based nonprofit. “We hear a lot of rhetoric about the kids. The reality is, the issue really is bigger than what gets talked about.”

      As the January 2017 PDF Report by the Consumer Financial Protection Bureau [CFPB], Snapshot of older consumers and student loan debt (linked to the above excerpt), notes: let alone cosigning on their children’s loans, there were a significant amount Boomers who took out new school loans for themselves. Hardly surprising after the horrid and rapidly increasing ageism (over 35 is over the hill!) — for all but the Elite, and Political Class — further exacerbated Boomers losing jobs during the ’2001’ Recession, the 2001 – 2007 Non Expansion [Corporate Profits] Expansion, and the ‘2008 – 2009’ Great Recession. During those years, and beyond, Boomers were told, despite already having degrees, that their prior education and degrees were obsolesced, that they needed to go back to school to make a decent living. From that Report:

      The majority of older borrowers’ student loans are for their children’s education

      The Bureau’s analysis of survey data shows that in 2014, 73 percent of student loan borrowers age 60 and older report that their student debt is owed for a child’s and/or grandchild’s education (FIGURE 3).11 In contrast, 27 percent of student loan borrowers report that their student loan debt is for their own or their spouses’ education.

  3. Epistrophy

    Dealers don’t want to talk to buyers who want to pay in full at the time of purchase.

    Yes Yes. Car manufacturers are actually finance houses selling products manufactured by subcontractors – such is the state of American industry – but their dream is to move to a SaaS model where ownership, of anything, becomes a relic of the past (except for the overlords and oligarchs).

    This could not be possible without government corruption and revolving-door regulation. Maybe these PAYG vehicles will contain built-in body scanners too; for our own security, of course.

    In his call for a unified national boycott of student loan payments, inevitably leading to a mass default on this debt, Campbell hopes to expose this crisis and instigate radical change.

    Default, or radical change, would bring the economy to it’s knees. But when there is another economic downturn, this is going to happen anyway. Terrible situation; negative real interest rates destroying the pensions of the elderly, student loan servitude destroying the youth and the middle class being squeezed to oblivion. What can be done to fix it, I ask?

    Yet they are doing God’s work, are they? Well, this is not a God I choose to worship.

    1. JohnM

      i’ve never had a dealer have any issue taking my full purchase price check for any car. is there something i’m missing or is this an exaggeration? should i also question some of the other claims in the story?

      1. JTMcPhee

        Well good for you. How many cars, of what age, have you bought, for your anecdote to rate as anything vaguely resembling the wide reality, and how does your personal financial situation let you just write checks for $30 or $70,000?

        Do a little research on car selling and you will see the pressures on the dealer sales force to suck the vast majority of buyers into long term debt. Car loans are now five or six years, routinely.

        And one wonders what the investment is in trying to impeach the points of this report, wth such an unlikely and atypical claim.

        1. mistah charley, ph.d.

          The last tine I bought a car – 11 years ago – I wrote a check for $15,000 after my trade-in.

          There are new cars with good Consumer Reports ratings available for twenty thousand today – not big, not luxurious, not prestigious cars, but modern and reliable cars – you don’t have to spend thrity, let alone seventy, thousand.

          Is there anyone who could write a check to buy a car who has actually been turned away by a dealership? I don’t think so – to me THAT is the unlikely and atypical claim.

          1. rd

            I agree. They prefer to make money from financing, but they get lots of bonuses from the car companies for moving cars, so just getting another car off the lot is worth money to them by increasing their inventory turnover rate. If it is a really popular model, it will be tough to get a deal on it in any case. If it is a less popular model, they will be more than happy to take a cash on the barrel offer.

          2. JTMcPhee

            How many Americans, who can’t scrape together $400 for an emergency, can write your check for $15,000 (after your trade-in, which was valued by the dealer at how much?) Especially after they make their student loan payments, and yes, there is actually something more than Facebook whines that document (as the post points out) how desperate the mopes lugging the chains and shackles of student loan “debt” actually are.

            And the dealers won’t ‘turn you away,” I don’t think that was the clam, but they will put the full court press on you to take out one of those “easy terms, just tell us how much you want your payment to be” loans. I recently bought a car, too, one of those Consumer Reports well-rated vehicles that bare-bones, was $16,000, but with the many “options” would have been closer to $20,000, and was fortunate to have money to pay for it without the loan scam. In addition to fighting off the “credit manager” who blatantly misrepresented the terms of the loan and also lied about the many add-ons like “extended warranty policies” that his part of the selling scam was to saddle me with. This after the young enthusiastic degreed-in-public-communication salesman put on a well-orchestrated play to get me to sign up for a loan (‘to help your credit score and leave your funds free for other stuff you might want to buy, did I mention the easy terms and Low Low Interest Rate and 6 years too repay? Are you SURE you don;t really what to LEASE a new vehicle? The numbers are really attractive!”).

            How many good reliable CU-vetted vehicles will be on the lots when the mandated self-driving machinery is put in place? You and I and the rest of us wll not even “own” the note on those any more — we’ll just have our RFID chips drained, per use, with lots if hidden costs and lootings, by “user charges.” And of course those good reliable not-sexy cars still burn petroleum, with all that means. Consumer Reports costs money too, though of course one can drive to the library to read the latest Auto Buying Guide there…

            1. Carla

              I am truly rich. I can walk to two public libraries — one a 10-minute walk away and the other 15. The director of our local library recently referred to her institution as a “facilitator of democracy.” Indeed, it is.

        2. divadab

          @JT Mcphee:

          I agree with John M. I never buy a depreciating asset for personal use unless I can pay cash. Which means I’ve only bought four new cars in 40 years of car ownership. And my experience of dealers is that they are more than happy to deal with cash buyers.

          Your insulting imputation of some malevolent intent to John M is ignorant and contemptible. Not everyone is on the debt treadmill – many of us are thrifty and responsible and avoid debt by deferring expenditure. You can choose to be a debt slave – that road leads to unhappiness and resentment of those who choose not to.

          1. JTMcPhee

            Hmmm, I thought I was being more subtle than that. “Malevolent intent?” You and JohnM seem to me to be in the smaller category of people who have done well via the present system, have been fortunate to be prudent and maybe not battered by the forces that drag so many of the rest of us down. And you “impute” that I choose to be a debt slave? Or was that the generic “you,” as in “one?” Lucky me, I was one of the people who was able to “work my way out of the debt slavery,” when the interest rates were a lot higher than they are now.

          2. ChiGal in Carolina

            Did you read the article or Yves’s preface? You are LUCKY to have been able to buy 4 new cars in 40 years, not morally superior.

