following is the fifth part of an ongoing Color of Law series.
here to read any of the commentaries in this series.
The education bubble is going to burst. It has to
happen. On a daily basis, we hear about the bursting of the housing
bubble. Housing values were over inflated. Millions of people
found themselves with mortgages they could not afford to pay—whether
through hard times and job loss, racial profiling and predatory
lending by unscrupulous, avaricious banking institutions, or other
But neither can many Americans pay their college
loans. Few people really talk about the unholy alliance made between
institutions of higher learning and educational lenders to create
a travesty in American education—that hot mess known as the student
Here is yet another reason why American capitalism
is the scourge of the global community.
Colleges, grad schools and professional schools have
become profit centers, cash cows and vocational processing plants,
rather than places to expand one’s mind and understanding of the
And each year, the cost of a college education increases
far in excess of the rate of inflation, twice the rate of inflation
to be exact. Private law school tuition increased nearly three times the rate of consumer prices
between 1990 and 2003. In this time of economic gloom, parents—financially
straightjacketed, perhaps unemployed or underemployed, no savings,
or their investment portfolios eviscerated— cannot afford to send
their children to school.
According to the College Board, the average cost
of four years at a private college is $136,000, $57,000 at a public
university. Meanwhile, the student loan industry makes $85 billion
a year. Federal loans are at $544 billion,
up $42 billion from 2008. And students borrowed a record $17.3 billion in private student loans in 2005-6,
a 913% increase from a decade earlier. In 2008, according to FinAid.org, there was nearly $131 billion in outstanding private
student loans. These private loans, the fastest segment of the
student loan market, often have exorbitant and variable interest
rates, highly punitive late fees and charges, and are based on the
borrower’s credit rating rather than his or her need. Thanks to
the power of the student loan industry— and hack politicians who
believe we must leave no corporation behind—these loans, unlike
mortgage foreclosures, are not covered by bankruptcy protection.
And then there are those unscrupulous and unduly
influenced university officials who accept kickbacks, gifts, trips,
revenue sharing agreements and other goodies from the lenders (who
are eager to earn even more profits on the backs of students), in
exchange for access to students. Andrew Cuomo, New York State attorney general, uncovered much
of this scandal in a 2007 investigation. For example, the financial
aid director at the University of Southern California owned 1,500 shares of Education Lending Group,
parent company of the university’s preferred lender, Student Loan
Xpress. In addition, the financial aid directors at Columbia University
and University of Texas owned stock in that company, with the former
selling his shares at a $100,000 profit. All three officers were
terminated by their respective universities. The director of student
financial services at Johns Hopkins University resigned after Cuomo’s
probe revealed that she had received $65,000 from Student Loan Xpress, giving the impression
that she was an employee of the lending company rather than of the
university. And Matteo Montana, a Bush Department of Education
official, held at least 10,500 shares (at least $100,000) of the company’s stock, and
he was supposed to be overseeing that lender, as well as others
who participated in the Federal Family Education Loan Program (FFELP).
greed rules the student loan process—not unlike financial deregulation
and the Wall Street meltdown, the Madoff scandal, and the subprime
mortgage mess— no one is looking out for the interests of ordinary
students. The result is that students get shafted, and the banks
and their enablers get rich. People of meager or modest means,
just hoping for education as a way up and a way out, are crushed
under the weight of loans they cannot afford to pay when they graduate.
They emerge no better, or even worse off, than the previous generation,
with six-figure, mortgage-sized indebtedness, and monthly payments
that exceed all other expenses, if not their entire paycheck. Some
young people must forego homeownership because they cannot afford
a mortgage, or must live with their parents until things get better,
if they ever get better.
But in this system of American capitalism, where
education provides false and empty promises of hefty rewards, not
everyone is even supposed to have a job. The proliferation of prisons
for the surplus population—in Dickensian fashion—and the doling
out of tax breaks for corporations that move jobs overseas, provide
more than ample proof of that proposition. High college debt levels
drive people into corporate jobs they might not want, but there
are not nearly enough of those jobs available for those who want
them, in any case. For evidence, look at the legions of thousands
who are being shown the door in corporations and law firms throughout the country right now. Often, those
who prefer a public interest job must forego a career of community
service, dismiss it as financially unsustainable, or choose that
potentially perilous path only through extreme personal sacrifice
and a commitment to a life of near impoverishment—that is, just
a stone’s throw away from the plight of some of their clients.
What is missing here is that education can and should
be an enriching experience, to build character and knowledge, and
create productive members of society. But for many, it appears
that is not worth the cost. And yet, why isn’t education considered
a civil right, a human right? Why isn’t it free, or at least close
to it? And if AIG, Citibank, General Motors and other corporations
deserve a financial bailout, what about the debilitated student
loan debtors? What about a national student loan forgiveness program?
Let’s wipe the slate clean and start anew. A Facebook group was created to call for just that, to petition Congress
to eliminate the estimated $600 billion or more
in U.S. student debt, on the grounds that doing so would stimulate
the economy. The Facebook group has nearly 167,000 members.
Is there hope on the horizon? Well, as a start,
President Obama wants to eliminate the role of private industry
in the federally guaranteed student loan program. This step would
eliminate the $4 billion in annual government subsidies to these private companies, which include such big names as Citigroup, SallieMae,
Bank of America and JPMorgan Chase.
Also, under The College Cost Reduction and Access Act of 2007, monthly federal student loan payments are capped at 10% of a debtor’s
gross income for 25 years. The rest of the debt is forgiven.
In addition, Rev. Jesse Jackson is leading a campaign
called Reduce The Rate. The movement is calling for Congress to do the
1) Reduce the interest rate on all student loans
to 1%, the same rate the banks enjoy;
2) Extend the grace period before loan repayment
begins from 6 months after graduation to 18 months;
3) End the penalties assessed to schools for student
loan defaults, and
4) Increase Pell Grants to cover the average yearly
cost of a public
4 year institution, rather than the amounts in the
current stimulus package (which are $5,350 starting July 1, 2009,
and $5,550 in 2010-2011).
What happens next will depend on public pressure,
and the power of youth and others whose voices were heard in the
2008 election. To be sure, the influence of Wall Street insiders
in the Obama administration, individuals such as Treasury secretary
Timothy Geithner and Lawrence Summers, is by no means encouraging.
And the pimps and prostitutes for the student loan industry who
double as members of Congress will do what they can to stop any
further pushes toward that ever-dreaded “European-style socialism”.
We shall see. If nothing else, it will be interesting to watch.
BlackCommentator.com Editorial Board member David A. Love, JD is a journalist
and human rights advocate based in Philadelphia, and a contributor
to the Progressive Media Project, McClatchy-Tribune News Service,
In These Times and Philadelphia Independent Media Center. He contributed to the book, States of Confinement: Policing, Detention, and Prisons (St. Martin's Press, 2000). Love is a former Amnesty
International UK spokesperson, organized the first national police
brutality conference as a staff member with the Center for Constitutional
Rights, and served as a law clerk to two Black federal judges. He
blogs at davidalove.com, Daily
Kos, and Open Salon. Click here to contact Mr. Love.