Yves here. I’d like to offer a tiny quibble to Gaius’ post, on an aside that he makes: “Viruses are a form of parasite. So are credit card companies.”
For the first two decades plus of the credit card industry, the pricing model include an annual fee. No exceptions. That meant that the credit card issuer made money on every type of customer: the one who paid off his bill in full every month, the one that ran occasional balances (say right after the holidays) and the one that was in debt all the time. Moreover, the credit card issuer had incentives not to give out credit cards to people with less than great payment histories, or at least not give them overly large credit lines, because back in the 1980s, the top interest rate (19.8%) wasn’t actually all that hot in a much higher prevailing interest rate environment. Plus regulators looked askance at a lot of defaults.
This model was so universal that I recall having a Lazard banker call me up who was selling a financial services firm with a big credit card business. For some reason, he seemed insistent on persuading me that the general credit card pricing model would endure forever. This was probably in 1985. I recall being perplexed as to why he thought my view mattered, and I told him, “While I don’t see any immediate impetus for this way of doing business shifting, it’s reckless to assume that anything is immune from change.”
It was only a few years later that no-fee cards were launched. That led to the entire industry losing money on people who paid off in full every month (they are now called “deadbeats” in the industry), and typically losing money on the ones who ran balances only occasionally. The big money makers were the ones that ran balances all or most of the time.
The point is that financial products are not natively evil. Even option ARM mortgages have proper uses (they are suitable for people who have low or no regular income but are pretty certain to have occasional windfalls, like Wall Street employees who get low salaries and high bonuses, or brokers who go from big commission to big commission with dry spells in between). It is how they are structured and targeted.
By Gaius Publius, a professional writer living on the West Coast of the United States and frequent contributor to DownWithTyranny, digby, Truthout, and Naked Capitalism. Follow him on Twitter @Gaius_Publius, Tumblr and Facebook. GP article archive here. Originally published at DownWithTyranny
For families under age 35, growth in student debt outstrips by far the growth from any other debt source, including mortgage and credit card debt (source).
In the world of parasites, the job of the parasite is to benefit from the harm it does to the host, but not to kill the host, at least not until the parasite is done with it:
In biology, parasitism is a relationship between species, where one organism, the parasite, lives on or in another organism, the host, causing it some harm, and is adapted structurally to this way of life. The entomologist E. O. Wilson has characterised parasites as “predators that eat prey in units of less than one”….
Unlike predators, parasites, with the exception of parasitoids [examples: wasps that lay eggs in paralyzed spiders, or the beast in Alien], typically do not kill their host, are generally much smaller than their host, and often live in or on their host for an extended period. Parasitism is a type of consumer-resource interaction. [Footnotes removed]
Parasites are not the same as predators. Predators kill, eat, and move on. Parasites disable, then live off the energy system of the disabled host for as long as they can keep the host alive.
Viruses are a form of parasite. So are credit card companies.
Loan Companies as Parasites
The parasite first disables the host’s ability to reject the parasite, then derives its own energy (that which sustains it) by robbing the host’s energy system. It attempts to do this for as long as possible. Loan companies whose “business plan” — survival strategy — is to prolong the loan, and at the maximum sustainable rate, are by definition parasites.
But there is a scale of parasitism among loan companies. The least parasitic are mortgage companies, in that mortgages typically don’t destroy incomes; they just feed off them. When the host goes into bankruptcy (usually for other reasons, such as illness, divorce or job change), the host (the home-owner) is abandoned, but mortgage company parasites don’t typically cause these bankruptcies by themselves.
In addition, if a host wants to repay her debt and free herself from the parasite, she is allowed to do so, though typically, hosts usually seek a new parasite, either by necessity or because of cultural pressure.
At the less gentle end of the parasitic spectrum are payday lenders and loan sharks, who actually disable the host’s income capability by extracting so much money that the host almost certainly goes bankrupt, often first drawing on the resources of others and transferring those resources to the parasite as well before they do.
Payday lenders thrive in an environment rich in new hosts, since so many of their former ones become useless. By contrast, most mortgaged homeowners (hosts of mortgage banks) don’t go bankrupt — just some of them.
Student Debt Parasites Feed on Especially Vulnerable Hosts
Not far up the parasitic scale from payday lenders and loan sharks are owners and beneficiaries of student debt, i.e. the lending companies.
First, as the chart above shows, there’s a large and growing population of prospects in the student loan world. New hosts, it seems, are everywhere.
Second, the loan amounts are extraordinarily large and extraordinarily long-lived (my emphasis throughout):
The average debt load for students who graduated in the class of 2016 was around $30,000, and the average rises every year.
But some students graduate with far more debt than that, especially those who pursue graduate degrees or professional degrees. Nearly 17 percent of those who borrow for education costs will graduate owing more than $50,000, according to the recent study by the Brookings Institution. That is a much higher rate than in 2000, when five percent of new graduates owed that much money.
Today, many of those who graduate with more than $50,000 in debt aren’t the students who are pursuing highly-lucrative careers, such as becoming a doctor or a lawyer, but undergraduate students and their parents. On the other hand, more people who are pursuing a professional degree are graduating with well over $100,000 in student loans.
While a student debt load of $30,000 doesn’t sound large compared to mortgage debt, remember that these hosts almost never have a source of income when they incur the debt. In contrast, mortgage holders generally have to prove income prior to acquiring the debt.
For high-debt graduates — greater than $50,000, greater than $100,000 — the situation is much worse. The debt burden can hobble their entire lives. I’ve met men and women in their thirties whose most common complaint is, “I will never get out of debt, and I will never get a job in my profession.” I’ve met high-tech workers in high-mortgage-cost regions of the country with incomes greater than $150,000 per year, student loan repayments of nearly $2,000 per month, more than one child, and no way to break even on a month-to-month basis.
All of these people are one bad-luck accident away from bankruptcy — which means good-bye to the next good job for more than a decade afterward.
Student Loan Parasites Also Feed on the Economy as a Whole
But student loan parasites don’t just eat and diminish the host — they eat and diminish the economy as a whole. It’s an axiom in economics that aggregate debt repayment subtracts from GDP, a measure of overall economic production. In practical terms, a dollar spent repaying a debt to a lender is a dollar that doesn’t buy bread, purchase services like health care, or build a factory.
