MEDIA WATCH: Rahm won't like this either, but the 'Pink Paper' gets it right on student debt
One of the lesser notes about the ways in which Rahm Emanuel pushed a conservative agenda while serving as White House Chief of Staff involves Rham's notoriously macho version of reality, some of it dangerously anti-intellectual (and mindless). And example given by the new investigative book Confidence Men talks about Rahm and the "Pink Paper People." According to the book, Rahm made fun of those who carried around the Financial Times (it's printed on that distinctive pink paper), implying that because they thought things through, there weren't men of action, such as he fancies himself to be.
Well, the Pink Paper has done it again, demonstrating in its latest issue how much the "Occupy" movement is rooted in the lies that Rahm helped propagate about the supposedly "value" of a college education. Those particular lies, while tuitions went through the roof at colleges and universities across the USA and access to higher education was being wiped out for most working class kids, have resulted, in less than a decade, in the creation of a new Debtor Class — the American college-educated young person.
While Rahm Emanuel was out making $18 million for three years' "work" on Wall Street (he called it "relationship banking", most people call it "crony capitalism") for the one percent, most young people were taking out enormous loans so they could get the education propagandists said would give them an entry into the so-called "middle class."
Other publications, apparently thanks to "Occupy Wall Street" and 1,600 or more "Occupy" clones, have noticed the crushing burdens of student loan debt, and the consequences. But so far, the origins of the conspiracy to force a huge debt burden on American college and university students has not been traced to the same greedy capitalist origins that everyone now knows brought about the "sub-prime" mortgage crisis (which was actually a crisis in capitalist accumulation). Basically, the reign of "Atals Shrugged" economics (which ironically was embraced by many of the young adults now crushed by debt) has guaranteed a rollback in the availability of public education to everyone, but especially those of the working class who aspire to college and beyond. Forty years ago, students could count on reasonable tuition at public colleges and universities, and public financing (through loans) to make up the difference. Today, students are forced (and often tricked) into taking out huge private loans that only serve to enrich the "1%."
Below are a number of stories recently from the corporate media on the question. Note that most of them do not trace the original problem back to the campaign by the U.S. ruling class against publicly supported public schools from pre-K through 16 (and beyond). Again, as in health care and other aspects of public life, greed chokes off hope.
But without further ado, here is what the Pink Paper reports about that:
FINANCIAL TIMES BELOW HERE:
US Student Debt Impact Likened to Subprime Crisis, By Matt Kennard and Shannon Bond in New York, Financial Times, October 16, 2011. The URL for those who need is it:
http://www.ft.com/intl/cms/s/0/6ae7dfc4-ef78-11e0-941e-00144feab49a.html#axzz1b4AOWnQu
US university students and graduates are facing a double whammy of ballooning debt loads and high unemployment, raising worries that a potential delinquency crisis could bleed into the wider economy.
Student debt has increased nearly sevenfold from $80bn in 1999 to $550bn at the end of June 2011, according to the Federal Reserve Bank of New York. Other estimates from the Department of Education put outstanding student loans as high as $805bn.
But the unemployment rate for 20- to 24-year-olds is nearly 15 per cent - higher than the overall 9.1 per cent rate - compromising the ability of graduates to pay off their growing debts.
Student loan delinquencies have risen from 6.5 per cent in 2003 to 11.2 per cent in June 2011, nearly as high as the 12.2 per cent rate on credit cards.
"The long-run outlook for student lending and borrowers remains worrisome," Moody's, the rating agency, said in a recent report. "Unlike other segments of the consumer credit economy, student loans have not demonstrated much improvement in performance despite some improvement in the broader economy."
In the first half of 2011 student loans were the only category of lending where the delinquency rate rose.
As state budget cuts have driven many public universities to raise tuition fees, students are
bearing a larger share of their educational expenses.
Alberto Gutierrez, a 38-year-old doctoral student at the University of California, Los Angeles, has had to borrow more money and take on a part-time job to cover his expenses, including a $3,000 monthly mortgage payment. He receives some financial aid, but not as much as he had hoped. "It's a public university so they've been cut a lot. Resources are pretty slim," he said.
To tide him over, Mr Gutierrez borrowed another $10,000. "I'm going to be about $25,000 in debt when I finish. I've never owed that much money."
Some observers have compared the potential impact of a steep rise in student loan delinquencies to the subprime housing crisis, in which a rise in defaults cascaded into the wider economy. The criteria for federally guaranteed student loans are not as stringent as for other kinds of debt, and many loans have been securitised and sold off to investors.
The rise of the for-profit college industry, where enrolment has grown 10 times faster than for public and non-profit universities in the past decade, is causing particular alarm: default rates among students at for- profit colleges are significantly higher. A report from the US Government Accountability Office last year found that some for-profit schools "encouraged fraudulent practices" when advising students to apply for federal financial aid.
But even though the total level of outstanding student debt is projected to reach $1,000bn in the near future, according to the Department of Education, it is still considerably smaller than the estimated $2,500bn in risky subprime loans.
While homeowners can default on their mortgages, students cannot walk away from their loans. The wages of student loan borrowers can be garnished and the debts cannot be included in a bankruptcy filing, except in cases of undue hardship.
"I don't think it's a subprime crisis in the making," said Mark Zandi, chief economist at Moody's Analytics. But he added there would be higher delinquency and loss rates on loans as graduates faced a difficult economic environment. "Student loans have historically had credit issues and it's going to get worse."
Activists, including the liberal website Moveon.org, have called for the government and lenders to forgive student debt.
