THE REAL COST OF STUDENT DEBT

Matt Taibbi recently wrote an  article  in  Rolling Stone  outlining the way that student loans have been manipulated by both the US government and banks to maximize profits at the expense of students and the entire system of higher education. While he did a great job explaining the problem, his free market "solution" would worsen the more fundamental problem of access to higher education. His proposed fix fails to address the full effects of this disgraceful bipartisan failure to deal with the problem. We have to understand the larger issues to devise a permanent solution that will not only deal with the immediate crisis but strengthen rather than destroy the system of higher education on which the hope of democracy depends.     

A trillion dollars in student debt threatens the futures of a generation of young Americans. It also endangers an American economy that depends on a thriving middle class, one already under siege by corporate interests with too much power in Washington. The recent bipartisan "victory" avoids an immediate doubling of student loan interest rates by tying increases to Treasury rates. However, this comes at the cost of future increases estimated to reach nearly 8% in five years. In a depressingly familiar pattern, Congress is patting itself on the back for kicking the problem down the road while the economic consequences of delay mount.  

Jefferson would have considered the idea that education should be treated like a commodity outrageous. He was so convinced that education was the key to maintaining democracy that he insisted that the only honor to be inscribed on his tombstone was "Founder and first President of Virginia University," the first public college in the United States. He realized that if Americans ever forgot how to think for themselves, they would be easily persuaded into following foolish arguments designed to appeal to their self-interest. As usual, he was prescient.

After WWII a grateful nation gave a generation of young American servicemen access to higher education fully paid for by taxes, including tuition, fees and living expenses. A period of unprecedented prosperity followed, as well-trained citizens were able to fill the wide demand for their talent in a booming economy.

While prosperity was in large part due to pent-up demand for goods and a wartime industrial base easily converted to peacetime manufacturing, the same benefits could be achieved if the economy were redesigned to meet the needs of a faltering middle class. Instead, they are increasingly falling into poverty because of the effects of crony capitalism, most evident in the crash of 2008 caused by bankers who walked away with billions and who remain at large, free to continue to commit their economic crimes and to serve as economic advisers in the current administration.

The purpose of higher education is not merely to make money. Even if it were, it would fail to meet that objective under the current system. The typical student graduates with $27,000 in debt and enters a job market so dismal that he or she will likely remain in debt for decades. Average wages have fallen. Despite increasing numbers of mostly poorly paying jobs, estimates of real unemployment remain at Depression-era levels.

Democrats and Republicans are negotiating to minimize what both argue are "necessary" cuts in a social safety net that is needed more than ever. Neither seem to realize it is the fig leaf covering the real extent of the economic devastation facing the next generations of Americans, whose taxes are supposed to support Baby Boomers in their senescence. Most young people are not yet aware of what they are facing, or they would be swelling the ranks of protesters.

Despite a failing economy and the publicity surrounding the debt crisis, the myth that students can just take a job and pay for college persists. With government funding to higher education slashed and costs rising at 2-3 times the rate of the Consumer Price Index, it is nearly impossible to find work that will pay tuition and fees. These costs have risen 300% since 1990 and now consume 11% of average family income. Wages at McDonalds, where workers are counseled to take second jobs to make ends meet, have not risen accordingly. In a sick irony, despite record profits that corporation wants to pay workers with debit cards that have high fees attached to them, mimicking a common scheme for ripping off students whose educational loans are distributed the same way.

An even more dangerous myth is the idea that the 20% rate of defaults on college loans is due to people attending college in pursuit of careers that will not produce income sufficient to pay their debts. Those who accept this argument believe that it is the popularity of majors in underwater basket weaving that is at fault. Using their logic, no responsible student would enter college except to study business. Haven't they figured out yet that it is the MBAs who got us into this mess? It seems that the study of ethics might have more practical implications for the country as a whole. To make matters worse, increasing numbers of employers are treating college as the  new high school diploma , the minimum requirement for even an entry-level job. Soon, young people will be left with a choice between poverty, getting an education at a cost that will likely make them lifelong debtors or joining the military to  risk their lives for an education.

It is time to consider what kind of future we want to leave posterity, and to begin to redesign the educational system to meet its demands. To do so, we must insist that politicians 

challenge the expectations of the economic elite for ever-increasing wealth. Do we want to continue to treat education as a commodity, as we do health care?

People are waking up to the fact that the health care system will collapse without a transformation into a universal one funded by government taxes, as even Harry Reid recently admitted.  The same could become true of higher education. Experience in France, where those who benefit most from government infrastructure pay a corresponding share of taxes, shows that both universal, publicly funded higher education and health care can be achieved in an economy that  withstood the banking crisis better than did the US .

The answer is not to be found in market-based fixes like limiting government backing of student loans to promote efficiency in containing costs while increasing competition for tuition rates. In also making college less accessible for the middle class and those who aspire to it, the  solution would be worse than the problem. Instead of trying to correct the market for education, we should be taking it out of the marketplace and making it part of the commons.

The damage done to the economy by the banks will not be repaired without fundamental changes in the way they operate as well as in the overall structure of business in America. If the government took the money now wasted on subsidizing corporate welfare and put it into education, green jobs, infrastructure repair and financing cooperatives where the wealth is fairly shared by worker-owners, we could counter the pernicious effects of globalization.

In the process, we could build a sustainable economy capable of meeting the needs of all its citizens rather than just a privileged few. We would also be building a far richer society in which people were encourage to develop their talents and interests while acquiring the knowledge to become responsible citizens.