The trillion-dollar student loan bubble
A recent issue of Bloomberg Business Week ran a feature headline: “Student Loans, the Next Big Threat to the Economy?”
Being the mouthpiece of big business, it did not occur to Business Week to run the more appropriate headline: “Student Debt, Huge Crisis for Students.”
But Business Week was much more concerned with potential problems for the capitalist economy and the latest findings by the Federal Reserve Board that student debt topped $1 trillion in the third quarter of 2013. What bothers the bankers is that, as loans rise, the default rate is also rising and reached 11.8 percent in the same period. The Fed also worried that, with so much debt, student graduates will be “unable to buy cars and homes,” which will “really delay the cycle.” This is a reference to a wished-for capitalist recovery, which always seems to be just around the corner but never seems to arrive.
The figures on student debt conceal the extra burden suffered by Black, Latino/a and other oppressed students because they are generally poorer and suffer discrimination in the job market, making it even harder to repay these crushing loans. The racism of the government statisticians keeps this information in the background.
The U.S. ruling class came through a near total collapse in 2008 that was triggered when bubbles burst in the housing market and other credit markets.
This column recently reported on the growing auto-loan bubble. (See the Feb. 20 Workers World, or go to the workers.org website.) Now the Federal Reserve Board and other capitalist institutions are beginning to seriously worry about a student loan bubble.
A generation of indentured servants
The average outstanding student debt jumped from $26,600 in 2011 to $29,400 in 2012. (CNNMoney, Dec. 4, 2013) College tuition is going up all around the country and family incomes are declining as the crisis continues to take its toll. The federal government, which originates most of the loans, and private companies that loan at very high interest rates are creating a generation of indentured servants — a generation of workers who must spend much of their lives paying back student debt.
Under the law, a student loan is the only type of loan that is completely exempt from the bankruptcy laws. The financial industry made sure of that. No one can get protection from payment of a student loan by declaring bankruptcy. So students are saddled for life. Much student debt is owed by people in their 40s and 50s. A loan is nothing less than a claim on future wages. If a graduate is not chained to a job by the need for health care, then he or she will definitely be bound by long-term student debt.
Education: source of
parasitic financial profit
Karl Marx long ago explained that under capitalism education is primarily for the purpose of training the future generation of exploitable labor — both skilled and unskilled. In modern times, a small elite group of students is trained as managerial agents to facilitate exploitation by the ruling class.
The aim of educating the broad masses of people, as far as the capitalist establishment is concerned, is to create the necessary level of skill required by the bosses for production of their profits, in whatever industry or service it might be.
But the latest crisis stage of capitalism at a dead end has a distinctive feature. Technology is destroying on a massive scale many of the jobs that require a college education. Yet everyone in the establishment, from President Barack Obama on down, is calling for more education, more college enrollment, as the key to the future.
High debt and low pay
But here is what the future really looks like. Right now, 48 percent of college graduates are underemployed — that is, working at jobs that do not require a bachelor’s degree. For example, 15 percent of taxi drivers have bachelor’s degrees, as do 24 percent of retail sales workers, 18 percent of telemarketers, 18 percent of bartenders, 23 percent of amusement and recreation workers, and the list goes on. (Bureau of Labor Statistics, reported in businessinsider.com of Aug. 22, 2013)
As projected by the BLS, only one of the top 20 growth industries in the U.S. is going to require a bachelor’s degree “with the biggest growth areas generally being in the worst paying, including home health care, retail sales, and food service.” (New York Times, Feb. 12)
How is this generation of millions of students with hundreds of billions of dollars of student debt supposed to pay off these debts working at low-wage to medium-wage jobs? By living at their parents’ homes; by taking two and three jobs; by taking out credit card loans. In other words, they will be forced to live paycheck to paycheck and without a future.
If the present is bleak under the new high-tech capitalism, the future is more so. The National Center for Education Services (NCES) projects that 19 million students will have graduated from four-year colleges between 2010 and 2020, but the BLS projects that only 8.5 million of the new jobs available will require a college degree.
This is the irrationality of capitalism. It has reached a stage where higher education is no longer just for the training of an exploitable skilled labor force. It has become a source of profit for colleges, universities, bankers and loan institutions instead of preparation for a future livelihood.
It is a big lie that education is the answer. Not under capitalism at a dead end. The simple truth is that education does not create jobs. In fact, capitalist technology destroys jobs by putting skills into software, robots and other automated systems.
The answer to the student debt crisis is to cancel the debt and create free, quality education for all — and good jobs for every graduate. These justifiable demands should be raised and fought for, but they can only be fully implemented when education serves society and not profit-making. And that can happen only when capitalism is destroyed and socialism is established.
Fred Goldstein is the author of “Low-Wage Capitalism” and “Capitalism at a Dead End,” which has been translated into Spanish as “El capitalismo en un callejón sin salida.”