As a nation’s private debt burden increases, private sector demand and spending falls. In the extreme, if everyone in a country decided or were forced to pay all debts at once, the overall economy would collapse. (The same would happen if everyone in an economy went on a savings spree.)
This is what today’s high levels of student debt are doing to our economy. Writes Eric Levitz at New York magazine:
In America today, 44 million people collectively carry $1.4 trillion in student debt. That giant pile of financial obligations isn’t just a burden on individual borrowers, but on the nation’s entire economy. The astronomical rise in the cost of college tuition — combined with the stagnation of entry-level wages for college graduates — has depressed the purchasing power of a broad, and growing, part of the labor force. Many of these workers are struggling to keep their heads above water; 11 percent of aggregate student loan debt is now more than 90 days past due, or delinquent. Others are unable to invest in a home, vehicle, or start a family (and engage in all the myriad acts of consumption that go with that).
Note that number: U.S. aggregate student debt has reached almost $1.5 trillion.
A Debt Jubilee to Rejuvenate the Economy
The obvious solution to this problem has been practiced since ancient times — a debt jubilee in which all student debts are cancelled. Keep in mind that the U/S. government owns or controls 90% of all student debt in this country:
Thus, if the government were to forgive all the student debt it owns (which makes up more than 90 percent of all outstanding student debt), and bought out all private holders of such debt, a surge in consumer demand — and thus, employment and economic growth — would ensue.
According to the Levy Institute paper [here], authored by economists Scott Fullwiler, Stephanie Kelton, Catherine Ruetschlin, and Marshall Steinbaum, canceling all student debt would increase GDP by between $86 billion and $108 billion per year, over the next decade. This would add between 1.2 and 1.5 million jobs to the economy, and reduce the unemployment rate by between 0.22 and 0.36 percent.
Note that the ancient concept of “debt jubilee” doesn’t necessarily apply to all debt, just unproductive debt.
Economist Michael Hudson writes this about debt jubilees in Sumerian and Babylonian times:
The Bronze Age core economies coped with the debt problem simply by canceling society’s unproductive debts when they grew too large. However, the Sumerians and Babylonians only annulled consumer barley-debts; they left commercial silver-debts intact. … This implicit distinction between productive and unproductive debt represents a third way in which Babylonian economics may be deemed more sophisticated than modern economics (in addition to the afore-mentioned focus on the destabilizing role of debts multiplying at compound interest, and the phenomenon of wealth addiction.)
Note his mention of the socially “destabilizing role of debs multiplying at compound interest,” as well as the (similarly destabilizing) role of “wealth addiction.” Our society is hobbled by both.
Student loan debt is by definition unproductive debt — a debt owed to parasites, in other words. There is no question that cancelling it would free both hosts — the millions of graduates (and those who failed to graduate) themselves, and the larger economy as well.
A Moral Question and an Economic Question
It’s certainly true that the economy as a whole would benefit from student debt cancellation. As noted, aggregate student debt is at or near $1.5 trillion, and rising.
We also know that even Repubicans believe that an injection of $1.5 trillion into the economy would do a world of good. According to one Fox News defender of the recent $1.5 trillion tax cut bill, “Democrats have now become born-again deficit hawks, painting an additional $1.5 trillion added to the deficit over the next 10 years from this tax plan as causing certain harm. But they fail to take into account economic growth that would be created by tax cuts”.
It’s true that tax cuts have a stimulus effect, but not much of one. Making the Bush tax cuts permanent, for example, had a “fiscal multiplier” (stimulus effect) of 0.26. By contrast, a one-time increase in food stamps would have a multiplier of 1.73.
Quite a difference. A one-time reduction of student loan debt of $1.5 trillion would immediately pour hundreds and in some cases, thousands per month into the productive economy — enriching not Wall Street this time, but Main Street.
Everyone in the country would benefit, offering an answer to the economic question “How do we improve the lives of all Americans?”
But a massive student loan cancellation would also help answer a moral question: “How do we free ourselves from the financial parasites who take money for themselves that others have earned?”
Freeing a host from parasites is indeed a moral task, especially when humans are the hosts. If you doubt you have a moral response to parasites, consider the “tongue-eating louse” (pictured below).
This parasite destroys the tongue of its host, replaces the tongue so the fish thinks nothing is amiss, then slowly drains the fish as the fish feeds itself.
If you owe student debt yourself, especially great amounts of it, something similar is happening to you — a large percentage of your income is going each month to people who do nothing but move money around. The only difference between you and the fish above is — you know something’s amiss.
Next Steps: Answering the “How?” and “What Next?” Questions
This answers the Why question of student debt cancellation — the moral job of freeing a host (us and our children) from parasites, the economic job of growing the productive economy so all can have better lives. I’ll answer the How question — what does implementation look like? — and the What Next question in another installment.
I’ll also answer the What If We Don’t question. Here’s a hint: Extreme parasitism is not a stable system. When hosts become aware of their parasites, they fight back.
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This whole country is full of nothing but parasites. The human race is one big parasite on this god forsaken planet. The people who designed student loans deserve to be brutally torchered and murdered.
Student Loan payments are functionally a tax. Payments go to the government, reducing spending, the money disappears from the non-government. Exactly like a tax.
So GDP reports income that is illusory. Then the poor saps (the ones lucky enough to be working) pay income taxes on that illusory income.
I can tell that a Millenial or someone of an equally unlucky generation did not write this article, as it is out of touch with how severe the socio-economic future of America is. Parasite isn’t the right word. Not even close.
Though many kinds of parasites exist, word does not usually bring to mind an entire system screwing you over and over again. It brings up things like paying a couple thousand $s for college applications, or paying a $4 toll every day after work. Generally, (1) Parasites are smaller than the host and (2) they dont outright kill the host. Parasites are the underdog, trying to hack a much larger, stronger organism into providing for it. Financially, parasites would be the unseen fees, tithes, etc that eventually over time add up to some tangible negative affect.
Nothing in this article is about small grievances that add up over the longterm. College debt is a HUGE highly visible problem that isnt nickel-and-diming my generation. It is the mass robbery of my entire generation’s future earnings, sold instead as some highly necessary step in becoming a part of society, an adult, or cultured (though nothing could be further from the truth). Parasites dont live in 3000 sq. ft University-provided mansions, making 100x the amount that any average college kid will make for the next 10-20 years after graduation. Parasites don’t use regulatory capture at high levels to permanently shift the system into garaunteeing profits when none should exist. They dont run multi-billion $ non-profits that bury you in legal jargon should you try to fight back and pay less taxes than an individual who makes a pittance.
