On April 25, 2012, students across the nation are gathering to mark “1TDay,” or $1 trillion day, as the total student debt now exceeds $1,000,000,000,000. According to the Federal Reserve Bank of New York report titled Grading Student Loans, “total debt on student loans easily surpasses total debt on credit cards ($693 billion) and total debt on auto loans ($730 billion).”
Some experts have predicted that student debt could be the next “bubble” to burst, threatening even more economic downturn in an already dismal market. Banks that have been profiting off of student loans for decades, such as JPMorgan Chase, the largest bank in the country, recently pulled out of the student loan market, following a move by U.S. Bank weeks earlier, according to Bloomberg Businessweek. The Milwaukee Journal Sentinel reports hedge fund investors who are betting on getting great returns from loan investments are anticipating that the default rate will shoot up to 40 percent. I don’t know about you, but when the banks back off, I sense an explosion.
Unfortunately for me, pulling out of student loans is not an option. If I can’t find a job that pays me enough to make minimum payments, I will go into forbearance or default. At that point, my original loan amount will double, triple, or quadruple as interest rates rise and interest compounds. Student loan lenders (the banks) don’t have to abide by fair debt and collection practices or usury laws, and there is no statute of limitations on student loan debt. They can garnish my wages, Social Security payments, tax returns, disability payments and even federal disaster relief payments. There is no risk for the banks; if the banks can’t get the money from me, the loans are guaranteed by the federal government.
Wow, the banks sure do have it good – a guaranteed profit. No wonder they lobby for cuts to public higher education and loosened lending requirements. According to the Chronicle of Higher Education, state spending on higher education has been declining and basically not kept pace with enrollment growth and inflation over the past several decades. In response, tuition increases and more loans are disbursed to make up for the gaps.
The myth that we can’t afford to fund public higher education is simply ridiculous. In a report from the U.S. Department of Education, in ’08-09 school year, less than $52 billion of public university revenue came from tuition. Compare that to the $117 billion spent on the war in Afghanistan in 2011 alone, and that’s only a chunk of the Pentagon’s $800 billion budget, reports the Washington Post. Education is a right, but in this country, it comes with a hefty, unsubsidized price tag.
As Obama dangles minor revisions in Federal Financial Aid regulations as an enticement to college-aged voters, he took away subsidized loans for graduate students and congress is currently debating whether or not to double the interest rate for subsidized loans for undergraduates.
It’s clear that real solutions are not going to come from the political establishment. We must demand increases in funding for higher education and decreases in tuition and fees. We have to act now to improve our own prospects for a better future and for those who come after us. Today, as the total amount of debt crosses $1 trillion, join your fellow students and add your loans to the “Wall of Debt” that will make an appearance in Library Mall and between classes from 11-2. And, sign the petition to forgive student debt. Get involved for yourself, your friends and for our future.
Katie Zaman ([email protected]) is a PhD student in sociology.