We must hate our children

We must hate our children
We crush them with debt to go to college -- and today, rates are actually set to double. Are we out of our minds?
By Joan Walsh
Salon.com
Jul 1, 2013

Next time you’re watching a college graduation, as you look out over the sea of caps and gowns, make sure you notice the ball and chain most graduates are wearing as they march onstage to receive their diplomas. That’s student loan debt, which at over $1 trillion tops credit card debt in the U.S. today. The average burden is $28,000, but add in their credit cards and they’re graduating with an average of $35,000 in debt. It’s no wonder that people who’ve paid off their student loan debt are 36 percent more likely to own homes than those who haven’t, according to new research by the One Wisconsin Now Institute and Progress Now.

What kind of society sends its young people from higher education into adulthood this way? I’m aware I’m only talking about those lucky enough to go to college, when roughly one-third of high school graduates don’t – but if this is the way we treat our relatively lucky kids, the rest of them don’t have a prayer. For many, the school to prison pipeline functions much more efficiently than the school to college one; California is one of at least 10 states that now spends more on prison than education (all education, not just higher education). According to the Federal Reserve Bank, two-thirds of college graduates leave with some debt, and 37 million Americans are repaying a student loan right now.

Unbelievably, interest rates on federally subsidized loans are doubling today, from 3.4 to 6.8 percent. As Congress bickers over alternatives, even Democrats are backing “market-based” plans that aren’t as bad as GOP ideas, but aren’t good either. I hope they can find a way to lower interest rates, but the real scandal isn’t the rate hike. The real scandal is that we take for granted that young people must go into debt – at whatever interest rate – to pay for college.

Of course, the truly lucky kids – those blessed wealthy members of the Lucky Sperm Club – sail through higher education without debt. But today, even upper-middle-class kids are having to take out loans, as the average annual cost of a four-year public university soars above $22,000, while private schools are over $50,000. Who the hell thinks this is a good idea?

* * *

I used to find it endearing when President Obama talked about how he and Michelle finally paid off their student loans after he was elected to the Senate. But in a way, the president’s folksy anecdote helped normalize what should be outrageous: that we expect young people to go deep in debt, well into middle age, to get a good education. Of course, the Obamas’ story should come with an asterisk, since much of their debt was built up paying for Harvard Law School, and clearly, that paid off for them. The assumption that students should borrow money to pay for an undergraduate degree, and that the only debate is over how high their interest rate should be, is seriously crazy.

As David Dayen explained in this great Salon piece, we shouldn’t even call them student “loans,” because you can’t refinance them, and you can’t get out from under them by declaring bankruptcy. It’s more like indenture. There’s no statute of limitation on collecting student loans, and lenders can garnish wages, tax refunds and even Social Security checks. Back in 2007, now-Sen. Elizabeth Warren asked: “Why should students who are trying to finance an education be treated more harshly than someone … who racked up tens of thousands of dollars gambling?” Nothing’s changed, although Warren is part of a limited number of people in Congress who are trying.

In the survey of 61,700 student loan holders recently completed by One Wisconsin Now and Progress Now, students with bachelor’s degrees took an average of 19 years to pay off their loans, at an average cost of $117,000. Their average monthly payment was $499. And this isn’t a brand-new problem: Of the $1 trillion in student debt, 60 percent is owed by people over 30.

It wasn’t always this way. The postwar American economic boom had at its heart an intentional, comprehensive program of making higher education much more accessible. In 1946, 2 million Americans attended college or university, representing only one in eight college-age students; by 1970, there were 8 million undergraduates, one in three in that age group. And the balance of enrollment shifted to public institutions: In the ’40s, more college students attended private colleges; by 1970 three-quarters were enrolled in public ones. Graduate enrollment spiked, thanks to expanded research funding, from 120,000 in 1946 to 900,000 in 1970.

States competed to expand their public university systems – and many were free, or close to it. The stellar University of California system was tuition free (though there were fees) until Ronald Reagan became governor in 1967; so was the City University of New York system for a long time. CUNY was from the start an “experiment,” in the words of co-founder Horace Webster, in “whether the children of the people, the children of the whole people, can be educated.” It was a contentious experiment, with its admission and tuition policies shifting back and forth over many years, but the egalitarianism at its heart, and through much of its history, can’t be denied. And that was true of most public university systems. Late in the game, when I graduated from the University of Wisconsin in 1980, I was still paying less than $400 a semester. Now it’s amost 15 times that, at $5,500 a semester; the annual cost to an in-state student (including room, board, books and other fees) is $24,000.