What my generation is fighting isnt parasites, it’s the entire system, from college to jobs to healthcare. Let me give you a quick anecdote – my wife is a JD/PhD at a very prestigious university. As such, she’s met many used-to-be lawyers in their mid 40’s or 50’s. We had a few over for dinner, and the topic somehow came to why so-and-so quit law, etc. It was incredibly poignant to find that all of these once lawyers, who are now teachers, consultants, financial advisors, etc. basically had the OPTION to quit law at any time. Many quit after their first or second year, took a year or two off, then went on to become successful in completely different fields. Some started families, bought homes 3-4 years out of College, an utter FANTASY for my generation.
The freedom of where and when they could work was astonishing, as in, nowhere today will you find a Millenial, who just spent ~$200k getting a law degree, talking about quitting law just because they “didnt feel it fit”. Instead, we are bound by this nondischargeable debt like Atlas, trying to stand up while America seems to do everything to hammer us flat.
And this is a kind anecdote coming from myself, a somewhat spoiled kid who went to private schools in SoCal and had my college degree paid for. The reality of the situation is much much worse.
My point is this: education and healthcare are at the core of society, and should be made as affordable as possible if not free. Far from being parasitic, the costs are downright unaffordable to anyone but the 1-2%. My generations only hope is some potentially never-before-seen class action lawsuits against the US Gov & the educational system for (1) bloating the costs of education and (2) insuring the universities against any and all potential loss by providing non-dischargeable loans to kids. The same kids that cant even begin the application for getting a loan to buy a house or car.
Amen, Brother zer0.
As a lawyer who graduated 23 years ago and only has 2 years left to pay on my student loans, I feel your pain. I borrowed more than I should have for law school—about $54,000 (including some undergrad loans)—and now law school costs more than that for one year out of a three-year degree! By the way, I consolidated my law school loans in 1996 at 9% interest. Seemed like a good deal at the time. But the thing is, by law I am not allowed to refinance to lower my loan rate. I’ve paid over $73,500 in interest so far. When I make the final payment in less than two years, I will have paid more than $135,000 for the privilege of having a JD at the end of my name. Yuck.
I feel bad for you guys who are paying three times as much as I did–after adjusting for inflation. I don’t know how you’re going to do it. At least your interest rates are a little lower than mine.
Oh, look, when your entire money itself is based on debt you obviously continuously need more and more debt just to keep the economy going, oops but they can only create the principal, they can never create the interest, which of course means you need infinite growth on a finite planet. So now that every possible mirror-fogging person and company is stuffed to the gills with debt, and debt service even where the cost of money is zero is overwhelming debtors, what happens now, Keynes-breath?
Sure, give the kids a break. And simply separate money and credit, the system where they’re one and the same is only 300 years old anyway and by any measure is a rank failure approaching its denouement moment. We practised blood letting for longer than that, but that doesn’t mean it was a very clever idea.
A hearty perennial, this. No matter how many thousands of times the idea that “when your entire money itself is based on debt [as opposed to what? All money is an IOU of its issuer and it MUST be ‘redeemable”/receivable by its issuer] you obviously continuously need more and more debt just to keep the economy going, oops but they can only create the principal, they can never create the interest, which of course means you need infinite growth on a finite planet.” has been knocked down, it comes back, zombie- or phoenix-like.
‘Student loan debt is by definition unproductive debt — a debt owed to parasites, in other words.’
Eh, that’s not the original concept. Old manila textbook covers we were given in 4th grade spelled out estimated lifetime earnings: $50,000 for a dropout; $100,000 for a high school grad; up to $300,000 for a college grad. $300K sounded good to me!
In principle, student lending is no different than project lending: take out a loan; build a project; pay down the debt from earnings. But the analogy falls apart on the back end. A project which fails can discharge its debt in bankruptcy; whereas former students — thanks to federal bankruptcy law — cannot.
Government, as the guarantor of most student lending, is a harsh, dickensian usurer, pursuing student debtors even unto their death bed by garnishing their Social Security.
Social Security pays a $255 death benefit. But if you’re being garnished for long-ago student debt, your heirs might get only $204 and have to inter you in a Walmart refrigerator box. Sad! as the orange fruitcake would say.
Jubilee is a radical solution. But recognizing the de minimis moral hazard in making bankruptcy available five to ten years after student debt is incurred paves the way to a bankruptcy fix that could be implemented next week. If Uncle Sam don’t lighten up, we may just have to roll the old git.
In legal terms, there is ultimately an individual jubilee on federal student loans, but it leaves plenty of time to crash the borrower in the meantime.
After 10 years (or 25 if loan payment is extended), any remaining unpaid balance is automatically forgiven. Federal loans are also automatically discharged upon early death, so the state is not liable for them. (These rules don’t apply to private loans, remember.)
However, as tax-types know, “forgiveness of indebtedness” is a weird creature which is _taxable income_ under the Internal Revenue Code. (It is actually the only kind of “imputed income” we tax.) This means that the amount of forgiven debt at the end of the 10 or 25 year period is potentially taxable to the borrower. However, at least for now, the tax rules also provide that if you are formally insolvent (liabilities > assets) at the time of the forgiveness then you can exclude the forgiven debt from your taxable income. So, there is some slight safety valve.
Regardless of what the government does on the tuition front, it might be sensible to provide that all loans are cancelled after 10 years (if you haven’t paid it back by then…it’s probably not all that helpful to you to have taken the loan anyways) and adjust the tax side of things.
Student debt use to be small, easily paid, dischargeable, and each increasing level of education pretty much guaranteed a higher income. Our parents and grandparents did not need to be very smart at least in California. You could fall upward fairly easily.
Parasites are a good analogy. It’s just that good parasites don’t seem to consciously kill the host. Some parasites are even beneficial.
I know that the label Evil Elites™️ is almost a cliche and maybe the label the Crazy Ones is better as they seem to be in a wrecker’s contest. He who dies with the biggest junkyard wins.
