FRONTLINE: Debt sentences

Career College Central Summary:

IN FEBRUARY, 15 students of Corinthian Colleges, a private education company in the United States, decided to refuse to pay back their student debt. Within a month, the students on debt strike swelled to 100. These are among the 400 students who took out predatory loans to attend the for-profit Corinthian Colleges—part of a landscape of moneymaking private institutions. The U.S. government is not unsympathetic to the plight of these students. In 2010, the Government Accountability Office found that in 15 private for-profit schools, their financial officers used “deceptive and questionable” means to get students to take out loans at terrible rates. At a Senate hearing at that time, Senator Tom Harkin made it clear that the entire ensemble of private for-profit colleges posed a serious problem. “Critics say it’s only a few bad apples,” Harkin noted, “but again, I ask: Is the entire orchard contaminated? Does something need to be done systematically to make the for-profit institutions viable and an asset to society, rather than a debit to these students?”
Despite the report and the hearings, little reform occurred in the for-profit college sector. The Consumer Financial Protection Bureau sued Corinthian for its predatory lending in 2014, four years after the report. In those four years, students continued to take out loans, often with the encouragement of government policy. Who were the people to continue to take out these loans and attend Corinthian and other for-profit colleges? California’s Attorney General Kamala Harris described them as “isolated, impatient individuals with low self-esteem” who have “few people in their lives who care about them” and who cannot “plan well for their future”. What Kamala Harris seemed to have said was that these private for-profit schools often preyed on working-class students who cannot afford private non-profit elite colleges. Nor do these students have the guidance of teachers to lead them to cheaper (and less financially dangerous) options. This is why President Barack Obama proposed that government-run community colleges be made free and therefore able to attract students who would otherwise be driven to the for-profit sector. Corinthian, meanwhile, shut its doors in 2014.
Creditocracy
Professor Andrew Ross of New York University (NYU), who has played a leading part in the campaign against student debt, wrote a full-scale jeremiad against the debt system, Creditocracy and the Case for Debt Refusal (OR Books, 2014). Ross suggests that growth rates in the U.S. since the financial crisis of 2008 have been substantially debt-driven. This is why the democracy of the U.S. is built on its citizens living on credit—hence, the U.S., for Ross, is a creditocracy. “Financiers seek to wrap debt around every possible asset and income stream,” Ross writes. “A creditocracy emerges,” Ross suggests, “when the cost of accessing these goods, no matter how staple, has to be debt-financed. For most people, that means borrowing simply to get by.” College tuition and health-care costs are financed by debt. “Indebtedness becomes the precondition not just for material improvements in the quality of life, but for the basic requirements of life.”
No wonder, then, that almost 50 million people in the U.S. are carrying student debt. These are not simply students in the for-profit sector but also students in the private non-profit, public university and community college sectors. The level of debt is vast, now over $1 trillion, second only to home mortgage debt in the ever-expanding world of consumer debt. Economists at the New York Federal Reserve Bank found that five years after graduating from college less than a fifth of the students had paid down their debt. Ten years after graduation, only a third of the students were debt-free. Student debt also has the highest delinquency rate amongst all consumer debt. This means that the debt hangs over the students long beyond their time in college. Student debt has become a part of the lifestyle of young Americans.

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FRONTLINE