2011 April 19 Tuesday
Student Loans The New Debt Peonage

Student load debts have surpassed credit debts in the United States.

Student loan debt outpaced credit card debt for the first time last year and is likely to top a trillion dollars this year as more students go to college and a growing share borrow money to do so.

“In the coming years, a lot of people will still be paying off their student loans when it’s time for their kids to go to college,” said Mark Kantrowitz, the publisher of FinAid.org and Fastweb.com, who has compiled the estimates of student debt, including federal and private loans.

This sets up a whole generation of students for debt servitude. Student loan debt is very hard to discharge in bankruptcy.

Gradually, bankruptcy law changed. In 1998, Congress ruled that federal student loans were not allowed to be discharged except under the undue hardship provision. In 2005, private loans, which can carry terms up to 25 years, came under the same regulations.

With the new debt peonage college graduates are bound in servitude to spend many years paying off their college debts. The law makes escape from that debt very difficult. Kids growing up are taught a myth about how education will put them on the road to wealth. This primes them to accept the debt peonage.

Mish Shedlock says Obama wants to kid some kids a debt servitude deal working for the government as a way to pay oft their debts. My advice: avoid college debts in the first place and then you won't have to become a debt servant.

Obama's solution is for kids to graduate from school deep in debt work 10 years in public service to get out of debt. At the end of 10 years, whatever education the kids got in school would be useless.

The solution involves slashing education labor costs by delivering video feeds (live or recorded) of college lectures and standardized tests cheaply purchasable. Automated online education is key to avoiding debt peonage.

Share |      By Randall Parker at 2011 April 19 10:59 PM  Education Costs


Comments
CFP said at April 20, 2011 9:56 AM:

While I agree that this is a huge problem, I'm not sure that it's going anywhere. Remember, the main purpose of college these days is to act as a screening mechanism for business, which aren't allowed to give IQ tests or to have a disparate impact on NAMs with their hiring. The college that a person attends shows your IQ, your ability to work a complex system, i.e. the admissions process, the ability to be reasonably social (joined a few groups or a frat), diligence (four or five years dedicated to the task of graduating), and a willingly to put up with a lot of shit, i.e. sat through a multi-cultural literature class and didn't kill the professor.

Most kids aren't going to become entrepreneurs. They're going to be regular office workers and executives. The key to that life - a middle to upper middle-class life for the non-entrepreneur - is going to a reasonably decent college. And given how brutal our elites have made life for working class whites, you can bet your ass that kids and their parents are going to pay whatever they have to pay to get that degree.

And that's not even bringing in the social status - which is huge for dating and getting married to someone decent - that gained by having a college degree from a good college. Face it, college grads almost always marry other college grads.

Online education may become a threat to middling to crappy universities, but the top hundred or even two hundred colleges and universities have nothing to fear. It's their brand name that counts, not the actual education - except for the STEM majors. These schools simply don't have to accept online education classes for credit.

The higher education bubble won't burst anytime soon for those top 100 to 200 colleges and universities. Yea, it sucks coming out of school with $40,000 in debt. But for most kids and their parents, that's nothing compared to not going to college, working as construction worker who competes with Juan for jobs, living in a mixed working class neighborhood and marrying a cashier.

Yes, you can argue that a reasonably smart kid won't end up with that life. Maybe. But maybe not. It's a tough world for high school grads, even smart ones. Regardless, the vast, vast majority of kids and their parents won't take that chance. $40k in debt is a small price to pay to avoid the creeping second-world life that now exists in large parts of cities and some suburbs.

no i don't said at April 20, 2011 1:48 PM:

"This sets up a whole generation of students for debt servitude."

Yes. Agree 100%

Meanwhile we got all these first and second-world European and Asian countries, and also these third-world Latin American shitholes -like Cuba- where higer education is FREE and really competitive. Not just "cheaper", not just "a lot cheaper", but free.

Of course, the rest of the world is not as Harvard-MBA-for-Wall-Street aimed as we are. But their peoples pay for everybody's education with their everybody's taxes.

As a citizen I can say that it is only until we travel and live out of the native land that we realize the kind of isolated alienated pricks we've become; the kind of dumb narcissists who cannot see the education -and medical care- reality in the rest of the world.

Didn't mean to yell, though. So please excuse the "prick" and the "shithole" words.