Aaron Bady and Mike Konczal ran down the California history in a piece about “the slow death of public higher education” last year. With the U.C. system’s bipartisan 1960 master plan:

The doors of the University of California were thrown open, tuition-free, for the top 12.5 percent of high school graduates. The top 33.3 percent could find a place in one of the California State Universities, which were also tuition-free. Everyone else, if they so chose, could go to one of the many California Community Colleges, which were open not only to high school graduates but also to qualifying non-traditional students. Perhaps most important, community college graduates had the opportunity to transfer to one of the UCs or CSUs to finish their bachelor’s degree, if their grades were above a certain point. In theory and to a significant extent in practice, anyone from anywhere in California could, if they worked hard enough, get a bachelor’s degree from one of the best universities in the country (and, therefore, in the world), almost free of charge. The pronounced social and economic mobility of the postwar period would have been unthinkable without institutions of mass higher education, like this one, provided at public expense.

I got angry about this all over again having dinner with a friend who’s a little older than me. He finished at the very bottom of his high school class – and wound up at the University of Wisconsin-Milwaukee, which as late as the ’60s had “open enrollment,” and cost $80 a semester. College unlocked something high school didn’t; he thrived and transferred to Columbia University and eventually got a Ph.D. That isn’t happening for anyone today, unless their wealthy parents can buy them into a private university.

Meanwhile, public universities are spending on new buildings, but they’re sharply hiking tuition as well as either cutting or just maintaining enrollment. (University of Wisconsin in-state tuition has doubled in just the last decade.) The Public Policy Institute of California (PPIC) found that the share of young people enrolled in U.C. or California State University campuses dropped 20 percent in the five years between 2007 and 2012. “You can go into any community and talk to somebody whose son or daughter either can’t get in or can’t finish [college] because they can’t get this or that course,” David Wolf, co-founder of the Campaign for College Opportunity, told California Watch. “Meanwhile, they go on campus and there’s all that fresh cement. That’s embarrassing, and it’s wrong.”

In the 1980s, at the flagship U.C.-Berkeley, more than half of all applicants were accepted; this year it was closer to 20 percent, as 67,000 applicants vied for 14,000 acceptances to the incoming freshman class (of 4,200 students, unchanged in the last 10 years). Meanwhile, both public and private aid has shifted from “need-based aid,” which tends to go to lower-income kids, to “merit-based aid,” which is tied to income but less directly. Not surprisingly, at Ivy League schools and the “public Ivies” (which includes the U.C. and U.W. flagship schools), 80 percent of students admitted come from the top income quartile of American families; only 2 percent come from the bottom quartile.

Astonishingly, in 2008, older people born in California were a third more likely to have college degrees than younger native Californians, according to PPIC; elsewhere around the country, the difference was only 1/16th (30.9 percent versus 29.0 percent) – but still: young American adults are less likely than older Americans to have attended college. This has to be the first generation for whom that’s true. We’re putting the history of American progress in reverse.

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With student debt so pervasive and crushing, of course it matters that Congress do something to keep interest rates from rising. The House GOP is gloating that (in a bizarre role switch) they’ve passed a plan, and the Senate hasn’t. The House GOP plan would send students out into a maze of “market-based” adjustable rate loans. Why should someone at age 18 have to navigate a thicket of variable rate loans, where their interest rate could double over time? But even the compromise Obama plan, which would let students lock in a rate once they decided on a loan, has no cap on interest rates.

A growing number of voices, including the Fed, are pointing to the way this debt burden is a drag not just on the borrowers but the wider economy. That One Wisconsin Now survey found that student debt reduces average aggregate car purchasing by $6.4 billion a year. Young people are leaving school with the kind of debt that was once only incurred by the purchase of a first home; not surprisingly, it’s depressing home buying too.

That practical economic argument is important, but almost no one is making the larger economic argument, that expanded access to higher education is good for everyone, period. There are proposals to reform the student loan system to make it more like a standard loan agreement and less like indenture. The Obama administration has expanded opportunities to have debt reduced for those in education or other public interest careers, which is great. But when we talk about doing big things again, when we dream about infrastructure, why are none of our major leaders advocating for new campuses for our state universities and colleges?

A Washington Post piece on the interest-rate impasse noted that Obama and Mitt Romney both called for Congress to stop the rate hike last summer, and it happened. “But student-loan policy has drawn less attention this year now that the presidential election is over.” Indeed. We should stop mouthing platitudes about how “children are our future.” From preschool to post-graduate education, we are proving the opposite is true.

Big Banks, not college students, wrecked the economy: Elizabeth Warren's bill calls for same interest rate for both

Last year, I ran for Senate on the idea of sticking up for the little guy against a system rigged for the big guy.

It's outrageous that the Federal Reserve loans money to big banks at 0.75% interest, while interest rates for college loans will be 9 times higher starting July 1. That's why I introduced a bill saying college students should get the same low rate.

I am proud that more than 385,000 Americans have signed a petition to Congress supporting my proposal -- in less than a week.

Can you join them, and add to the momentum? Click here.

...The simple fact is that big Wall Street banks wrecked our economy. College students did not.

Students are the future of our country and our economy, and they should get the same good deals as Wall Street – they shouldn’t be saddled with debt...

Thank you.

