Nearly a year ago, President Obama came to the University of North Carolina at Chapel Hill where he campaigned for re-election by reaching out to young people saddled by crushing student debt and facing a jump in interest rates on their federal loans.
He said he knew the weight they felt. “I didn’t just read about this. I didn’t just get some talking points about this. I didn’t get a policy briefing on this,” Obama told the students. The president said he and his wife, Michelle, both found themselves under “a mountain” of student loan debt and, when they married, “We got poor together.”
The president succeeded in winning the issue at the time. Congress agreed to a one-year freeze on Stafford Loan interest rates that prevented a doubling of the rate from 3.4 percent to 6.8 last July 1. But Obama and Congress have failed in addressing the larger and growing problem, which is both an economic threat and a moral challenge: A generation has been put deeply into debt to feed aggressive lenders and for-profit schools, to support a boom for the higher education establishment and to obscure government’s retreat from its obligations to educate the young.
Obama can say he relates to young people who graduate not only to meet their futures, but also their creditors. But it’s not the same. The indebtedness now endured by graduates isn’t some passing and vaguely romantic status, a time of Ramen noodles and spare but true living before the jobs come through, the raises kick in and they move to a house in the suburbs to enjoy the American Dream.
Since the financial crisis of 2008, young people have learned their hardest lesson after graduation – they invested in a hollow promise. Their college degrees provide more opportunities than if they had none, but the opportunities are scarce. Many are settling for unpaid internships, part-time work, jobs without benefits and jobs that don’t require a degree.
And, perversely, the price of their enhanced earning power is a debt that many cannot pay, a debt that will narrow their options and stunt their ability to find fulfilling work and a measure of prosperity later in life.
Andrew Ross, a New York University professor of social and cultural analysis and an advocate of student debt relief, spoke on the subject at Duke this month. In an interview, Ross said he sees the effect of debt on his students. “A lot of my students fall asleep, and not all of them because of my boring lectures, but because they are working two or three jobs,” he said.
Their struggle will continue after college, Ross said, despite a degree from one of the nation’s most expensive institutions. “This generation faces a predicament where their future is foreclosed,” he said. “They’ve taken on debt to prepare themselves for employment, and the employment is not there.”
At a time of bailouts for Wall Street banks and extensive corporate welfare through tax breaks, it’s wrong that we now accept heavy student debt as inevitable and inescapable. (Federal law prohibits, except in rare cases, private or federal student loans from being discharged in bankruptcy court.)
Democrats and Republicans should join in an effort to give a rising generation a fair chance at what earlier generations had. Not so long ago students paid nominal amounts for their education at state universities or went to private schools where the tuition was affordable to their parents.
Total student debt, now almost $1 trillion, has passed credit cards and auto loans to become the second-largest type of consumer debt behind mortgages.
Lauren Asher, president of The Institute for College Access & Success, a nonprofit that seeks to make college more affordable, said two-thirds of college students now graduate with loans, up from less than half 20 years ago. And the average indebtedness has climbed to $26,600.
“There’s been a shift in how people are expected to pay for college,” Asher said. “As states cover less, students and families are carrying more.”
Many debtors, particularly those who obtained advanced degrees, owe more than $50,000, some more than $100,000. Bloomberg Businessweek reported last week that students graduating with MBAs from Duke University’s Fuqua School of Business have the highest average amount of student loan debt among the nation’s business schools: $87,398.
Graduates are struggling to pay off loans that can continue to grow with interest and fees. Default rates are up. It’s time the young get different bills – legislation that brings relief to them and curbs the relentless increases in higher education costs.
There should be widespread debt forgiveness and zero-interest loans. Lenders and Wall Street firms that did so much to cause the nation’s financial crisis should be made to contribute to the relief of the student loan crisis. One step is already proposed. Sen. Richard Durbin (D-Ill.) is sponsoring the Fairness for Struggling Students Act of 2013. It would allow privately issued student loans to be discharged along with other bankruptcy debt.
There is so much focus these days on the national debt and our obligation not to burden our children and grandchildren. But more needs to be said about the debt burden so many young adults are carrying. The issue of what this rising generation has had to borrow to become the educated people the nation needs must now become an issue of what the nation owes them.