            And please be careful with those ad hominems, diva

          3. drumlin woodchuckles

            Student debt is non-deferrable I believe, and definitely non-dischargeable. And also non-avoidable if you want the college credential which most better-than-subsistence employERS deMAND that you have in order to get hired with.

      2. Louis

        JohnM wrote:

        [I]’ve never had a dealer have any issue taking my full purchase price check for any car. is there something i’m missing or is this an exaggeration? should i also question some of the other claims in the story

        You absolutely should question the claims in the story as a lot of claims in stories like these are questionable to say the least.

        There are a lot of Facebook memes, and similar claims, floating out there claiming that a borrower took out amount A and owes amount B, This is often accompanied by an emotional pitch saying something to the effect of “I’ve paid my loans for [insert number of years].”

        In many of these claims and memes the amount they supposedly owe is many times more than the amount they claimed they originally borrowed, so much more that something doesn’t add up. If the borrower is telling the truth about the amounts borrowed and amounts owed, which they may or may not be, they either took out a really shady private loan or haven’t been as diligent in making payments as they claim to have been.

        1. jsn

          No one forces borrowers to borrow, but there’s been consistent marketing and social coercion pressure since the 70s when financialization ended the historic parallel between wage growth and productivity growth. Since then, easy credit has been the most available tool, rather than a better job or a better wage or even working harder which has netted the average worker essentially nothing, for addressing all the economic challenges ordinary people face.

          No one forces lenders to lend either, but rather than looking after their own interests directly by actually doing due diligence on the loans they make, underwriting having been outsourced to an algorithm, they instead bribe politicians like Dem front runner Joe Biden to either guarantee the loans or enforce collection or both, regardless of the “quality” of the initial loan, most of which should never have been made.

          People who have thus had their social heuristics manipulated to get them into debt by almost every aspect of the corporate narrative machine the MSM has become are then debt shammed with the doubts of the conservative pious who, when they’ve themselves made a poor choice, have always been able to rely on social networks, family wealth or position to bail them out, generally without even realizing it.

          Its easy to have penalties and penalty rates compound the debt of loans that should never have been made to ridiculous proportions. Like addressing employers who employ illegal workers, its time to hold lenders who make irresponsible loans responsible: these are the agents in the transaction that have the resources to understand the actuarial realities of what they are doing. Natural, essential, human optimism is being systematically abused to create debt bondage by accusing the optimistic of being naive, which they are, by a deeply cynical finance industry who knows exactly what it is doing.

          Yes there are irresponsible borrowers. There misbehavior is confined to hurting themselves. Irresponsible lenders have created an epidemic poverty, homelessness, and hopelessness. That you’ve been blessed is no reason to scold.

          1. JTMcPhee

            “No one forces borrowers to borrow.” Well, consider payday loans (hundreds to thousands of percent interest) to desperate people, the mope who has to have a car to get to his place of labor (and ends up at one of the “auto street” places where “Got a job? We’ll get you a loan!,” maybe not a gun held to the head of the person labeled “borrower,” but you and I seem to be on the same patch.

            And did Manafort, time for Current Events now, “borrow” the money to own those places he has “forfeited” as part of his plea deal? And we have several notorious vulture capitalists and Banksters here in FL who “borrowed” the money for some pretty palatial digs, then “strategically defaulted” on the loans, scammed a way to put the title to the palace in a family member, and disappeared that “debt” into a bankruptcy discharge without apparently even having a creditor make a case for what’s called a “preference,” or just straight criminal “bankruptcy fraud.”

            Maybe the nation (whatever that is, any more) should nationalize the banks, and take as the motto of said new structure the one adopted by Garrison Keillor’s fictional Lake Wobegon “Bob’s Bank,” where Bob goes by the hard and fast principle, “Neither a borrower nor a lender be.” On account of “If you can’t afford to pay cash for something, why should I take on the risk that you won’t be able to pay me back?’

        2. Rajesh

          It’s like dieting. “Yeah I did ALL the right things ….. except that small sip of Coke, and one small spoon of ice cream and that smallish BBQ ribs”.

          Are there genuine stories of student debt distress out there? Absolutely, but presumably some of these people might have also taken credit card debt which causes them to fall behind their student debt?

          Also the real stigma is presumably the stigma of not having a degree? In that case, this problem will not go away.

          1. JTMcPhee

            Wow! Fat-shaming rolled into debt shaming! And once again, claiming a factual basis for the Righteous Puritan mythology, and discounting not only the anecdotes of distressed debtors, but the actual factual numbers showing how and to how great and to what extent that what, 40 million people have somehow (pick your blame structure or attempt to realistically describe the means and motives) ended up in.

            The Presbyterians, and a lot of other less-Roman sects, pray thusly: “Forgive us our debts, as we forgive our debtors.” The more Roman, like the “God’s Frozen People” Episcopalians and Lutherans, put it in terms of “trespasses,” which in the law (like fraud and assault) is what is called an “intentional tort…”

            1. Rajesh

              By the way I am overweight (fat), and I did all of the above i.e. small sip of Coke here and there. But I don’t blame the world for all my problems.

              Puritans, Presbyterians? What does an Indian know of all of those? 40 million people ALL being blameless sounds as ridiculous as “40 million people have somehow (pick your blame structure or attempt to realistically describe the means and motives) ended up in.” You are saying every one of those people has never made any meaningful choice ever!!

              1. Jonathan T McPhee

                I’m overweight too, but losing it by “meaningful choice.” And I am lucky to just have a relatively cheap mortgage as my “debt burden,” and the income to carry it (so far).

                It appears Indians also know of “debt-shaming” and “debt desperation,” and many thousands of Indian farmers have committed suicide over the impossible-to-ever-repay scams foisted on them by “structural changes ” courtesy of the World Bank, and supranationals like Monsanto-Bayer and Cargill, and their buddies “in government.” https://www.huffingtonpost.com/vandana-shiva/from-seeds-of-suicide-to_b_192419.html

                And of course I am not even close to denying agency to each and every one of those 40 million Americans, and millions of Indians. But of course a whole lot of them are subject to the “structural changes” forced on them by Banksters and corporations and their buddies “in government.” Looks like farmer suicides are on the upsweep in the good old former “breadbasket of the world,” too: https://www.mintpressnews.com/india-us-farmers-caught-crushing-agribusiness-debt-trap-turn-suicide-spiking-numbers/244932/

                So it appears that suicide in the face of inescapable debt might be deemed a “meaningful choice,” especially where that “debt” is due to the effects of social and political-economic structures that are designed to drive people into that debt-trap corner.