Mercer said at April 20, 2011 6:41 PM:

"where higer education is FREE "

It is not free. It is paid by the taxpayer. What does the typical student do:

" This is the way all four years have been. In a typical day, "I just play sports, maybe go to the gym. Eat. Probably drink a little bit. Just kind of goof around all day." He says his grade-point average is 3.3."

http://chronicle.com/article/Business-Educators-Struggle-to/127108/

Why should taxpayers pay more for people to "goof around all day". I do not blame the students for this situation. I blame employers for wanting a credential of worthless schooling for many jobs.

Students and parents don't have to go deep into debt for a degree. My local community college charges $2500 a year. Parents and students need to make the tuition price a major factor when they choose a college.

Bernard said at April 20, 2011 8:16 PM:

"As a citizen I can say that it is only until we travel and live out of the native land that we realize the kind of isolated alienated pricks we've become; the kind of dumb narcissists who cannot see the education -and medical care- reality in the rest of the world."

You buy the tickets and pay for the hotels, I'm good to go. I can learn quite a bit on the French Riviera, a place of hardship and tough working conditions. And flying coach is fine with me. And you? I suggest you join the Marines, the USN will provide the cruise ships.

al harb ... al haak said at April 20, 2011 9:32 PM:

Nah, the new Obama rules regarding student debt prevent them from taking over a small percentage of your wage, so if you have a small wage or no wage, no problem, also after 20 years or so, the whole thing is dischargeable. So I would recommend going whole hog, and taking out as much as possible in a mad attempt to take a big risk and "win big". Of course I'm a male with a male's reproductive strategy and a New Era sense of doom.

Randall Parker said at April 20, 2011 9:54 PM:

CFP, You say:

While I agree that this is a huge problem, I'm not sure that it's going anywhere. Remember, the main purpose of college these days is to act as a screening mechanism for business, which aren't allowed to give IQ tests or to have a disparate impact on NAMs with their hiring.

But it is possible to create new and much cheaper screening mechanisms.

The college that a person attends shows your IQ,

So does getting a college degree at a younger age or getting a college degree in an especially hard subject. If you earn an online degree in physics at, say, age 19 then you show that you are smart enough to zip thru learning a very difficult subject much more quickly.

your ability to work a complex system, i.e. the admissions process, the ability to be reasonably social (joined a few groups or a frat), diligence (four or five years dedicated to the task of graduating), and a willingly to put up with a lot of shit, i.e. sat through a multi-cultural literature class and didn't kill the professor.

All that is true. But I suspect it counts for less than how smart you can show yourself to be.

Lots of certifications offered by taking tests in difficult subjects could allow people to demonstrate how smart they are. Imagine lots of skills tests in very difficult topics. These tests would allow smarter people to stand out at the top of a pecking order.

Abelard Lindsey said at April 20, 2011 10:18 PM:

Also, when attending the Ivy league or Stanford, one is paying around $200,000 for a Rolodex of the alumni networks. Harvard graduates, well-placed in investment banking, management consulting, venture capital, and big company CEO's tend to hire Harvard graduates, for example. The higher education bubble is not going away anytime soon for the elite universities.

One thing for sure, the major debt peonage is going to seriously cut into the fertility rate of the next generation of white (and Asian) kids. There is no way these young people are going to even consider having kids until they are debt-free, own their own homes, and are financially set in a sustainable manner. I sure as hell wouldn't consider having kids until all of these conditions were met if I were in their shoes. I wouldn't even dream of it.

No, my strategy is to make enough money and either be self-sustainably in my own business or if I have to quit the game, hang out on the beaches of S.E. Asia or Latin America and wait until the SENS or equivalent technologies open up the future for me.

This conventional life-pattern of mortgage payments, car payments, and the 2.1 kids (and their college educations) represents nothing more than 40 years of wage/debt slavery. I would not even dream of doing this.

no i don't said at April 21, 2011 11:16 AM:

"It is not free"

I'll put it in other less practical words so you can understand: By FREE education I mean that you don't have to pay for it again if you have already paid for it in your taxes. If nothing in the U.S. is certain but death and taxes, then there could be such a thing as free education. (Or at least not having to pay for it twice)

"Why should taxpayers pay more for people to "goof around all day". I do not blame the students for this situation. I blame employers for wanting a credential of worthless schooling for many jobs."

No, no, no. You're talking about something different. Tax payers don't ususally pay for goof ups, because in free universities there are also admission exams, term exams, grades, report cards, lots of competition for a seat in a classroom, discipline and of course expulsions for those who deserve it.

See, free university doesn't mean that anything goes. In fact free universities in many countries are a lot tougher than your regular U.S. university. There you cannot BUY your degree with money or by having daddy fund anything. They don't usually include distractions such as leisure clubs, fraternities, sorrorities, welcoming parties and many other wastes of time and money.