And what happens if a majority of student loan “hosts” gets together, goes to the Self-Initiated Jubilee clinic, and gets wormed, expelling those parasites with a hefty dose of #juststoppaying?
I hear you JTMcPhee
right on
#juststoppaying
I’m sure there are a lot of homeowners who #juststoppedpaying that can attest to how that worked.
And a lot of homeowners who paid, and paid, and even paid in full, and still got evicted and foreclosed. Happened during the Great Depression too. And there are still people living in houses, “rent free,” not paying anything on their “just debts,” either unable to, or just thumbing their noses at the banksters who have not found it worth their while to proceed with foreclosure and eviction, in part so they don’t have to book a losing “asset,” in part because stupid and incompetent and corrupt.
There’s no fairness or justice in any of that, no “rule of law” either. No guarantees, except that the PTB will screw ove me anyone weaker than them, if they can get away with it. But people do and have fought back, out of desperation: https://isreview.org/issue/81/fighting-evictions-during-great-depression. That link is about evictions in big cities, but it happened out in the boondocks too.
“The only thing we have to fear… is fear itself,” said the guy with the cigarette holder and charming wit.
Whatever happened to those law students who sued their school? If schools misrepresent the average starting salaries of their grads, or their job placement rates, are they legally liable for misrepresentation, false advertising, etc?
As far as I know, the cases didn’t do so well. The one that went to trial was a loss before the jury, too (https://www.nytimes.com/2016/03/25/business/dealbook/law-graduate-who-sued-her-school-loses-at-trial.html).
To my mind, a school should be liable for inaccurate or misleading statistics designed to solicit attendance (and therefore money) if reliance on the statistics is shown, and that if key statistics for attendance decisions are misstated, reliance should be assumed (e.g., starting salaries, job placement rates). In my view, if students are going to be treated as consumers by schools (as they are), then the legal analysis appropriate to consumer protection and fraud should apply to them.
I think my comment to this question got eaten–my apologies if it ends up double posting.
To my knowledge, the lawsuits didn’t do well. The one that went to trial turned out to be a loss for the plaintiff-student (https://www.nytimes.com/2016/03/25/business/dealbook/law-graduate-who-sued-her-school-loses-at-trial.html).
Simply making student loan debt dischargeable in bankruptcy again would do much to arrest the feeding frenzy that’s gone on in the higher education world for the last twenty years. New buildings, new dorms, new high priced administrators (while the quality of the actual teaching has taken a nosedive and adjuncts starve) and it’s due to the easy availability of credit with zero responsibility for the school for making sure what they’re offering is worth the price.
Finance, Insurance, Real Estate, Education.
Parasitic industries that need a good cleansing fire.
Has your representative co-sponsored HR2366?
https://www.congress.gov/bill/115th-congress/house-bill/2366
Complete student loan forgiveness is just another form of privatized gains, socialized losses.
Should ex-students have reasonable/good interest rates that reflect the benefit to themselves and society for *their* education – yes. Should there be some consolation to those that pay on time and work for the public good, such as teachers, rural doctors – worth considering. Should there be wholesale forgiveness – no.
How is someone who has a college education more disadvantaged, deserving of public assistance than some poor kid who grew up with limited educational experiences and opportunities who never had the chance to go to college in the first place. I really don’t hear a lot of whining from them – nor anyone writing essays about their needs.
Everyone should live with their life decisions to some degree. I didn’t buy into the over-priced silicon valley housing market back in 2008 – which now looks like a total fool move – and now basically priced out of where I have worked the last 20 years. I didn’t fully invest/margin-up into the stock market in the face of QE1, QE2, QE3, QE-infinity because couldn’t believe in the US such a transfer of wealth from have-nots to haves, society at large to bad investors, could occur.
So if you really think that someone that was giving the opportunity to made a financial decision, that on balance makes their lives better over time, but maybe didn’t pan out as rosy as they thought – please write me a check for my mistakes too. I really don’t see it as any different than a college graduate who got in a bit over their heads.
Well, I think that we should look at student loans another way. We should change them from being loans to the students to investments in labor pool of the country. I say this because how can you expect a 17 year old to analyze college tuition as an investment? The adults, professionals and lenders should analyze the risk, shoulder it or not make the loan.
“How can you expect a 17 year old to analyze college tuition as an investment? The adults, professionals and lenders should analyze the risk, shoulder it or not make the loan.”
I’ve been saying this for years. Indeed, I routinely argue for two major changes to student loan policy:
[1] Bankruptcy protection should be restored for both publicly- and privately-funded student loans. [For reference, the US Department of Education issues about 90% of loans, while the banks do the remaining 10%.]
[2] And for publicly-funded loans in particular, the US Department of Education should implement lending standards to avoid issuing loans in circumstances when full repayment is unlikely. Today, the Education Department will pretty much issue a loan to anybody with a pulse (much like banks did during the housing bubble), and the easily-foreseen consequences have been devastating to millions of Americans. At best, this is irresponsible or even reckless lending. And when you combine it with the lack of bankruptcy protection and aggressive repayment practices, it could rightly be called predatory lending. Sometimes saying “NO” to a prospective student is the right thing to do.
As for a large-scale student debt jubilee, I don’t expect it to ever happen. It’s too unfair to those took painful steps to pay off the debt early (or to avoid it in the first place), like working extra jobs, attending a cheaper and less prestigious school, draining their parents’ retirement accounts, or living in their parents’ basement.
When I went to a state university in the 80’s my tuition was $600. My entire tuition cost me less than the $7000 used VW Golf I bought during that time. Same school is now $7500/year. Four years tuition is the equivalent of very nice new Golf. It’s not just inflation, students are receiving a bloated, overly expensive product that is not in their best interests. Comparing paying your way through school a few decades or more ago, when you could do it scooping ice cream a few hours a week, to now is not fair.
I don’t know what state you live in, but here in Colorado, tuition and fees alone run $15,000 per year. And that’s in-state tuition.
The fairness issue is an important one.
Instead of canceling all student debt, what about abolishing student loan interest? Remove the food source (compound interest) and starve the parasite.
Restructuring all outstanding student loans to 0% interest loans would address the fairness problem—if you borrowed it, you still have to pay it back. But the loans will be less of a drag on individual finance and the economy as a whole.