                And if you are overweight (fat), and don’t want to be, well, you have agency to not sip Coke or sup on fat-building foods, and of course can get up and do the other part of weight loss, that thing called “exercise.” (Assuming you do not have some disability that keeps you from burning calories.) Not every debtor has the luxury of “agency,” though BIG debtors doing “strategic defaults” certainly do. The same people who get fat crapifying everything for their personal pleasure and profit. And are positioned to have “personal trainers” and personal chefs to move them to healthier behaviors, and the wealth to pick the best foods, from wherever in the world the supply chains they, as a group, own and operate, might originate.

                Maybe in the next turn of the great wheel, some of those dead Indian and American farmers will reincarnate as Banksters! So hey, it’s all good…

              2. jrs

                blame isn’t even the right word in many cases, if one gets a degree and is able to turn it into a career that they couldn’t have gotten without a degree, how does blame or blameless even figure into that which is just good decision making, except with debt. What is the 40 million anyway, those who can’t pay their debt, or just those with debt who may of course have made the right decision to take it on.

                Now the problem is many people make the decision when they are too young to know much of anything which is unfortunate. But even then, for it to even be a bad decision, other better alternatives had to have been available, otherwise it is good decision making. And were they? Maybe in some cases where a state college would have been a better cheaper choice than say a private college, but even that assumes the state colleges weren’t way overcrowded etc. and many places they are. Maybe no better options were available.

                1. drumlin woodchuckles

                  And of course the State colleges themselves are not as “affordable” as they used to be, after several decades of state-government de-funding and budget-boycotting forced State colleges to raise tuitions to make up for the state-taxpayer-funded subsidy-support-removal from those State colleges.

              3. anon

                Puritans, Presbyterians? What does an Indian know of all of those?

                Oh my, the subject, generally, is US Student Debt, if that isn’t clear from a first glance, it certainly is clear after reading the above article, checking the links in it, and reading the comments.

                The historically Monetized and Politicized US Religious™ backdrop (by certain elite Puritans, Presbyterians, etcetera), has very much to do with shaming US citizens over debt they took on in order to make enough money to afford at least basics. If you are unaware of that backdrop, maybe you need to read up on it, instead of demanding that no one refer to it because you’re Indian™.

                I can’t believe you even had the nerve to write that crap, particularly given the outrageous suicides in India because basics can’t be afforded. Of course, now I’m (along with likely many others) wondering about your Employment, the financing of your Degree[s], and what your transnational, global pedigree is, a Narendra Modi fan, perhaps?

      3. Yves Smith Post author

        When did you last make a car? Automakers are now financial firms with manufacturers attached. Dealers get big incentives for providing financing and they make way less on a car sale than they do with financing. I have heard tons of complaints from people looking to buy cars that the salesman hounded them to take financing too.

        1. Epistrophy

          I coudn’t agree more. Speaking from personal experience, years ago a cash buyer could negotiate a discount. My latest experience was the opposite – the better price was to be found by financing – not by cash.

          Not only is it about financial incentives – its about big data too. Our personal data is becoming quite valuable.

          There is a market for cheap, cash-preferred new cars. But I suspect our government will regulate them out of existence in order to protect the big boys.

          1. drumlin woodchuckles

            Question: if a car is financed, does all the interest paid as well as the “price” itself of the car add up to more money overall then would the “higher price” of the cash-paid-for car would be?

            If so, then the cash-paid-for-in-full car is still cheaper over the long run than the financed car, even if it “costs” “more” up front.

            1. kevin

              It obviously depends how quickly you pay it back. If you pay it back the following month “financing” is definitely cheaper

        2. Synoia

          Take the financing, push the outstanding balance as low as possible during the negotiation by taking the higher interest rate, and pay the car off 2 weeks later.

          One is obligated to pay the outstanding balance. Not the future interest on the loan.

          Use the Costco buying program to get the best price.

          1. JTMcPhee

            As above, assumes one has the money in hand to work the bit of a reverse scam on the dealer. And not all car loans are free of prepayment penalties. And what rule says the Costco program (one has to pay to be a member, of course, I believe $60 a year is the current vig, and how many mopes can “afford” that, as against other necessities and “obligations?”) gives “the best price?’

          2. Yves Smith Post author

            I have not looked at any of these loans but you assume there is no prepayment penalty. I would suspect there is one, since booking a loan cost the lender money (and the lenders almost certainly also pays the salesman an incentive).

            1. Angie Neer

              I got a deal like this on a new Kia a few years ago. I was going to pay cash, but they took $1000 off the price to convince me to finance it (through Kia, not through “Joe’s House of Finance.”). I was highly skeptical, but read the agreement carefully before signing, and when I paid it off a few weeks later there truly was no penalty or extra expense to me (other than prolonging the excruciating time filling out paperwork). I think the dealer must get a payment that makes it worth the effort on their part, and the finance arm of Kia takes on the risk of prepayment, counting on inertia to prevent too many people from taking that option. YMMV.

        3. Quade

          “Hounding” doesn’t mean they won’t take their check though. Buying a car is a nasty process and you have to be prepared for a nasty experience. People seem to have a hard time saying “no”. No I’m not financing. No I’m not getting the extended warranty. No I don’t want to pay for a maintenance plan. You have to read every form because the finance guy will try to screw you.

          You’re right about them being a financing machine but I’ve never had an issue writing a check for all or part of a car.

          1. Yves Smith Post author

            You miss the comment above, which I have also heard quite a few times but cannot prove, that the cash price is often HIGHER than the price if you take financing.

      4. jrs

        yep it’s not true in my experience, dealers will sell you a car. Of course I’ve also never bought a brand new car (but usually only slightly used), but I can’t imagine it being a problem either. I last bought a car this year.

          1. Kurtismayfield

            A dealer has huge leeway with used or trade ins.. the brand new cars have all kinds of incentives to finance and to get you to sign up for services. The two most well payed employees at the dealership are the sales manager and F&I for a reason.

            I know someone in the business and he calls it “pushing metal off the lot”. The dealer makes little off new cars.

      5. Quade

        You can often get a better deal if you finance because the dealer is getting some back end. Some people take the loan, work a better deal, then simply pay off the loan in the first month.

        I agree with you, I’ve never had push-back from buying without a loan.

      6. kevin

        Was going to pay in full.. but the dealership gave me a better price to finance. So I financed and paid the whole thing off the next month. Seemed odd to me, but considering the dealer worked with someone else that just paid him for the loans he sent that way (similar to CDOs) it makes some sense

  4. JTMcPhee

    Maybe a little traction, then, for the notion, and increasingly the inscapable reality, of #juststoppaying on those “remember Joe Biden” virtually non-dischargable, often fraudulently induced, “student loan” debt shackles?

  5. Norb

    I can offer this anecdotal story of current American working class life. A recent hire at the company I work for has this employment trajectory. Upon graduating college, she accepted a job outside her field to make money in order to survive. She did not have extended family resources, so securing living expenses outweighed any career building strategies- also of interest is that her college experience included all the currently accepted musts- unpaid internship at a leading company and part-time employment while in school working in her field of study. She fell into the category of being a hard worker, but not the best, and most talented available.

