Student Debt: The Predatory Nature of Student Loans

Today 40 million Americans are indebted for their passage to the new economy. Too poor to pay their way through college, they now owe lenders more than one trillion US dollars. They do find what jobs they can get to pay off a debt that is secured on their person. 

In America, even a bankrupt gambler gets a second chance. But it is nearly impossible for an American to get discharged their student loan debts.

Once upon a time in America, going to college did not mean graduating with debt. 

My friend Paul’s father graduated from Colorado State University on the GI Bill. For his generation, higher education was free or almost free, because it was thought of as a public good.

Not anymore. 

When Paul also graduated from Colorado State University, he paid for his English degree by working part-time. 30 years ago, higher education tuition was affordable, reasonable, and what debts you accumulated, you paid off by graduation date. 

Not anymore. 

Paul’s daughter followed in his footsteps, but with one difference: when she graduated five years ago, it was with a whopping debt.

Students like Kate have to take on a loan because the cost of higher education has become unaffordable for many if not most American families. 

But so what? 

Getting into debt to buy an expensive education is not all bad if you could pay it off with the increased income that you earned from it. But that’s where the rubber meets the road. 

Even a college grad earned 10 percent more in 2001 than she did in 2013.

So, tuition costs up, public funding down, family incomes diminished, personal incomes weak. Is it any wonder that more than a quarter of those who must, cannot make their student loan payments?

Sajay Samuel: How college loans exploit students for profit | TED Talk

Opinion

Exorbitant tuition, student loans, and rising student debt are getting out of control. The intentions of colleges were once genuine and transparent, with a clear mission to educate students. Money was a means to that end. However, somewhere along the way, the service for the public good became corrupt. Money became not just the means but also the end.

I think the perversion started with the public backed guaranteed student loan (aka the Stafford Loan) programs introduced in 1965. That suddenly made student enrollment easy and accessible for many.

Perhaps too easy.

Encouraging opportunistic institutions to exploit students to tap this newfound stream of government-backed money.

With the exception of accreditation, there isn’t much in the way of government regulations to protect students many of which are young and impressionable.

I was a professor at a career college for nearly 6 years. That coupled with my earlier experiences as a college student. I have never witnessed a financial aid officer advise or counsel a student of the true gravity and potential negative effects, loans may have on their financial future.

Unfortunately, for students, many of which are the first to go to college in their family. Have little to no experience in what it means to hold a full-time job, balance a budget, and the responsibility of paying bills. Not to mention, the anxiety that all of such and more brings.

Though either through society or the school itself there is plenty of focus on the potential positive effects of earning a degree.

Any degree.

Not necessarily a skill, particularly a tradable skill that is in demand. Just the positives of a degree and it’s cult-like right of passage into an elite group of society.

Then there is the incentive to pass students through the program, deserving or not to maintain the school’s completion average. Which plays a role I gather in a school’s ability to continue qualifying for government-backed guaranteed student loans.

Most young students are too consumed with what papers their parents need to sign or what paperwork they need to bring in. To avoid the embarrassment of being told to report to the financial aid office in front of the entire class again and again.

No one takes the time to provide basic counseling to control inflated expectations regarding a particular career path. Or explain the financial ramifications of changing majors and forfeiting credits, etc.

It’s unethical not to provide good-faith consultation before aiding in applying for student loans.

With all that money to be made, are we surprised that some in the higher education business have begun to engage in false advertising, in bait and switch … in exploiting the very ignorance that they pretend to educate?

Professor Sajay Samuel

Professor Sajay Samuel draws a striking analogy between institutions of higher learning and content service providers (ISPs, cable service). Schools are content service providers, the curriculum is commoditized content, and the students are the consumers.

Constantly, upselling more courses, more programs, and more degrees.  I never looked at it that way but now that I do, in hindsight, it is consistent with my experiences.

I second, gone are the days of facilitating actual learning for the greater public good. It’s now as much if not more about selling and up-selling than it is helping students establish meaningful career paths.

Degrees have apparently come to represent pretentious accolades more than genuine knowledge and skills.

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In my childhood, I recall vividly the refrain from elders “get your education … get your education”. Repetition and fear are effective! So, I went to school and got an education or introduced to a lot of content.

Fortunately, for me, that was at a time when TAP and Pell grants were more than enough to cover tuition, books, and sometimes the remainder in cash.

However, as I got older I noticed a compromised version of the refrain from many family elders. “Get your education” morphed into “get that piece of paper”. As in, do what you have to do to complete the program and “get that piece of paper”, so you could qualify for certain positions.

No lingering student debt.

Education got lost somewhere and was no longer the priority for many. Just the accolade and the “right of passage” mattered. Pretentious accolade or not it is still and likely will remain to a great extent a qualifying prerequisite for many jobs.

Conclusion

What is the solution for increasingly inaccessible higher education and predatory student loans? Professor Sajay Samuel in his TED talk proposes Income-Based Tuition where the tuition rate is tied to the projected income of an occupation.

Not a bad idea. The solution I support is the one some 2020 presidential candidates are touting.

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Fontaine Cook

Taine is an all-around IT guy, system administrator, graphic designer, and code slinger. He is also a self-admitted news junkie, who has a lot of opinions regarding education, economics, and politics. A Bronx, New York native, now living happily in tropical Kwale, Kenya.

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