That proposal is winning the backing of the Occupy Wall Street protesters who are demonstrating against the perceived excesses of the financial sector.
Ani Monteleone, who graduated from the Oregon College of Art and Craft in 2006, carried a sign calling for student debt relief at an October 5 march on Wall Street. She said monthly loan payments were a burden for graduates who were already struggling to pay their bills and find a job. "They bailed out the banks. Why can't they bail out the people?" she asked.
Some analysts say such a plan would bail out the wrong people. "It's not about creating a fairer income distribution," said Justin Wolfers, at the University of Pennsylvania's Wharton business school. "It's actually high school dropouts who are doing badly, not necessarily university graduates."
Mr Gutierrez is not waiting for such a bail-out. He wants to stay in higher education when he finishes his degree, but finding work will be hard. He accepts he could go into delinquency.
"In California, there's no university hiring, I will have to relocate and even then most are hiring for non- tenure track positions," he said. "I'm looking to end up with a temporary lecturer position, which I'll have to juggle with other part-time work."
SALON COMMENTARY BELOW HERE:
Thursday, Oct 20, 2011 6:45 AM 09:16:07 CDT. Student loan debts crush an entire generation
Hyped like subprime mortgages, school loans now run to hundreds of billions with no relief in sight
By Alex Pareene
USA Today says that at some point this year, student loan debt will exceed $1 billion, surpassing even credit card debt. Felix Salmon says the number is closer to $550 billion. Either way total student loan debt is rising as other debts have tailed off. Delinquency has increased, too, since the height of the financial crisis.
It’s a huge mess.
Some people have noticed that “student loan debt” comes up a lot among the Wall Street Occupiers and the members of the 99 percent movement. Often, older people, who either attended school when tuition was reasonable, or who didn’t attend college at all in an era when a high school diploma was enough of a qualification for a stable, middle-class career, tend to think this is all the entitled whining of spoiled kids. They don’t understand that these kids accepted a home mortgage worth of debt before they ever even had a regular income, based on phony promises, and that the debt is inescapable, regardless of life circumstances or ability to pay.
Thanks to the horrific 2005 bankruptcy bill, one of the most nakedly venal modern examples of Congress serving the interests of the rentiers and creditors over the vast majority, debtors cannot discharge student loans through bankruptcy. The government is shielded from the risk, and creditors are licensed to collect by almost any means they deem necessary, giving no one in charge any real incentive (beyond basic human decency) to fix the situation.
In other words, this is unprecedentedly awful for an entire generation of young people just entering adulthood.
“It’s going to create a generation of wage slavery,” says Nick Pardini, a Villanova University graduate student in finance who has warned on a blog for investors that student loans are the next credit bubble — with borrowers, rather than lenders, as the losers.
Even if by some miracle our unemployed and underemployed debt-laden graduates all win decent jobs tomorrow, the money they make will go into paying off these now-delinquent loans instead of anything productive for the economy as a whole. Banks will continue to see massive profits, in other words.
The impossibility of escaping student loan debt is why an industry sprang up to foist useless, overpriced degrees on vulnerable people. It’s a scam, but a profitable one, and respectable enough for major establishment players to feel comfortable making a killing on it.
Like, for instance, Kaplan University, a chain of for-profit colleges built on winning free government student aid money and attracting suckers to borrow small fortunes.
The crooks are shameless. The Fiscal Times asked a bunch of predictable brain-dead airport bookstore luminaries (Dr. Oz! Mort Zuckerman!) to share one idea to “solve our fiscal crisis.” Here’s my favorite entry:
If I could do one thing, it would be to ensure the future of for-profit education companies, which this administration seems bent on eliminating. The Washington Post Company has struggled hard to be a good and decent company, but our for-profit education division is under fire by the administration, as are other for-profit education companies like Apollo and Strayer. (Full disclosure: I and my family have an ownership interest in WPO.) The majority of students in for-profit education companies are minorities, which makes you wonder how shutting down these companies will help achieve the president’s goal of having more college graduates in the U.S.
This wisdom comes from Lally Weymouth, “Senior Associate Editor” at the Washington Post and also part owner of the Washington Post Co., owner of for-profit college company Kaplan, the exploitative education corporation that subsidizes the money-losing newspaper. Lally’s idea for solving America’s “fiscal crisis” is to allow her to continue enriching herself by burying already poor people in paralyzing debt.
But, of course, she’s only doing it to help those poor creatures who otherwise couldn’t attend schools! If she happens to make a killing doing so, then the market is working its magic, I guess. This is the same argument used by exploitative payday lenders — loan sharks in ghettos — to justify predatory lending habits targeted at impoverished and vulnerable communities. Only it’s coming from one of the most respectable members of Washington’s elite, and not the proprietor of a check-cashing joint.
Of course, you know an industry is generally bad for the world as a whole once Goldman Sachs gets into it. Goldman bought part of predatory for-profit college chain EDMC in 2006, and it’s already made a killing driving random people into crushing debt. EDMC uses sales tactics taken directly from subprime mortgage hustlers to find and retain customers.
But employees recounted a distinct culture shift once the company went private under Goldman Sachs and the other private equity investors, as day-to-day operations warped from a commitment to students and their success into an environment laser-focused on hitting mandated enrollment targets. New recruits were viewed simply as a conduit for federal student assistance dollars, the employees said, and pressure mounted from management to enroll anyone at any cost.
So we have incredibly rich and powerful elite institutions joining forces to bleed youths and minorities and poor people dry. And people wonder why there’s marching in the streets.
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Alex Pareene writes about politics for Salon. Email him at apareene@salon.com and follow him on Twitter @pareene More Alex