A corollary would be to retroactively apply to the principle balance the interest payments already paid. So if you previously paid $5,000 in interest on a loan, you now get a $5,000 deduction on the principle of the loan. Borrowers who have paid more money in interest than the original principle amount of the loan would immediately have the loan forgiven.
A corollary to that is refunding any amount paid over and above the original principle. Someone who has paid $5,000 in interest on an original $4,000 loan would have the remaining balance forgiven and receive a check for $1,000.
Then make college tuition free going forward.
The point is that if you remove the profit, there is no point in predation.
I love this solution. It’s a great compromise in a system that’s dogmatic about paying back what you borrowed.
People want others to pay their debts. But people also hate predatory interest.
I think you’re on to something here.
Given the inability to declare bankruptcy, I don’t know why the student loan interest rates aren’t close to 0% anyways. Either there’s an implicit assumption that a decent number won’t get paid back (if so, then the removal of bankruptcy is bad policy–though that was already clear), or the government just likes this unnecessary source of revenue (most student loans are federal now after the Obama administration).
While I also agree that college tuition (and graduate education, too, at this point) should be free or low cost at most, I am a little worried about how to deal with the higher education complex on financial terms. Free tuition from the student’s perspective means the government is going to have to negotiate or set a tuition rate that it is willing to pay. One of the reasons the student loan crisis has happened is government is essentially willing to lend unlimited student loans–true, there are caps on Stafford and Perkins loans, but there aren’t on PLUS loans taken out by the parents of undergraduates and by graduate students themselves. But the nature of the political fight means that neither Democrats (the favorite of higher education lobbyists) nor Republicans (markets!) would sign on.
KJV Exodus 22:25 “If thou lend money to any of my people that is poor by thee, thou shalt not be to him as an usurer, neither shalt thou lay upon him usury.”
Life is not fair.
Neither are student loans when colleges have just upped their spending because student loans are so easy for students to qualify for. Spending has to end by these institutions!
Do you guys know that students can no longer declare themselves independent from their family finances until they are 25? Can you imagine? In my family of four children, with my Dad making an okay wage, I would not have qualified for grants and work-study jobs that I got had I not had the ability to declare my independence from his finances. This is the terrible secret that many oldsters, like me, had no idea was going on.
Yep. I’ve got a daughter in college. We have a modest, middle class income. Whenever I fill out the FAFSA, the only “financial aid” we qualify for is student loans. It doesn’t take into account the fact that I am still paying for the college degree I obtained in 1995.
Student loans shouldn’t even be considered as financial aid. That’s not aid, it’s a loan. And if the FAFSA says I can’t afford to pay for college now, how am I supposed to be able to afford to make parent loan payments in the future?
If you’re looking for underprivelged classes benefitting from such a jubilee, as Heidi’s Master says, these are loans made to 17 year olds. These are predatory loans floated to people who really don’t know any better. They can’t drink, vote, or smoke.
That’s a major problem.
This is a good point. Generally speaking, a minor’s contract is void for lack of ability to consent for a reason–we think they cannot make responsible decisions for themselves yet.
I see that opinion thrown out a lot, and it always seems a bit scroogy to me. An educated citizen (and a WELL educated citizenry) is a benefit in and of itself, completely different from a mortgage or a credit card used to buy material things. Well, unless you think that masses of illiterate serfs are the basis for a functional society.
I don’t know your circumstances, but I feel like I grew up in a sort of ‘sweet spot’ era of public education…states & feds heavily subsidized colleges, tuition low – at least at the state university I went to. Pell grants (free fed money), state grants, low-low interest rates, worst case – student loan debt dischargeable in bankruptcy without garnishing for rest of life. (I paid em off, but then I also won again in the ‘dot com bubble stock option lottery’…and am well aware of this luck)
“…How is someone who has a college education more disadvantaged, deserving of public assistance than some poor kid who grew up with limited educational experiences and opportunities who never had the chance to go to college in the first place. I really don’t hear a lot of whining from them – nor anyone writing essays about their needs…”
I was one of those disadvantaged kids. I was dirt poor. Society subsidized me, and in the balance I think my productivity in the form of taxes, to say nothing of being an educated well-rounded rational citizen has been a good investment.
I didn’t realize it at the time, but my college education was *heavily* subsidized by taxpayers from soup to nuts. In the decades since, these subsidies have pretty much dried up at every level. Instead of front-loading the taxes/support to kids seeking education, we have now decided its best to not bother loading at all….unless its all loaded on the backs of the student.
Debt forgiveness is simply acknowledging that yes – we as a society pulled up the education ladder after we had climbed up it. Forgiving some, or all, of student debts is simply a way of pushing the ladder back down to where the serfs can catch a rung again.
I view it as not a subsidy, but as an investment by the Government. One which has a return in future income tax.
What better “investment” than education? Certainly better than the expense of Billions on foreign wars.
With education one can point to a return. With wars there is no return, just expense.
In what way is an “investment” by the Federal Govt in the post-secondary education of some of its citizens “repaid” (creates a “return” stream) in the the form of “future [federal] income tax”?
The whole point of the currency issuing government imposing taxes payable only in its own currency is to provision itself materially (so to speak), not ‘financially’.
Future federal income taxes cannot possibly be seen as a “return” for the Federal government’s “investment” in the “human capital and productivity” of those to whom it extends credit for post-secondary education in its own inexhaustible, no collateral, liabilities.
Here, here!
I think you’re missing about 99% of the point. A lot of us aren’t crippled by our debt. I’ve got a $2400 monthly student loan bill, I pay it every single month and have done so for the past three years and have ~4 years to go. That’s $2400 that’s streaming into a financial institution and school that are already fat with cash, the school in question has an endowment that could cover all costs for all students year over year on interest alone. That $2400 is effectively removed from the economy. I could be buying shit, infusing cash into my local community and likely starting an independent business. But instead a sizeable chunk of my monthly take home is shuttling off to sit in some account somewhere where it won’t be touched.
