Student Debt: The New Indentured Servitude

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by Greg Foisie, CSULA grad student

Education is a human right according to the Universal Declaration of Human Rights, which the US voted in favor of in 1948 as a UN member state, but the US student loan industry is a system that takes advantage of this right and this need of youth, making them accessible as commodities only to those who can pay for them. Currently 67+% of students seeking BAs are forced into debt to obtain what society demands, making education a cash cow for the banks. The student loan industry is a product of legislation, resulting in a trillion dollar plus debt (reportedly greater than student debt in all other countries combined).

Does the student loan industry make indentured servants of students from low income families, struggling hard to improve their lives? Many graduate to find few decent-paying jobs available. Monthly payments can be dear – $500-1000 a month is not unheard of – and students can pay for years without touching the principal. Students are unable to declare bankruptcy from student loans. It may take decades to pay off loans and interest. Those
who can’t are subject to harassment and punishment that can include modern-day debtor imprisonment in many states. Co-signed loans can endure beyond the grave. That sounds like indentured servitude.

In Many Industrialized Countries Post-Secondary Education Is Free

Over 30 industrialized countries offer postsecondary education for free (including Mexico),
but the US began abandoning this in the ‘50s, and a borrowing binge began by the ‘80s. According to the Institute for College Access and Success, low income families ($40,000 annual income or less) have the major burden of student debt, because of the cost of post-secondary education racing ahead of inflation, combined with decreasing support by government.

The US is the only country to impose these kinds of costs on college students, and no other country requires loans to cover so much of the cost. Most government attempts to rectify these problems haven’t addressed the basic issues, instead making loans larger, easier to obtain, and more efficient to service.

A college degree increased in cost by over 1,000% since 1985, with the greatest increase in recent years. By 2012, average US student debt had increased 58% since 2005, rising to $27,253, with college costs rising 1.6% more than inflation in each of the previous 20 years. Public universities increased fees by 27% from 2007-2012.

The CSU system was free when created in 1949. In 1990, 78% of the cost of a CSU bachelor’s was still borne by the state, but by 2014, just 48% was covered. This year a resident undergrad’s cost at CSU full-time with summers off is $5,482.00 per year. Additional expenses can be significant: room (easily $7000 a year in LA), board (another $7000), books (hundreds each for required texts), and other fees (such as “student success fees,”) etc. A student in the US can graduate with a debt between $29-40,000 for a bachelor’s degree that takes on average 6+ years to acquire.

In 2012, 71% of all graduates from 4-year colleges struggled with such debt, 1.3 million students. 66% of public college grads had student debt averaging $25K+; 75% of private non-profit college grads had an average student debt of $32K; and 88% of for-profit college grads had debt of nearly $40K on average. 1/4 of borrowers owed more than $28K; 10% owed more than $54K; 3% owed more than $100,000; and 167,000 students owed more than $200,000.

Goodbye to College, Hello to Debt Peonage!

Repayment conditions are excessive. It’s equivalent to indentured servitude, where much of
the laborer’s reward goes into the pockets of their creditors for an extended period. Many students aren’t fully aware of the ramifications of debt, and its ability to limit their options for years to come. Borrowers are often presented a bewildering set of payment options. Both students and parents need clear information about how much they have borrowed every year, and how much they will have to repay for how long.

When this was done at Indiana University, borrowing was reduced by $31 million in one year.

If the student withdraws from the school or drops out of classes, debt may increase.  Withdrawing from a school, especially with failing grades, can deprive the student of the ability of further attendance by disqualifying the student from financial aid. Additional debt also may include retroactive penalties for unused room, board, etc.

The Case of Corinthian

A case in point of student abuse by the for-profit education system is the corporation Corinthian Colleges. Once one of the largest US college chains, boasting around 72,000 students, Corinthian just shut down its 28 remaining campuses, jeopardizing the education of its last 16,000 students. The federal Education Department has fined Corinthian almost $30 million, claiming the corporation misrepresented job placement rates to induce students to take on debt in order to enroll in its academic programs. The federal government also ordered
Corinthian to stop registering at some of its locations, and the California Attorney General, Kamala Harris, is suing Corinthian for predatory practices.

Loan forgiveness for these ‘stranded’ students is being considered, but not guaranteed. There’s a “closed school” discharge provision and a seldom-used federal law forgiving borrowers due to college misconduct. The cost to taxpayers for such discharges could amount to tens of millions of dollars. Students at the Corinthian campuses took out $56 million in federal loans in the last six months of 2014 alone. Corinthian had continued to enroll students
and get taxpayer funding despite problems evident for years. This has intensified legislative proposals to reform or prevent such abuses, as well as those against private for-profit colleges soaking veterans under the GI Bill.

When necessities are turned into commodities for sale in capitalist economies, the likelihood is great that abuse will follow. Student debt in the US eclipsed credit card debt and auto loans combined as of 2011, and currently stands at over $1.2 trillion. 40 million youths across the
US owe this monumental debt. Our jobless recovery means many students will graduate burdened with debt without good paying jobs. In June 2014, The Economist reported that over 7 million US student debtors are in default. With one in nine debtors past due and 20% of
total debt in default, the US student debt market may be the next big bubble to burst.

For more information and calls to action, including forgiveness of student loan debt, please go to:
Occupy Student Debt http://occupystudentdebt.tumblr.com
https://www.facebook.com/OccupyStudentDebt
Rolling Jubilee http://rollingjubilee.org;
Student Debt Crisis http://studentdebtcrisis.org

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