    Her job search lead to accepting a position in another state, which she accepted. While working in this current position, she desired to move back home to be closer to friends and family- which brings her to her current position at the company I work for. This was a three year process.

    Her current living condition is that she is co-renting a three bedroom flat with two other strangers- an arrangement facilitated through craigslist.

    So, for an average graduate, without strong financial backing or family resources, requires relocation across state lines, and risky living conditions- on top of repaying student loan debt. Also, the job is probationary until skills are proven- no health insurance or retirement funding. No wonder there is a 40% default rate- in a way it says much to the character of debtors that the rate is not higher.

    These are the pressures placed on individuals trying to start out their lives. It is a national crime.

    However, American education is evolving into a Jay Gould dreamworld- getting one class of people to kill off the another class. The upper class of American education- the winners- being those whose current employment depends and the fortunate few to secure employment stand as cheerleaders for the current system and fight doggedly for its continuance.

    This whole educational system resembles a drug induced hallucination where the “college experience” is facilitated by debt, and by the time one is able to comprehend the actual reality of the situation, it is too late. When the national ethos becomes making money, luring the ignorant into debt bondage becomes justifiable- or even inevitable. For this class of moneymakers, it is a creative exercise-

    Use emotional appeals to drive families into debt, then, when that unplayable debt reaches a breaking point, sell the debt to unscrupulous collectors who will torment individuals and family’s further. The original perpetrators of this odious debt keep a clean conscience, while the lowest sort of humanity, the debt collectors- reveling in their predation find plenty of employment and opportunity.

    Maybe this the the hallmark of a failed society- when the best and brightest are instrumental in promoting the livelihoods of the lowest sort of humanity- the criminal elements and perpetrators of violence and predation. Warfare and debt collection.

    When the elite are seen in league with criminal elements, the game is up- or soon up- or ready for overthrow.

    “Significant conversation”- indeed. Its called revolution.

    You can tell when a true revolution is underway when the conversation stops with the elite running the show and solutions to problems are found outside the current structure.

    We are in the midsts of revolutionary change, but the American public will be the last to realize this.

    1. Epistrophy

      “Use emotional appeals to drive families into debt, then, when that unplayable debt reaches a breaking point, sell the debt to unscrupulous collectors who will torment individuals and family’s further. The original perpetrators of this odious debt keep a clean conscience, while the lowest sort of humanity, the debt collectors- reveling in their predation find plenty of employment and opportunity.”

      This is the heinous truth. The University system and their financial backers are the equivalent of the Tobacco Road encyclopaedia salesman promising the illiterate and impoverished that they can rise out of their deplorable conditions by just ‘signing this contract…’

    2. jrs

      and the most amazing thing is all anyone talks about is college costs compared to elsewhere, which are indeed high, but noone talks about the fact that NO OTHER COUNTRY seems to run things the way the U.S. does, where the only training option is college or a small amount of for-profit training on one’s own dime after high school (it’s not all bad, hair stylist get this training so do CNAs – but it is costly and all on the individual). The whole rest of the world seems to do real vocational training often with apprenticeships before adulthood, as well as have college options.

      If U.S. students who enrolled in college all graduated, the U.S. would have near the highest rate of college graduates in the world, it already ranks well even with many dropping out. And this all despite costs. Well yea, you are dealing with a country that doesn’t actually provide much in the way of other options to people, so people do what they must …

    3. Jason Boxman

      Since Obama kicked the private sector out of student loans, that unscrupulous lender is the United States of America, which does not need any of the interest income to fund its ongoing operations. It is manifest evil, to destroy an entire generation of people, simply because the Establishment is ignorant (perhaps willfully so) of how sovereign money works.

  6. Steve

    As someone who graduated college in 1983 none of my student loans had an interest rate below 7% except for the smaller NDSL loans. I had no family help with college costs. Many of my friends who continued to get a Masters degree or Law degree had loan rates of 9%. The economy in the early 80’s was also terrible and good jobs were scarce. It was not fun. The main issue now can’t be blamed totally on the criminal student loan industry. 100,000 in student debt is still a terrible decision even at 0%. This debt will haunt them for their entire lives. This year the daughters of 2 friends left for college; one expects to be done carrying $20k in debt and the other $100k. Both are attending good schools (one private and one a State college). Both are getting similar general business degrees. The daughter who will be in debt $100k has no family income that could ever absorb that kind of debt. This is a scenario I have seen quite a few times in the past 10 years. From just a perspective of fairness how does the issue of people knowingly putting themselves in such financial risk play out with any attempt to correct the system or bail out student debt? How could any bail-out of student debt be politically possible when a whole segment of people recently or nearing retirement already had their fixed savings robbed to bailout Wall Street?

    1. Eudora Welty

      I changed careers in my 40s, needed a master’s degree. Long story short. I was told by friends in 2008, if you work for a non profit & pay for 10 yrs, it’ll be forgiven. I believed my friend’s sincerity, but doubted it. Skipped grad school. Got a job in my field, well, 2 part-time jobs that pay more than a living wage. I feel I dodged a big bullet, just because I have lived long enough to doubt certain things. I know that plan has worked for some people, but NC has written about the obstacles.

      1. Jason Boxman

        Indeed, it is shameful how entirely dysfunctional the loan forgiveness for public service program is, whatever it is called. Perhaps everything is like CALPERS, or HAMP.

        And this was happening under Obama; It’s not clear why liberals Democrats can claim they’re the party of effective, technocratic government when they can’t even run their own byzantine programs correctly. What gives?

      2. jrs

        Sure the plan can work, but in one’s 40s just has to up the risk factor. Anyone who does that is brave at least, maybe foolish, but surely brave. It’s hard to get entry level work if one is an early 20 something (the old “can’t get a job without out experience, can’t get experience without a job” catch 22), but firms do make adaptations that allow some of the next generation at least to get in. But at 40 something, none of those rules apply, and age discrimination starting slowly, very slowly, to creep in as well (full blown by 50 something though). So for the young, it’s sometimes a good idea, but at 40 something, wow it takes a lot more consideration. Willingness to move all over the country for work surely makes it more likely to succeed. And then actually taking the potential garnishment of social security a little more seriously than one would at 20 as well.

      3. Stephanie

        A friend of mine did believe that hype: got her master’s, worked for a non-profit for 10 years, and when she applied for forgiveness was told she didn’t qualify because she was current on payments.

    2. JTMcPhee

      “Knowingly putting themselves…” Well, maybe for some Neoliberal definition of “knowingly.”