Sen. Elizabeth Warren

Online Campaign Prompts Sallie Mae to Change Fee Policy for Loan Suspensions

I went to the Sallie Mae office in D.C. to deliver my petition in person. TV cameras were there, and I handed every signature to an exec who wouldn’t even look me in the eye.--Stef Gray

Online Campaign Prompts Sallie Mae to Change Fee Policy for Loan Suspensions
By TAMAR LEWIN
New York Times
February 2, 2012

Score two for online consumer advocates — or, as they might be called, Occupy Online.

On Thursday, three months after Bank of America backed down from imposing a $5 monthly debit card fee in response to an online Change.org petition that collected 300,000 signers, Sallie Mae, the nation’s largest private student-loan provider, changed its fee policy in response to an online petition.

For years, Sallie Mae had required unemployed people who could not afford their monthly payments to pay a $50-per-loan fee every three months to suspend their payments temporarily, even as interest charges mounted.

Sallie Mae called this forbearance fee a “good faith deposit” — but it was neither credited to the borrower’s account nor refunded.

Stef Gray, 23, a New Yorker who owes $600 a month on four loans, saw it as a predatory effort to squeeze blood from a generation of turnips — graduates already buried under a mountain of student debt. In November, she started a petition, “Tell Sallie Mae: Stop the Unemployment Penalty” with Change.org., a group based in San Francisco. “Sallie Mae is preying on people like me and cashing in on the fact that we need more time to find work before we can repay our student loans,” it said.

Ms. Gray, who has paid $300 to Sallie Mae in forbearance fees, had another $150 due for January. (Although she has four loans, she said, the top Sallie Mae fee is $150.) She did not pay the fee, and this week her loans became delinquent.

On Thursday morning, wearing a cap and gown and accompanied by Molly Katchpole, 22, the nanny who started the Bank of America petition, Ms. Gray visited the Washington offices of Sallie Mae to hold a news conference and deliver the petition, which had attracted 77,000 signatures.

Thursday afternoon, Sallie Mae blinked.

“We have been giving careful consideration to our policy for some time, and we are changing it to apply the good-faith payment to the customers’ balance after they resume a track record of on-time payments,” it said in a statement.

Patricia Christel, a Sallie Mae spokeswoman, said that about 4 percent of its private student loans are in forbearance. The new policy will be retroactive to forbearances started Jan. 1.

Ms. Gray was pleased, if cautious.

“It’s a partial victory,” she said. “They’re still charging a forbearance fee, which they don’t for federal loans. I’m glad they’re not pocketing the fee, but they’re still charging it. And I still can’t pay it.”

By comparison with Sallie Mae, she said, her credit-card companies seem pleasantly responsive.

“With Sallie Mae harassing me with collection calls while they’re tacking on $1,100 in interest every three months, and refusing to work with me, it’s ridiculous to say, but it’s made me hold up credit card companies as kind to consumers,” she said.

Ms. Gray, who held a job in school, said her $40,000 in loans have ballooned to more than $65,000. In a better economy, she said, her master’s degree in geography and expertise in geographic information systems would make her a good candidate for a job working with census or health statistics. But so far, she said, nothing has been forthcoming.

Back when she was borrowing, said Ms. Gray, whose parents died when she was young, no one explained the difference between federal and private loans.

“I was under the impression that Sallie Mae was a governmental agency, a nonprofit, with the same terms as federal loans,” she said.

But with federal loans, there is no forbearance fee, and sometimes there is even an opportunity to put off not just loan payments but interest accrual. Even better, with federal loans, she might have been eligible for income-based repayment, in which borrowers make up to 25 years of payments based on their income — payments of zero for those who are unemployed or earn very little — and have any remaining federal debt discharged.

“Private student loans have been so grossly under-regulated that this is just one of many issues that need to be addressed on a broader level,” said Lauren Asher, a founder of the Project on Student Debt. “Private loan borrowers are at the mercy of their lenders if they hit hard times.”...


Tell Sallie Mae: Stop the Unemployment Penalty
by Stef Gray

I’m Stef Gray. In December, I started a Change.org petition asking Sallie Mae to stop charging unemployment penalties -- extra fees to jobless people who pause their student loan repayment. (They’ve been charging me $150 every three months, while I’m struggling to buy groceries!)

Sallie Mae didn’t respond -- even after 77,000 people signed the petition.

So yesterday morning, I went to the Sallie Mae office in D.C. to deliver my petition in person. TV cameras were there, and I handed every signature to an exec who wouldn’t even look me in the eye.

Less than 3 hours later, Sallie Mae announced to the press they were changing their policy, and would start applying these fees towards borrowers’ loans instead of just pocketing the cash for extra profits.

I’m psyched that bringing the fight to Sallie Mae forced them to start paying attention, but this policy change isn’t nearly enough. Sallie Mae is still asking me (and unemployed and underemployed grads like me) to fork over money we just don’t have.