Ran Prieur: a rant on universities and student loans

This post pretty well summarizes the ongoing corporatization of the university from the point of view of a person who has just now managed to finally pay off the last of his student loan, and is seeing red, as he should. Every day with my puppy Shadow I walk by at least one gigantic new building project at Indiana University — from fancy dorms to the brand new School of Global and International Studies that is going up, floor by floor, as a two pronged structure that rivals the imposing IU library nearby.

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Ran Prieur: The last Monday of every month is Finger Pointing Day. This month I’m just going to post part of a group email from a reader about finally paying off undergraduate college loans.

I’m sending this partly out of relief, but partly because its the best chance I’ll get to rant and reinforce David Graeber’s point that there is nothing moral about debt obligations. In a just world, anyone originating a loan would be accepting a risk that the debtor might default, or die, or the real value of the currency-denominated loan might collapse, and would attempt to cover that risk by securing collateral, charging interest, and seeking insurance.

In fact, however, student loans operate in a realm of moral hazard – although banks charge interest and, in some cases, secure collateral, they are backed by the US federal government, both through federal guarantees and interest subsidies, and indirectly through a set of draconian enforcement laws that include garnishing wages, tax returns, and entitlements, including Social Security, as well as rescinding licenses including in some states a driver’s license. Under no circumstance are banks left holding the bag.

In fact, student loans aren’t even held by the banks that originate them. Sallie Mae resells them on the secondary market as “student loan asset backed securities” – basically the right to collect the income stream from me or other graduates of my generation.

I would feel less bad about this were I to simply be paying highly trained professionals to educate me, but that is not what’s been happening. The explosion in tuition (and debt) has coincided with a collapse in pay for educators. Individual professors have not been earning less, but increasingly they have been replaced with near-minimum-wage non-tenure-track adjunct faculty. Tenure-track hiring has dropped off so precipitously that a newly minted PhD has a 1:350 chance of finding a full-time position.

Instead the increase in tuition has gone towards facilities and administrator salaries. Administrator positions have grown at 10x the rate of faculty positions since I graduated high school, and every year the number of administrators making more than one million dollars per year doubles. To put that in perspective, adjuncts are making $5000 per semester per course, and their pay has remained essentially static.

There are people who think, and I am becoming one of them, that student loans are a way of liquifying a previously untapped resource, specifically the future lifetime incomes of people not born lucky enough to have parents who could pay cash for tuition. “The economy” loves an untapped resource, and has been maximizing the rate of return by upping tuition and decreasing eligibility requirements. To a lot of people, this looks like a bubble.

I wanted to end this rant by encouraging everyone to send $20-$100 to Rolling Jubilee or some other debt abolition group. They buy debts on the secondary (collections) market and, instead of collecting them, abolish them entirely. Unfortunately, for reasons I don’t understand, RJ has stopped accepting donations.

I’m just curious how this is going to end. My guess is, eventually Americans with unpayable debt will be a political majority, but because they don’t understand that the debt was amoral in the first place, they will not be ambitious enough to force a mass cancellation of personal debt, and instead they’ll pass some tame laws to protect debtors from starving or going to prison, and to keep debts from being passed on to family members. The deeper problem is the popular American belief that all income is deserved. Can you give me a non-circular definition of “deserve”? In practice, high income is normally just a sleight of hand to turn power into more power.

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3 Responses to Ran Prieur: a rant on universities and student loans

  1. rose day says:

    The Universities are so at fault in this debacle…student loans aside, the ‘foot-in-the-door’ occurred
    when these ‘institutions of higher (???) learning’ sold student post-office box numbers to credit card
    companies as school fund raisers as far back as the 1980s.

    What a boondoggle! To extend thousands of dollars in credit to unemployed 18-year-olds is comparable to letting a 3-year-old loose in ‘Toys-R-Us’. At least a 3-year-old is under parental supervision yet this credit card scam was undertaken without parental knowledge, theory being that if 18-year-olds were old enough to be drafted, they were old enough to accrue credit card debt with no financial means to pay the debt…outside of ‘good old Mom and Dad’.

    Now these young (and not so young) carry incredible debt and many cannot find meaningful
    employment in today’s market…plus, a boat load of ‘good old Moms and Dads’ lost a bundle
    toward retirement in the 2008 financial debacle and are no longer in a position to ‘help out’.

    Does anyone else smell a sure-fire recipe for ‘planned’ financial disaster?

    By the way…congratulations to Ran… in paying off the debt, he has thrown the proverbial
    kink in the plan for ‘Debt into Perpetuity’…Way to Go!

  2. Cindy W. says:

    Bravo for the comment “all income is deserved” – I have noted this as well, particularly among those with more. And I think Rolling Jubilee is still working on this issue – they just periodically go quiet & then resurface. John Steinbeck said something about how a socialist economy (I don’t think he wanted state control as much as he wanted generosity and sharing) would never make in America, because Americans “think they are temporarily embarrassed millionaires.”

  3. ksense says:

    There was actually a time when buying on credit was looked down on by others. It was something you wouldn’t want everyone to know, for good reason. Debt snowball worked for us. Fortunately there was no student debt involved.

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