These universities actually exist, you know; they are very competitive, very tough and very real. It's just a matter of getting interested in what's going on in other parts of the world

no i don't said at April 21, 2011 11:23 AM:

"You buy the tickets and pay for the hotels, I'm good to go. I can learn quite a bit on the French Riviera, a place of hardship and tough working conditions. And flying coach is fine with me. And you? I suggest you join the Marines, the USN will provide the cruise ships."

Ha, ha, ha, Thanks for proving my point correct Bernard.

You guys see the typical U.S. closed mentality I'm talking about?

I rest my case...

al harb ... al haak said at April 21, 2011 8:17 PM:

"in free universities there are also admission exams, term exams, grades, report cards, lots of competition for a seat in a classroom, discipline and of course expulsions for those who deserve it.

See, free university doesn't mean that anything goes. In fact free universities in many countries are a lot tougher than your regular U.S. university."


.... So, we are still left with the problem of living in a diverse, mulitcultural society. We couldn't have your system here, and there would be some , uh, "discrepencies" for some unknown reason ...

Why should NAMs pay all those taxes when they aren't fairly represented in your "free" University system.

Randall Parker said at April 22, 2011 9:59 PM:

Abelard Lindsey,

Yes, the debt peonage has disastrous impact kids getting out of college in terms of their ambitions for a family.

The solution is to decouple taking classes, getting tutored, and taking tests. They should be separately purchasable. One should be able to watch free lectures on common core subjects. Then pay to take tests that certify your level of knowledge of physics or mathematics or accounting or other basic skills.

Randall Parker said at April 22, 2011 10:16 PM:

no i don't,

Trying to convince us we are ignorant and you are more wordly? You are engaged in an exercise in futility. Except it does provide one upside: You can interpret our remarks as showing that we are close-minded and therefore you are more enlightened. You obviously need to feel that way to make up for the fact that your own country (Mexico) is a failure compared to our country.

Abelard Lindsey said at April 23, 2011 9:47 AM:

Randall,

I agree totally with your ideas.

However, the nature of the education system coupled with all of the legislation and SCOTUS rulings (Griggs vs. Duke Power, etc.) over the past 4 decades makes it a certainty that your ideas will not be implemented.

WJ said at April 23, 2011 12:31 PM:

Getting young men and women into the job market more quickly has multiple benefits. Not only are you saving money on education, but you are boosting GDP and tax revenues by having more people in the full-time workforce. You're also getting them into the mating market (as opposed to the sleeping-around market).

Two major things that need to happen to fix the present mess are that we need to have a higher workforce participation rate and higher birthrates among the more intelligent. Getting them out of school, debt-free, and into the workforce more quickly accomplishes both. Otherwise the demographics will keep moving in the wrong direction.

Racial politics will keep getting in the way, however. Every black and Hispanic mother thinks 16-year-old Fush'aqua and Pedro deserve to have their shot at med school, even though they still can't pass their 3rd grade reading test. So IQ tests, tracking, and voc ed training will not be allowed. We're forever stuck with the ed system we inherited from the 1800s. After all, those kids need summers off for the harvest.

WJ said at April 23, 2011 12:34 PM:

Getting young men and women into the job market more quickly has multiple benefits. Not only are you saving money on education, but you are boosting GDP and tax revenues by having more people in the full-time workforce. You're also getting them into the mating market (as opposed to the sleeping-around market).

Two major things that need to happen to fix the present mess are that we need to have a higher workforce participation rate and higher birthrates among the more intelligent. Getting them out of school, debt-free, and into the workforce more quickly accomplishes both. Otherwise the demographics will keep moving in the wrong direction.

Racial politics will keep getting in the way, however. Every black and Hispanic mother thinks 16-year-old Fush'aqua and Pedro deserve to have their shot at med school, even though they still can't pass their 3rd grade reading test. So IQ tests, tracking, and voc ed training will not be allowed. We're forever stuck with the ed system we inherited from the 1800s. After all, those kids need summers off for the harvest.