      Forget about the various pressures that impel mopes to sign up for that tantalizing dream held out to them, or that fear they are taught from early in their school experience, that you just HAVE to get that degree however you can, not to worry, things will work out.

      “Fairness?” The herring that shoal up so the sharks and tuna and dolphins can more conveniently slash through and eat their fill — is that an example of “fairness?” The word gets used a lot in this context — but it seems always offered to mean only that “Some lottery winners exist, therefore lotteries are ‘fair,’ any idiot should know that the chances of winning are much nearer to zero than the seductive and slyly crafted advertising and come-ons and reports of Big Winners would lead a ‘prudent person’ (that other misleading nonsense, in the real actual world of manufactured Bernaysian demand and fraudulent inducements top to bottom) not to throw money away in the many lottery options.”

      “Hey, I paid off my student loans, or managed to get through to a degree and a job without them by various means and fortuities— NO FAIR that mopes who are not as prudent or fortunate as me might get Real-Economy-saving relief from what I choose to define, as a special wise prudent person, as their improvident idiocy in incurring impossible debt!”

      Interesting how quickly the apologist hyenas and jackals pick up on posts like this, and circle around, to try to kill off any discourse that might lead in the direction of “promoting the general welfare” by extinguishing the whole fraudulent enterprise (that more and more just “teaches to the test,” a “test” written by the likes of Betsy DeVos, designed very artfully to make more mopes who will be “useful” until they don’t meet the All Powerful Market God’s demands, and are then told or nudged to the understanding that their only remaining option is JUST DIE!

      My YHWH, can’t have people coming to understand that there were and are very good reasons, pro-social reasons, why there have been debt jubilees through history. No, the Vampire Squid must have his meal…

      1. jsn

        Yes, it is amazing the efficacy of the trolls…

        It is the lenders who benefit from asymmetrical information when making loans. Rather than putting that informational asymmetry to a social use but not making the loan, they are rewarded for the antisocial use of debt to abuse trust and concentrate power. Lenders need to be held socially accountable: they need to expect to eat the bad loans they make.

        If you want capitalism, that’s what it looks like. Riskless abuse of power is feudalism, not capitalism.

      2. Steve

        The examples of the two families I know well both have somethings in common. They both have household incomes well over 100K and the parents all have college degrees along with one spouse in each household having an advanced degree. In addition one of the households votes Democratic and the other conservative Republican.

    3. steelhead23

      Steve, you just brushed the dust off the underlying issue – college costs too much – and provides too little. When I graduated, way back in 1980, a full-load semester at Colorado State cost around $500, with used books, materials were usually in the $200-300 range. College wasn’t free – but it was pretty cheap. I got grants that paid for most of it and left college about $1000 in debt, which I quickly paid off. Today, ignoring enrollment and student fees, a single course could easily cost more than an entire semester way back in 1980. That some are now carrying student loan debt (larger than my first mortgage) well into their careers isn’t wholly the fault of the financial industry, the institutions of higher education themselves bear a larger share. It seems that somewhere along the line academia went from a service to a commodity – an increasingly expensive and remote (on-line classrooms) commodity.

      1. Steve

        I totally agree and that was my main point. Even removing the lending industry from the equation college for many has become a no win situation. The result of this gamed system is another crash which will be externalize to many who had no involvement.

      2. HotFlash

        Add to that the jobs that kids could get to save for college have disappeared. Pumping gas, car jockey, grease monkey, babysitting, delivering papers, mowing lawns, bagging groceries — I had two years of college $$ in the bank by the end of high school (1968). Kids can’t do that anymore, those jobs just aren’t there.

    4. run75441

      We did bail out Wall Street to the tune of $7 trillion and this came at the expense of Main Street. Are you saying Main Street can not help Main Street?

  7. Anarcissie

    I think there is an additional problem here: the dubious monetary worth of the kind of higher education many young people seem to be receiving. One of the reasons people can’t pay their student debts is that the learning and credentials they receive in exchange for the money are often of low value or even worthless, financially speaking. This problem is often blamed on the students, but the con artists in the Education Industry who are cheating them are also to blame and should be restrained by law if nothing else will work. I’m talking about the whole system here, not a particular segment of it.

    It’s as with the Medical Industry: if you just give people money, at least in a culture that sanctifies greed as does that of the USA, they will just keep raising their prices.

    1. JTMcPhee

      Another thought — how many degreed people can “the system” use, what kinds of actually useful (to the real world, now, the one threatened by runaway “tech” and combusto-consumption and MOARism, not the broken mess served up by the looters) “training” can they get from the system that seduces, loots and discards them, and for how long, as permissionless disruption and control fraud and the rest of the FIRE disease and neoliberal “faith” work their way through the real world?

      AI is touted to replace a lot of them, as some fortunate few of them (facing being “excesses,” too, as their “innovations” come on line) figure out how to extend the reach of the “tech’ world’s claws — one REAL threat among many, like messing with genetic material, weaponizing everything and forcing all “vision” to pass through the distorting lens of WAR, EVERYWHERE, ALWAYS AND FOREVER, concentrating all wealth and ownership in ever-smaller sets of grasping hands.

      Where are the Marriner S. Eccles for our time?

      1. Inode_buddha

        American -style career and business is the reason why I urge you to support bacteria — its the only culture some people have!

    2. Brooklin Bridge

      Just listening to TV adds for this or that “U” are enough to prove your point beyond any reasonable doubt. The later into the evening it gets, the more criminally motivated the adds, particularly drug addiction programs and education scams. It’s like all out porn, only full frontal greed instead of lust.

    3. Wukchumni

      If one put in the effort, just about everything you’d ever learn in college or university is right here on this contraption, for free.

      1. JTMcPhee

        That was a point that the hated Ralph Nader used to make (talking about libraries, at the time,as the source of learning, not the manipulator phantasmagoria that infiltrates their impressionable consciousnesses vis all these “screens”. His view was that a mope could get educated to the college level in a year and a half, or less. Greek Life and binge drinking and back then, lots of sex, did not enter into his calculus. I’m sure that position cost him a lot of votes, in his windmill-tilting run at the Presidency.

        I have fortuitously benefited, all through school, from many really excellent teachers and the time to digest what they sought to impart. And knowing how lazy so many “students” are (e.g., playing “Catch the Plagiarism” game with their now pre-written essay purchasing “students” who can threaten profs with various charges to encourage curve-busting grades for themselves and only “learn” by cramming, I think Nader missed the mark a little— maybe a driven person like himself could zip through a “decent education” in that short a time— not everyone, by a long shot.

        And what are young people and students of all ages supposed to learn, any more? Stuff that is purely useful to the oligarchy? Or maybe a more “classical” and broader base of actual knowledge, that might fit them out to be “citizens” rather than “consumer wage slaves,” and better stewards of the planet they have to live on?