I’ve only read the comments to here, but I’m surprised that we haven’t addressed the elephants still in the room. In NYC, at a recent Columbia University graduation (my wife’s professional degree being my reason for attending), there were something on the order of 2 (or 3?) thousand graduates. Perhaps more. Assuming even a modest average tuition of $35k (consider: the Law School tuition is @$60k), and modest NYC living costs of $35k (books included), that’s still $70k x 2,000 minimum: $140million annually being pumped into the city’s economy. NYU is larger still. The universities are cities unto themselves, and they also suffer from “grow or die” syndrome. (Columbia and NYU are, if I’m not mistaken, the largest aggregate property owners in the city.) A very large proportion of the student body get by via loans. (For my wife, the debt tab was over 100k.) The bottom line: like the banks, the universities are, if not there already, fast on the way to still another institution/category that is too big to fail.
Theoretic debt jubilees that require transferring the cost of these “economic engines” onto the greater society as a whole skips the important step of measuring, in meaningful terms, the costs and benefits. Perhaps future discussions by the author will attempt to make such measurements, but to me the problem reinforces the conclusion that economics remains an art (and a dark one at that), and never a science.
NYU and Columbia also have significant endowments, so I’m not sure to what extent they actually couldn’t just rely on endowment yields and lower tuition and other costs. Other schools might be different in terms of TBTF in comparison to their location and other funding availability.
(FWIW, I’m also pretty sure Trinity Church is the largest landholder in NYC, which is also something that makes you wonder, but the two universities are undoubtedly quite large.)
I really don’t get this argument – if I don’t have to pay back my loan, I could be spending money, infusing it into the (local) economy. Didn’t that initial loan do that? Debt financing overall is a way to pull forward demand. Why should a student loan be viewed differently in this regard?
I am all for re-financing by the government at low or zero rates. Remove the profit, and it (partially) offsets to a time when there was greater government support for higher education.
But as others have pointed out, unless the administrative costs of colleges are addressed, then it is only a reset.
The play that higher education is some well reasoned, fiscal decision about personal investment is the furthest from reality any reading of the situation can be. People like to bring it up of course, but it doesn’t change how things actually work and only serves to justify the predatory side of things. Higher education isn’t a choice, it is a normalized “next step” from High School. It is “what you do”. Parts of High School were regularly based on “preparing” for college.
Interesting wishlist. Not is going to happen, not in the United States and not under this administration. This is a pure slash and grab group of parasites.
DeVos plan protects student loan collectors from state regulators: https://www.upi.com/Top_News/US/2018/02/26/DeVos-plan-protects-student-loan-collectors-from-state-regulators/1731519680689/?spt=su
This post fails to address our governments complicity in establishing this system of student loan debt. Refinancing of the debt is forbidden by law, and the Federal government continues to reap billions of dollars a year in profits off the backs of students crushed by this debt.
For decades, private servicers and banks profited by billions every year to process and issue student loans, wholly backed by our government, when the same had been done for years for only pennies on the dollar for what these banks charged. This ostensibly got better under Obama, in that much of the obscene profits for the banks were eliminated, but then Congress elected to keep the profits for our government as a revenue stream. Students are paying way above market interest, and were prohibited from refinancing this debt in the marketplace, with this difference in cost being a penalty or tax borne solely by student borrowers.
Our Federal Government is the parasite, and it is Conservative’s selective abuse of this student population, enabled by our Wall Street Democrats, like Obama, that have designed this parasitic system.
“This ostensibly got better under Obama…”
I don’t think it got better at all. Not even “ostensibly”. After all, moving 90% of student loan lending from the banks to the US Department of Education meant that 90% of student borrowers are now subject to the even more extreme debt collection practices that our government employs. Like garnishing EIC or Social Security benefits. Practices that have been (rightly) outlawed in the private sector because they’re deemed too harsh.
Thanks to Obama, the vast majority of student borrowers now face the full force of US Federal Government when it comes to debt repayment. And the results aren’t pretty.
“and the Federal government continues to reap billions of dollars a year in profits off the backs of students crushed by this debt.”
No, it’s not, not actually, really, operationally. There are no “profits” for the Federal Government. It doesn’t have “more money to spend” because it collects interest and fees and principal on student loans it extended. It is merely reducing the disposable USD balances of the people paying the interest and fees, plus principal. It doesn’t have to “repay” itself in USD. It cannot run out of USD, such that it has to get USD from someone else.
I feel hopeful when I see the perverse moralistic underpinnings of the debtPowerStructure exposed as cannibalism on future generations.
What a fantastic way to start my day.
Looking forward to the Next Steps.
The problem with forgiving all student loan debt this is that you’re rewarding a very affluent segment of the population – it’s very regressive. I can’t justify taxing poor folks to pay for wealthy folks’ education. http://www.slate.com/blogs/moneybox/2016/08/15/mass_student_loan_forgiveness_is_a_terrible_idea.html
I agree that is would be very unfair to simply wipe out all student loan debt. I’ve been scrimping and saving to put my daughter through college with as few student loans as possible. Now you’re saying I could have borrowed heavily to send her to posh private college instead of public college and you’re going to let she and I discharge all debt? There has to be a way to consider the fairness of the discharge.
Is it fair for a guy to pay $1000 per month on his $50,000 credit card debt, while his neighbor files bankruptcy and walks away from his $50,000 credit card debt?
. .. . .. — ….
I agree. Even with the large debt loads that college graduates are saddled with they are still generally doing better than people without college degrees. Plus, college students still tend to be relatively affluent in the first place despite more people going to college. Student loan forgiveness would be a subsidy to the relatively affluent and a slap in the face to working-class people who have suffered the most from the last 40 or so years of economic change without getting any help or even consideration from our elites.
It bothers me that the student debt issue has always gotten significantly more play in the media than issues that more directly impact less-educated workers such as the trade deficit and the economic impact of mass immigration. Even among Millennials the majority of people have less than a 4-year degree.
I suppose the greater attention to the well-educated is due to their being more likely to vote than less-educated people along with the class biases of journalists, economists and other opinion makers who naturally relate to the problems of college-educated people more than those with less than a 4-year degree.
Re: Jon
February 27, 2018 at 10:17 am
You seem to assume that forgiving student debt will somehow penalize other ‘taxpayers’ — “poor folks”, as you call them. Hello! There are no shortages here: taxes don’t fund govt expenditures, any more that deposits fund bank loans. Or, if you prefer to believe that govt spending is funded by taxes, just take it out of the defense budget.
“I can’t justify taxing poor folks to pay for wealthy folks’ education.”