REN said at April 23, 2011 8:15 PM:

No offense, but everybody here is framing the issue improperly. The frame of reference is off due to money blinders. Here is a link to the Canadian Banking system from 1935 to 1974. When you have sovereign debt free money systems, then you can afford much, much, more than what we have in the current U.S. system:

http://www.youtube.com/watch?v=9yYEFuN2v08

The bulk of our money supply comes into being when you take out a loan at the bank. This is called credit money, which is of a lower power than "base money". Base money is that that which is issued from the Government. Credit (bank) money drags around a lot of debt with it, and that debt is buried in every transaction. I've seen estimates of 40% when you average out the capital costs across industry and private households. Base money can be issued debt free, and hence does not drag around debt. Base money is higher power and is closest to real money. When Canada had a state bank, they spent directly into labor and into "people" who then were able to save and invest. Eventually those savings became so great that industry began to self finance. In other words, base money became a large percentage of the total money supply, and the people became economically independant, not debt peons.

We can easily pay for everybody to go to college, or let them raise themselves to their level of incompetence. To not invest in people, is to let a productive asset languish. Laquisha with an IQ of 85 should be allowed to be all she can be. Our lack of investment insures a future of poorly educated, unactualized, wage slaves. The money system is the problem, but it has been made obscure even to intelligent people. We paid for WW2 with Base money at 3/8 of 1%. The loss of airplanes and tanks and other war material was huge, yet we had little debt at the end of the war. We also paid for returning GI's to go to college, and that proved to be a terrific investment. During the Civil War, Lincoln issued debt free Greenbacks, and won the war. The North actually gained in wealth despite the destruction of war.

Our debt money system transfers real labor wealth to a growing plutocracy. It does this via a hidden hand of usury that most are unaware of, and then here we are. The argument is framed incorrectly. We are bent over looking at the pennies, while the dollars are flying over our heads and transfering to a monied elite.

REN said at April 23, 2011 8:29 PM:

Let me say something now before I get flamed by my previous comment. The government can spend and consume wealth from the private sector. It can also spend base money into labor, which can create a virtuous cycle. Both are spending, but they are entirely different. One type of spending consumes wealth, and the other provides money that becomes savings and lowers debt. But, to the casual observer, they look the same.

I'll probably have to create my own blog spot to explain things because it cannot be done in a few sentences. If we the people don't get a handle on our money system, then the plutocracy and monied elites will continue to gain power over us. Humanity is producing plenty of wealth. We have put the industrial revolution into hyperdrive with computers and telecommunications. Pretty soon we may have lights out factories making all kinds of consumer goods. Even further into the future we may have artificial intelligence directing those same factories as servants to humanity.

By then if we haven't fixed our money system, we will be enslaved to it, or we will be enslaved by Marxism of some other sort of Statism.

Mthson said at April 24, 2011 7:39 PM:

BTW, new article:
[Boston Globe] Competitive disadvantage: High-achieving Asian-American students are being shut out of top schools around the country.

"Even though the Supreme Court ruled in 2003 that universities can continue to consider race in admissions in the interest of diversity, admissions officers deny they’re screening out Asian-Americans. However, in researching their 2009 book No Longer Separate, Not Yet Equal, Princeton sociologist Thomas Espenshade and researcher Alexandria Walton Radford examined data on students applying to college in 1997 and found what looks like different standards for different racial groups. They calculated that Asian-Americans needed nearly perfect SAT scores of 1550 to have the same chance of being accepted at a top private university as whites who scored 1410 and African-Americans who got 1100."

My personal 2 cents: western liberals are some of the most racist people on the planet.

no i don't said at April 25, 2011 11:46 AM:

Wow Randy, you are so deep! You got me. Just like you assumed my gender because my e-mail name. But as it is my custom, I'll take the time to explain things, not out of narcissism, but because this is an interesting excercise for me in logic:

1. I think I've made it clear in this blog that Mexico is a failure, yes. I'll say it again, Mexico is really a mess; probably near a failed-state condition, and I'd be an idiot not to see that reality. However, public education continues to work pretty well in such conditions. By the way the main example I set was CUBA, yes Cuba -look it up about 15 comments above- a country that perhaps is even a little more impoverished than Mexico. I just thought that the U.S. had standards a little higher than Mexico or Cuba, but now I begin to wonder... (?)

2. Mexico is not "my" country, as you again rashly assume. Patriotisms are not for me -as I've stated and implied many times for years now-

3. Considering how you are so ready to dogmatically sentence, I don't even frown at your comment.

4. I've never said or implied that I'm very "inlightened" as you assume I feel. Feeling really enlightened mostly for priests, ministers and physicians, who are never wrong... I simply QUESTION the grounds of statements and dogmatic claims; some people might consider that disrespectful or challenging, but then again they have the option to explain themselves, not just react.

5. "Trying to convince us we are ignorant and you are more wordly?" Wow, look who's talking! I think you bit your tongue there. I least I speak a foreign language, therefore I'm able at least to think in subjunctive.