        1. Odysseus

          His view was that a mope could get educated to the college level in a year and a half, or less.

          Many people do not in fact have those skills. I don’t.

          There’s a reason why some people used to be described as “book smart”.

          I have taken multiple professional examinations after self-study. In every case, I was able to pass the relevant examination, but had no confidence in my skills and needed months of on the job experience to become actually competent.

          Further, human instructors regularly point out entire aspects of certain problems which would never have occurred to me at all. I cannot bootstrap a curriculum just by asking my own questions.

          1. JTMcPhee

            My point exactly, of course. Nader is a really smart, self-directed kind of guy who can maybe self-educate. Most of us are not, and gain greatly from quality pedagogy. There’s a reason why having teachers teach and students learn, or masters teaching apprentices, is the long-standing model.

            For all that, though, he did have another point: that 4 or 5 or 6 year degree program kept millions of young people out of the statistical pool of the unemployed, for the duration of their matriculation, letting politicians more easily lie about the “great condition of the economy.”

    4. jrs

      I suspect most educational institutions provide high quality education. Ok some for-profit education is NOT good quality (some is, but unless it’s certain things where the vocational option makes sense, it does not send the right signals on a job application regardless).

      But if we are talking public colleges, the education is usually fine. And more and more people pursue “practical” degrees. Not that many are getting humanities degrees or the like anymore, even if those who do often do ok in the world as well. Poor quality formal education isn’t what employers actually complain about (see the book “why good people can’t get jobs” by Peter Cappelli). They complain about lack of work ethic or lack softer skills like verbal communication skills or lack of experience in doing that exact job etc. which no college could ever train for. So education might be ok. The job market on the other hand is another matter and is really NOT OK! It’s much low wage jobs that aren’t enough to live off of etc.. So educational institutions providing good quality education (even if at inflated prices) can’t really solve that problem.

      1. juliania

        Sadly, these days college is a gamble. Some get lucky, get that job; most do not. It isn’t about learning how to learn any longer. and the punishment for taking the gamble lasts the rest of your life for the unlucky ones.

        This country is not only eating its children, it is eating their parents as well. I do hope the folk who made it through and have good jobs, good lives will pause a moment to understand how severe this crisis is. And stop telling folk to pull themselves up by their bootstraps. I bet they all have family in dire straits; they couldn’t live here otherwise. They ought to be the ones, the few who have been lucky, to get the system changed. All us others are just kicking furiously to keep heads above water. What would it hurt, you comfortable posters, to give others a helping hand? You who have influence, use it; they’re not listening to us.

  8. Brooklin Bridge

    Why aren’t people waking up a little more quickly? Why, for instance, do people stuck in this viscous loan scheme have to go through such a guilt trip in the first place? Why aren’t there more angry people, particularly students and their parents? Why don’t more people connect the dots between this kind of scam and the scam of all scams the bankers and government pulled off (not to forget government regulators; the people who’s job it supposedly was to rein in such behavior and put said bankers in jail instead of giving them -or at least ignoring- gigantic bonuses, the same people who are now trying to blame it all on everyone else) starting in 2008?

    Answers to that question, sometimes exceptional ones, have been posted on this site particularly, but somehow they are never quite enough for really, what’s going on is just plain crazy.

    1. nycTerrierist

      Preach, comrade!

      Occupy seemed like such a moment: people connected the dots. People were in the streets, and contrary to media attempts to marginalize the participants, the newly awakened 99% included every demographic (except the banksters…)
      That moment of direct action was shut down — thanks Obama! and let’s not forget this
      was under Obama’s watch.

      Nevertheless, we should give other, more specific forms of direct action another try,
      like comrade JTMcFee’s #juststoppaying
      predatory loans

      as Prof. Hudson has said: Debts that cannot be paid, will not be paid.

    2. Wendell

      I almost wish I could preface the following comments with something like ‘I’m really a liberal but let me play devil’s advocate here!’ But that would be false. I’m not a liberal; I’m more like an anarcho-syndicalist and I am fed up to the teeth with ‘It’s just N-O-T F-A-I-R!’ (Of course it’s not fair. The question is: what are you going to _do_ about it?!?)

      The student debt problem is of course serious, not only for the debtors involved but for society as a whole. On the one hand I am in full agreement with what I expect to be the sentiment of many (most?) readers here that the system is rigged by the rich, for the rich, forever and ever, amen. And that needs to change. I’m actually amazed that it has got to the point that it has; I mean, where is the pushback? Seriously. Where are the torches and pitchforks? Why do the serfs tolerate their shackles? Is it only because the police have more and bigger guns? Or is it perhaps because too many are simply content to wallow in their victimhood? As Nietzsche put it: ‘Sie heißen sich selbst nicht die Schwachen, sie heißen sich „die Guten“.’ (‘They don’t call themselves the weak; they call themselves “the good”.’)

      I have to say that I don’t have much sympathy for someone who admits: ‘… but I also made the conscious decision to take out loans for a college I couldn’t afford in order to become a journalist, a profession with minimal financial returns.’

      I mean, bed: make -> lie. And stop whining. I went to college on the GI Bill (+ part-time jobs; + student loans) and rarely had two nickels to rub together in my pocket until I was well over 30. I am now beyond retirement age, like the North Carolina psychologist ‘who is now beyond retirement age. He explains that his student debt balance soared after losing a well-paying position during the financial crisis, and that he is struggling to pay it back.’

      Wait a minute. The ‘financial crisis’ was a decade ago, as the recent spate of articles keeps reminding us. At that point, the North Carolina psychologist must have been at least in his mid-50s. And he was still carrying student debt?!? From loans taken out when? The ’70s? ’80s? ’90s?


      1. run75441


        That is called; “I got mine, now you get yours.” Is that you Jason Delisle or is it Beth Akers?

        When I publicly asked Debbie Stabenow what she was going to do to fix or mitigate the student loan debt crisis, she answered we are not in control of the Senate. This I already knew; but, they were in the past and did nothing. My point was to let her know, I knew she voted for the 2005 bill which was sponsored by Joe Biden.

        As Alan Collinge (above) of the Student Loan Justice Org. will tell you, 40% of those students holding the ~$1.5 trillion of student loans are either delinquent or in default. In the last couple of decades state support in the form of subsidies resulting from taxes has eroded from being a majority of funding for states schools to less than a third. The funds have to come from somewhere for 4 year and 2 year institutes. It came in the form of tuition. An undergrad degree at one Jesuit institution is $40,000 annually. It ends up at ~$30,000 on average after financial aid. In the eighties when I was going at night to complete my Masters the courses were $350 a course. Today, that Masters is $80 + thousand. The $80 thou is half of what a another school Is charging and even less than the two hallmark schools in the city. What median income family of 4 could afford this? They can not so they turn to loans.