Who said anything about “taxing poor folks to pay for wealthy folks’ education”?
Enjoyed your article Yves, but now I’m really depressed. And I was doing so good on my diet.
I know and understand the ‘Why’s’ but can’t figure out your next article on the pull the rabbit out of the hat ‘How’. Having two Millennial sons carrying a good amount of debt is more than just a ‘burden’. It’s their futures my wife and I worry about. And are tied to. I always thought the ‘Host’ thing went to the healthy offspring once the elders became ‘seniors’. But there’s no escaping the parasites these days than escaping from the cancer infecting us all, having to listen to the Orange Idiot, unarmed, bone spurs and all, chasing a fully armed disillusioned mad child down a high school hall. We deserve better.
As to the credit card parasites, let’s remember it was Corporate America, around the time or Reagan that decided to no longer share with workers in their productivity gains, and to take those new profits and reward CEO’s with an indefensible financial bonus, hundreds of times more than the salary of the stiff on the assembly line. Because they ‘deserved’ it. And then debt became a profit center, tying employees to employer’s cost-saving take it or leave it decisions, using J.P. Morgan’s examples as he ‘morganized’ the railroad industry. And today we have FICO determining and giving permission to how we live our lives.
So here we are, getting older, tied to our children’s debt, hoping for a Jubilee Day as the only answer. And it is the only answer. Freeing up all that student debt will IMHO, crank up our marginal ten year tepid economy, up to or close to a sustainable healthy 3.0% GDP, giving hope to us all. Right now, it appears to be the only way out before tax ‘reform’ drags us to GR II.
As to the ‘How’, who the hell is going to lead the troops? Republicans can’t organize a two car funeral while Democrats are always ready to fight the down the road ‘Blue Wave’ fight – as long as the odds are 10-1 in their favor – and they have permission from the same donor class that fuels the Republican Party. But even aside from today’s shameless out in the open Corporate Whoredom, who is going to lead the fight and carry the message? Personally, being a chair throwing Bernie Bot, I’m looking for a 50 year old Sanders (w/o the finger wagging) to lead the way with the same message of free college and student debt discharge, for starters. Thanks for listening.
Maybe this will involve “leading from the bottom?” As in, all those mopes and their families, being crushed by that debt millstone, all of them #juststoppaying and #justsaynomore.
Can’t be paid, won’t be paid. Corporations shuck billions and billions in debt all the time — by bankruptcy and accounting tricks, or just defaulting especially where the MMT Provider of Last Resort has been roped into “securing” those Contract-based Sanctified Debt Obligations. Corporate Persons get one “discharge and fresh start” after another, but not us mopes. And how many billions of dollars in wage-funded, “contract-based” pensions have slime like a Mittens Romney and the other vulture looters skated away with or extinguished through bankruptcy scams?
We mopes are still rebuilding the foundations of the Real Economy (and a growing parallel Dark Economy) from the last round of what, $6 or $8 trillion GIVEN to TBTF and their execs and minions. Rebuilding, at low wages and by “multiple gig jeans.” What is “fair” about that? Or a trillion a year to the war industry, that’s “fair”?
And one has to marvel at the people who carry water for the Puritan-Rugged Individual-Bootstrap charlatans — the ones selling us on using loans to fund an ever more debased and worthless higher education that is sold through fraud in the inducement from the git-go. Where the cynical parasites are so happy that parents will be suckers enough to pledge their homes and savings on a lie that Johnny and Sally will “make it up in future higher pay” in a globalized race-to-the-bottom, ever more automated “workplace.” That’s “fairness?”
“I’ve been paying my debts, everyone else must, too, even if they can’t, even if the crush that puts on the overall economy also debases my own opportunities for Success.”
Stupid comes in many flavors and colors. http://harmful.cat-v.org/people/basic-laws-of-human-stupidity/
#juststoppaying. #justsaynomore. Sand in the gears of the debt machinery that is crushing millions and stealing trillions. If large numbers do it, as the right and fair thing to do, it’s like those scenes in the movies — the bad guy has a six-shooter, but the crowd numbers in the hundreds: “You can’t shoot us all. And we will take you down!”
When banks create their profits by loaning money, then banks are going to loan as often and as much as they can because on their balance sheets, loans are assets. Why is anyone surprised that banks loan, and loan, and loan? Banks have even been known to give loans to people who cannot pay them back and then devise another profit-making venture by using derivatives to sell and make profit from “bad” loans. This is the world of the parasite that is bleeding the economy to death.
What are the interest rates on that debt? Literally converting those from loans to a private contract at a lower interest rate could save significant actual dollars.
Of course, people don’t think in terms of actual dollars. I was talking with my sister last weekend. She has four figures in credit card debt that she is paying over 20% interest on. I suggested that I could use a balance transfer to pay that off with 0% interest for 18 months and a 3% fee, and she could pay me back. She wouldn’t hear it. “I couldn’t bear the idea that I might not be able to pay family back”.
Sure, debt forgiveness is all well and good, but it is only part of the problem. The business models of nearly all higher education institutions are based on the current way student debt is handled. You can’t simply fix the debt side of it and leave all that intact. Getting rid of one involves massive reforms in the other. We need to go back to state universities which provide high quality, free or extremely low tuition education as well.
Another way to say it is it’s about the debt, of course it’s about the money, but it’s not just about the money. The neoliberal way of handling higher education has pulled everything into its orbit, shaped how countless things are handled. The majors people chose (you’d be free to study nearly anything if massive debt weren’t an issue), the countless administrators at universities getting fat on this cash, the massive real estate development projects going on at too many schools to count, the way student housing is built and aimed at…it just goes on and on. I think the problem is much, much worse and more entrenched than many realize.
Higher education has become just another “industry,” I agree. As I mentioned in a comment above, proposals for free tuition comes with the same money issue as single payer–who sets the prices?
One difference in political dynamic here is the Democrats will want to keep prices high (higher education is on “their side”), while the Republicans might want to stick it to the universities.
This! You can’t forgive student loan debt without fixing the cost of higher education. If you do that, then you’ll have another $1.5 trillion in student loan debt amassed in less than ten years.
You have to fix the cost of higher eduction first, or at least fix them simultaneously.
We can forgive the debt, when I went to college it was much, much cheaper. But how about all the added administrative cost? There are so many budgetary issues that also need to be addressed.