6. "You are engaged in an exercise in futility" Hey, that's a good one. I see you are having great success in convincing everybody else around here, ha, ha, ha.

Randall, for years now, I have been a faithful and loyal participant in this blog. I seriously participate. The fact that you don't like that I respond to lazy insults from idiots around here doesn't mean I don't mean a point. I try to ask people here how is it that they come up with such possitive conclussions; but most don't like it. I'm here to participate, I'm not here to insult, but also I'm not here to help reinforce opinions, patriositsms or dogmas just because they're "in trend". Many of my differences here are of fundament; if you want to know where I stand, ask.

By the way I'm not Mexican, I'm not a girl and I'm not a communist. I'm one of your most loyal readers and I think that any writer who praises himself of being so, will always feel fortunate to be read by others. I don't always agree, but I read you.

Cheers!

no i don't said at April 25, 2011 12:08 PM:

"We couldn't have your system here, and there would be some , uh, "discrepencies" for some unknown reason"

See what I mean Randall? The worst thing about being dogmatic is being "uh", a sarcastic dogmatic. "Al harb" feels he doesn't have to take the time and explain WHY it couldn't work. He just sentences, and the way he does it is so comfortably, so sensual, so lazy.

"Al harb" thinks that living in a diverse, mulitcultural society is a problem. He doesn't know that a free educational systems works in other diverse, multicultural societies.

"Al harb" implies that Mexico or Latin America is not diverse and multicultural. Could you imagine the progress he would make just by asking himself "What if..." "What if it really worked?", "What if it really were possible to have quality free higher education in the U.S.?" "Is Mexico really as homogeneous as I believe?" Even if he did it with a silly quasi-divine uh-look on his face; that would be ok too.

al harb ... al haak said at April 25, 2011 5:22 PM:

Last time I looked, Mexico is 100% Latino with almost zero immigration, so that's pretty homogeneous. If things are spread out so equally in their higher education system, why hasn't there been a ethnic census since the 1920s?

I've visited Monterrey Tech, it doesn't "look like Mexico". I've visited UNAM, doesn't "look like Mexico" either. I'd wager the same for every top school in Latin America.

All I'm saying is that the "competition for seats"' and "course expulsions" can and do have very real and very different outcomes for politically recognized groups. That's why Mexico and Latin America (except now for Brazil) doesn't recognize them!

no i don't said at April 26, 2011 10:59 AM:

"Last time I looked, Mexico is 100% Latino"

Well I'm still looking and have done so for years, so.. where exactly did you look? And what exactly do you mean by "Latino"? A race, an ethnic group, a particualr nationality?
Yes Mexico is a Latin country if that's what you mean, but a latino can look white -blond and blue eyes-, mestizo, latin european or black. Spanish are latinos, French are Latinos, Italian are Latinos, Argentinian are Latinos,etc. By the way NO COUNTRY IS 100% anything. (Except maybe for catholics in the Vatican) I'm surprised you didn't see any white Mexicans, black Mexicans or indian Mexicans.

"I've visited Monterrey Tech, it doesn't "look like Mexico". I've visited UNAM, doesn't "look like Mexico" either.

What exactly do you mean "it doesn't look like Mexico? What does Mexico "look like"? That IS Mexico, isn't it? Perhaps you think UNAM is an expensive private university, right? Sorry I think you've never seen UNAM really. I bet you also didn't know UNAM is the second largest university in the world and a very competitive one, and it's free. Did you?

"All I'm saying is that the "competition for seats"' and "course expulsions" can and do have very real and very different outcomes for politically recognized groups. That's why Mexico and Latin America (except now for Brazil) doesn't recognize them!"

I really don't know what you mean in this previous sentence. What politically recognized groups? Brazil doesn't recognize who? Politically recognized groups, seats or outcomes?

But ok, fine, fine. Keep your shirt on; I'm not here to convert you... Continue fighting for that wonderful "financial aid" or "student loan" or paying for it if you are at that point already. Continue fighting for people to have only the one elitist option in education. Oh sorry, I mean the only TWO options in education: expensive and more expensive.

Meanwhile I'll continue to attend my little mexican store that doesn't require a degree from me in order to yield.

Kisses.

Mike said at April 26, 2011 8:35 PM:

"a willingly to put up with a lot of shit, i.e. sat through a multi-cultural literature class and didn't kill the professor"

Good point, having a low BS tolerance is certainly a big handicap in modern white collar work.


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