A major impediment in America’s return to prosperity lies in its publicly-funded system that loans to wealthy, non-productive bankers at .75% and individuals trying to acquire necessary training and education at 6.8%! In addition, banks and other corporations bask in the limited liability of their corporate structure. Where needed they can declare bankruptcy and walk away from liabilities and excessive debt. Student debtors are afforded no such relief. The jobless recovery since the great recession has sent millions of unemployed workers scampering to retrain. But even where hopefuls are unable to find work after graduating, education loans cannot be discharged in bankruptcy.
While median household income is just 8% higher on an inflation adjusted basis over the past 33 years (50K vs 46K in 1980) tuition costs over the same period have increased more than 100%.
Student debt for graduating seniors now exceeds $26,000 per person and up more than 40% in the past 7 years. At the end of 2012, more than 30% of student borrowers were at least 90 days behind on their payments. As we have been reminded in other areas over the past 6 years, loans that cannot be repaid simply won’t. But banks have once more made incredible short-term profits securitizing buckets of the bad paper and selling them off to pensions and other desperate souls gasping for income.
Meanwhile the overall economy continues to suffer from a mounting pool of people who simply cannot get an economic foothold. The debt load on young people is constraining their ability to form households, start families and buy homes. The status quo keeps trying to extract profits from a human herd that is now increasingly milked dry. More than enough debts have been amassed bailing out the banking system. Time to direct stimulus efforts to an affordable public education system along with debt and rate relief for students. Time to invest in the future through the workforce. See: Student debt and the crushing of the American dream
“A CERTAIN drama has become familiar in the United States (and some other advanced industrialized countries): Bankers encourage people to borrow beyond their means, preying especially on those who are financially unsophisticated. They use their political influence to get favorable treatment of one form or another. Debts mount. Journalists record the human toll. Then comes bewilderment: How could we let this happen again? Officials promise to fix things. Something is done about the most egregious abuses. People move on, reassured that the crisis has abated, but suspecting that it will recur soon.
The crisis that is about to break out involves student debt and how we finance higher education. Like the housing crisis that preceded it, this crisis is intimately connected to America’s soaring inequality, and how, as Americans on the bottom rungs of the ladder strive to climb up, they are inevitably pulled down — some to a point even lower than where they began.
This new crisis is emerging even before the last one has been resolved, and the two are becoming intertwined.”