        I went on the VA bill alsol. It paid for my BA along with state grant. The VA paid for much of my Masters too. So what. I do not advocate more wars to get them VA benefits either. You got lucky to be able to sit here and boast about it. Nobody cares how you did it. It was far easier on us if we needed a forbearance or an economic hardship temporary deferment. Plus the loan servers are not as honest today as in the past.

        What is your plan Wendell when they become more of a burden. Work Houses, prison, soylent green? Best to fix the issue now, relieve the burden , and make them more productive members of society.

        It does not make much sense to indenture a generation or two of young people to loans which will not be paid back and make them a drag on the economy in $millions or a feew billion? In my estimation, it does not make good sense. .

  9. divadab

    I look forward to Joe Biden’s run for the Presidency. And watching that sellout have to answer why he promoted making student debt undischargeable in bankruptcy. Tell us why, Mr. Biden, you want to create legions of lifetime debt slaves of free Americans?

    1. JTMcPhee

      Of course who, exactly, with a voice that can be heard effectively by the electorate, will be asking that question, or the many others that might be asked to similar effect?

      “The Narrative is strong, in this one…”

        1. JTMcPhee

          Isn’t that what already exists?

          I kind of find myself referring to this illuminating work on what might come next: “The MAnagement of Savagery,” https://azelin.files.wordpress.com/2010/08/abu-bakr-naji-the-management-of-savagery-the-most-critical-stage-through-which-the-umma-will-pass.pdf

          But I’m silly — I worry about stuff like, what is it now, $4 QUADRILLION (in those supposedly self-cancelling “notional dollars” in derivative “exposures” that’s floating around waiting to find a soft place to land…

          1. Wukchumni

            You’re going about it all wrong, in that over 1/3rd of us don’t have more than $400 in ready dough, long green, semollians, etc. There’d be a fair number of the X & Y chronozones represented.

            That makes for scant chance of starting a bank run, as a minimum amount of fiscal fitness is required in order to partake.

  10. anon y'mouse

    you can’t get even a job opening mail at a law firm without some kind of degree. wanna work at walmart for the rest of your life, on p/t minimum wage no benefit no guaranteed hours? if not, then you are somewhat forced to enter the college ratrace.

    the idea of blaming this on the students themselves is like Scrooge saying “are there no workhouses?”

    1. Wukchumni

      You only need one kidney, and the other one could keep you in pee-chee folders, wand-type metal detectors, #2 pencils, or counter-assault rifles.

  11. ChrisPacific

    To me this seems like an inevitable consequence of the macroeconomic trends of the last couple of decades, at least in the US – particularly the GFC. There was a huge bubble, and everyone (especially financial firms) experienced a massive increase in paper wealth. Then came the crash, and it turned out that the majority of that wealth was actually imaginary and had never existed in the first place. It turned out that the government had no option but to make the financial sector whole by replacing their imaginary wealth with real wealth to avert the collapse of the global financial system and the end of civilization. So that’s what they did. In combination with government austerity policy, this meant that taxpayers took the hit, resulting in a massive increase in inequality and leading to many of the problems we see today.

    Yes, student loans are a big problem and there are things that can and should be done to resolve it, but they are just one manifestation of the whole corrupt system in action. While the explicit and implicit transfers of wealth upwards remain in place, regular people will continue to find that one or more of the things considered necessary to have a happy, healthy and productive life in the modern era will continue skyrocketing in price, and they will have no choice but to go into debt to afford them. It’s like pushing on a balloon. Even if you could somehow resolve the student loan problem, if you do so without fixing the underlying dynamic then people will just end up getting into debt for some other reason.

    TLDR: The financial sector is increasingly in the business of monetizing the destruction of people’s hopes and dreams.

  12. KYrocky

    Yves, you buried the lead:

    But the bigger issue is the way indebtedness is demonized in a society that makes it pretty much impossible to avoid borrowing.

    Exactly how is indebtedness demonized in our society? Trump’s multiple millions and millions of dollars discharged? Bailed out financial institutions? Are the richest of us demonized? Hell no.

    Are the struggling poor and middle class demonized? Of course.

    In our national discourse there exists two sets of value systems: one for the powerful and one for everybody else. Two sets of standards, two sets of rules.

    If debt was truly “demonized” in our society would it not be expected that those who are the greatest individual abusers would be as equally if not more demonized and economically punished as the least of us?

    There is absolutely no reason that some members of our society can walk away from hundreds of millions in debts and continue to live in the lifestyle of the rich and famous, while regular folks are forced into extreme personal sacrifices and hounded to their graves to ensure some gets their money.

    The demonization that exists is manufactured by the rich and political, for financial and for political gain. It is but one part of many in a pattern of the looting of this country for our rich ruling and favored class. Student debt has been politically structured to maximize financial extraction for the rich.

    Just as there are reasons why the worlds most expensive and inefficient health care system exists only in the United States, so it is with financial borrowing for education. The result is more money for the rich, and reduced purchasing capacity by more than a generation of college graduates in a flat wage environment of the last 40 years.

    Any one struggling to understand why economic demand barely budges need only start with health care and student debt, and anyone wanting understand the decline in opportunity for an entire generation need look no further.

    be applied

    1. Yves Smith Post author

      Trump borrowed via corporations. Business borrowing isn’t at all the same as personal borrowing and you ought to know that. You can bankrupt the business and still keep your personal assets (unless you get stupid and pledge or borrow against them to try to keep the business going).

  13. lentilsoup

    As someone who has been very aware of the student debt problem for many years, I loved this post, which shows two possible ways forward: 1.) changing public policy to be more in favor of student debtors rather than creditors, and 2.) organizing a mass default. Either one (or both) of these would be great, but there is a necessary pre-condition for either of these to work: first, social solidarity / class consciousness / unity must first be built among the student debtors. No easy task, in this most divisive of cultural moments in an already fragmented social landscape in the Not-So-United States of America. But here are 3 things that I think could help build this consciousness:

    1.) Education about the history of student lending. Most students do not major in the political economy of the last 40 years. They know about whatever their major is, they don’t necessarily know about 40 years of stagnant wages, 40 years of inflation in fixed costs (like education, which can’t be outsourced), the deliberate dismantling of state student aid and its replacement with student loans. Students need to learn how the financialization of everything under neoliberalism has led to the creation of a trillion dollar debt market which did not exist before. Etc. Understanding history and context is the first step to getting rid of the guilt and despair that plagues student debtors, and replacing that with righteous anger and positive change.

    2.) Gender Focus. For years, you’ve seen the news about how there are now more women than men who are getting degrees, and this is usually portrayed as evidence of slacker men falling behind in life, or “you go grrll, hooray for women” feminist narratives. The ugly truth, however, could be that the men seem to know a bad deal when they see one and stay away, while the women are blindly falling into a debt trap. We could see a future of educated women as indentured servants, drowning in unpayable student debt, unable to form families, buy homes, or achieve security. In other words — student debt is a womens issue. Reframing it in this way means that already-established political groups (feminists & women voters) can be tapped to advance this cause.

    3.) Media attention. One way to build group consciousness is through mass media. What about making a TV game show, like Jeopardy or Wheel of Fortune, in which the prize at the end is the pay off of the winner’s student debt? And in the course of the show, you could interview the contestants about their debt and how it has affected their lives? It would be a way getting rid of the public debt stigma / guilt, helping people to realize they’re not alone, etc.

    Anyway, I’m encouraged that more people are talking about this problem, and I’m optimistic that we can make a better future, preferably without violent political revolution or a global economic crash. Higher education is a public good!

    1. nycTerrierist


      In the world of TV game shows, people have had their lives changed by winning expensive cars or houses. In 2018 America, a new programme is offering a slightly different – but perhaps as coveted – prize.

      Your student debt paid off.

      “It’s a comedic trivia show that’s an absurd answer to an absurd problem,” said actor Michael Torpey, presenter of Paid Off, which premiered this week on the entertainment channel TruTV.

      The programme sees three contestants, usually in their late 20s and early 30s, answering basic general knowledge questions. As they advance, they get closer to having their loans – some above $40,000 (£30,000) – fully covered.

      The idea for the project, Torpey said, came when he met his wife. She had some $40,000 in loans for degrees and was doing “all sorts of odd jobs” to earn money. At the same time, she was also working towards getting her licence as a mental health counsellor.

      “I didn’t appreciate what it was to have this burden impact you all day, every day, keeping you from picturing your life moving forward – the ability to have kids, a home, go on vacations, down to the small stuff of having a second cup of coffee.”

      So when debt-free Torpey – known for his role in the Netflix drama Orange Is The New Black – booked his first commercial campaign, he knew exactly where the money would go….”


      Hope to hear more about this!

    2. anon

      The ugly truth, however, could be that the men seem to know a bad deal when they see one and stay away, while the women are blindly falling into a debt trap.

      That’s never been my decade’s long experience. If anything, I’ve witnessed more females sniffing a rotten ‘bargain,’ particularly when they still do far more shopping for basics than males, on the whole. I suspect it has far more to do with females, historically and currently, being expected to have far more credentials and Education™ than a male (yet still being paid less than a male when they do).

      1. jrs

        well men probably do have more options in traditional male blue collar and apprenticeship type fields than women do (various construction work etc.). It doesn’t mean blue collar work is really for everyone. And like anything else has to be researched first, especially as it pertains to opportunities depending on location etc.. Noone should just pursue it or anything because someone says it’s hot today, but if one has relatives etc. already working in those fields … it becomes a pretty natural option.

  14. arihalli

    I would like to make 2 points.

    1) College education is not just good for the individual but for the nation as well. It is an asset for our country to have educated citizens. It not only contributes to innovation of technology, etc but to have people who can comprehend matters necessary in a democracy.

    2) The kids taking out these loans are, largely, blameless. I recall going to school many many yrs ago and the cost of books were outrageous. It was a scam. It hasn’t changed. Neither have the schools nor teachers assisted the college kids in lowering book prices. Same with the cost of the education. Its skyrocketed. And its necessary to obtain a good job. 6% interest rates can literally costs exponentially more, if the graduate doesn’t obtain a good enough job to sustain payment.

    Its scandalous the way the college industry has preyed upon young adults. We can afford 70billion dollars for the defense bill this year but we can’t put kids thru school with better subsidizing? The Defense industry is war profiteering and pays us back little. The educated students would be a far better investment. Look at China for confirmation of that!

  15. VietnamVet

    Until the Reagan revolution in the 1980s, public education and public health were funded with taxes. Voodoo economics cut taxes on the well-to-do and corporations. This lead to lower public funding that was made up with user fees. To make do, these costs were financialized by families. They were debts that they could not afford in the first place. Also, since hospital and education administrators are paid with the future earnings of others, they have no incentive to economize. Early death and homelessness are two of the many adverse effects of the plutocrats counter revolt.

  16. Chris

    Does it strike anyone else as criminal that with all the paeans on education and training and information literacy we’re told to ingest by the powers that be, basic understanding of a contract is never included in their lists? How much harder would it be for the loan market, educational or otherwise, to be predatory if people understood contracts and had read several of them before ever seeing what a loan agreement looked like? What if they had read a loan contract that most would consider fair and then a typical edu loan agreement, and been allowed to compare the two? What if parents and children were both told what co-signing meant, and why they can’t discharge any of these loans in bankruptcy, or due to hardship?

    It seems to me that most people in the middle and lower class in the US learn about the importance of reading contracts and asking questions after they’ve been screwed over several times. And then like cavemen we gather round the fire to tell ghost stories about how Aunt Judy was taken away by an ambulance that was out of network and her son Thom signed loan papers that he didn’t realize allowed interest to accrue even when he was in school and the loan payments were deferred and neither were ever heard from again. We pray to shamans like Joel Osteen and search the Internet hoping for totems that will keep those demons away, so that we may reach the promised land of a fully funded retirement on or before age 70…

    And then, to really screw over the youth, you have the rancid hypocrisy of people who graduated with C’s in the 80’s, 90’s, or early 00’s, now telling kids with A’s B’s and C’s that they’re not good enough with a 3.2 GPA. “There’s better candidates vying for the same job. Sorry.” So these kids took out those loans for nothing. Funny how the diversity that everyone is so concerned about never reaches those who worked hard but couldn’t pull an A grade, or maybe didn’t have the connections to influence the school.

    I don’t blame the wolves for killing sheep. I blame the changes in our society that have turned our people into sheep for the wolves to slaughter whenever they feel hungry. And I blame the shepards who sympathize with the wolves and can’t be bothered to help the sheep they’re responsible for.

  17. Jonathan Holland Becnel

    Count me in on the boycott.

    100K in debt. Never once sent in a dime.

    F em. No way im ruining my life in some never ending rat race.

    Id rather chill, make a few thousand bartending, and read about how we can start the Revolution!

    First things first. Now where did i put my bowl…

  18. zagonostra

    “Activists are calling for a significant conversation about the commodification of educating our youth”

    Stop. Think about this sentence. It should jolt you to the core, but I would venture most people glibly move along…that young people are being used for financial fodder should cause such an disgust and anger that any politician would be scurrying for their lives. But alas, we move on to the next outrage in the Trumpalvaina world created by a corrupt and immoral political system.

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