Mmmm, how about fire the (bloated) administration? Perhaps some of those ~million-$-earning chancelors could be rendered for something profitable. Condi Rice, I am looking at you.
Some creative young people (19 & 20 years old) were exposed to shady practices recently. They had stopped by a photography institute to find out about course offerings to expand their technical knowledge. During their visit the office person showed them around, provided some pamphlets and then had them fill out some ‘interest forms’. You have probably seen such forms. Just sign here, and here, and here, and initial those boxes there. It turns out that those interest forms were really contracts!
When they told me the story, I asked to see the paperwork. As soon as I saw that, I went online to learn more about the institute. It turns out that they were subject to a consent decree that prohibited deceptive trade practices such as had just been inflicted on those youngsters. I then got on the phone with the institute manager and ripped her a new one, and got written confirmation that any and all contracts with those young people were null and void.
Later development: The so-called institute folded up shop, leaving current matriculants underdeveloped and in debt.
Caveat emptor! Tell those you know to seek get advice and counsel when looking at any potential transaction, then read the fine print, the gross print and all print in between. For those not yet exposed to the dark arts of business, remember the beneficial effects of sunlight.
Debt comment.
Consider any and all debt first as a weapon wielded against you and yours by variations on Economic Hit Men. Do not voluntarily enserf yourselves. Use debt sparingly and only when you can demonstrate that you can afford it, such as for housing. Debt can be useful as long as the dangers are well-understood. The creditor is not your friend.
“But student loan parasites don’t just eat and diminish the host — they eat and diminish the economy as a whole. It’s an axiom in economics that aggregate debt repayment subtracts from GDP, a measure of overall economic production.”
I agree with the axiom, but I seem to recall Michael Hudon’s book (which this article’s title seemingly references) arguing that GDP ironically shows the opposite.
That is to say, while student loan payments indisputably equate to lower disposable income for debtors, those payments actually show up as profits for the loan companies themselves, and thus contribute to ostensible GDP growth.
Am I missing something here?
That is how it is supposed. The “profits” are mostly salted away, used to bump up stocks, or to increase the already vile, obscene, and sickeningly high compensation of the senior management. It does not go into increasing general wages, hiring people, or any sort of investment into the company itself. Maybe into some yachts, helipad, a new mansion, or some similar BS. So they might contribute to the recorded GDP, it really doesn’t do anything except maybe like that of a brief sugar high.
The power of finance is the power of debt.
The ability to bring future spending power into today (you spend the loan today and make the repayments in the future).
Today is good, the future is impoverished and it’s now here.
Thatcher bought neoliberalism to the West, it appeared to work as its neoclassical economics didn’t consider debt.
https://cdn.opendemocracy.net/neweconomics/wp-content/uploads/sites/5/2017/04/Screen-Shot-2017-04-21-at-13.53.09.png
This real estate and financial speculation fuelled economy always was on a one way trip to a financial crisis and it got there in 2008.
It never worked in a way that gave it a long term future as it ran on debt. It always relied on bringing future spending power forwards into today with debt. Today we are struggling as the repayments are due and even ultra-low interests rates can barely compensate, this is the future we were borrowing from.
This debt blindness bought down the US in 2008.
https://cdn.opendemocracy.net/neweconomics/wp-content/uploads/sites/5/2017/04/Screen-Shot-2017-04-21-at-13.52.41.png
1929 and 2008 stick out like sore thumbs.
This debt blindness caused the Euro-zone crisis.
https://www.youtube.com/watch?v=B6vV8_uQmxs&feature=em-subs_digest-vrecs
Australia, Canada, Norway and Sweden are set to blow with silly neoliberal real estate booms.
The Chinese have worked out the importance of the debt-to-GDP ratio and can see how it led to 2008.
It’s obvious when you know where to look.
It’s time to stop messing about with this silly neoliberal ideology that is destroying the West.
A shining star in the Western technocratic firmament.
Adair Turner has been looking at mess left behind by debt blind, neoclassical economics.
Adair Turner can see most of the advanced economies were growing by 4 – 5% before the financial crisis, they, but the debt was rising at 10 – 15%.
https://www.youtube.com/watch?v=LCX3qPq0JDA
This always was an unsustainable economic model; it had no long term future.
It’s always been the same.
The 1920s roared with debt based consumption and speculation until it all tipped over into the debt deflation of the Great Depression. No one realised the problems that were building up in the economy as they used an economics that doesn’t look at private debt, neoclassical economics.
“Stocks have reached what looks like a permanently high plateau.” Irving Fisher 1929.
Its disciples develop a blind faith in markets that can be very dangerous.
I paid for my education. I got a scholarship for college and paid for law school through the gi bill and savings. That meant I was four years behind my classmates who went straight to law school. I lost four years of lawyer pay. It also meant I graduated into a recession instead of into a booming market.
I sympathize with people who have large student debts. I would like them to be released.
But I worked really hard to not be in debt. There are lots of people like me out there.
How will we be brought into the constituency of a movement to cancel student debt? Will a plan include compensation for me?
Why? Would it be a deal breaker if there wasn’t? For that matter, the older members of my family got an almost full ride for their college education.
What happened to you was not fair and what is happening to tens of millions of people is also unjust.
Too many people can not easily, if at all, pay for college while paying for food, clothing, and shelter without going into non dischargeable debt.
Hard worker, forgive me, but you got paid for those four years in the military, and if you add your salary, housing allowance, free health insurance and other benefits, THEN ADD the free tuition you got through the GI bill AND the stipend you received for living expenses while in school on the GI bill, then I’d say you were making “lawyer pay” during those four years in the service. You got one heck of a deal—all paid for by the taxpayers. I don’t see how you’ve got any room to complain that some people might get student loans discharged.
Ms. Smith,
My parents struggled to pay off loans for nearly a decade and a half, years in which they were rendered unable to make any big purchases without taking on massive debts due to interest rates, which is phenomenon that loan companies most definitely attempt to take advantage of. You compared loan companies as a parasite since it feeds on the economy and mentioned that in order to free the economy we should eradicate the parasite. I agree that student loans are a massive problem to both many individuals and the entire economy as a whole, and that quite imminent action is needed for said problem; however, I am quite hesitant in agreeing with the solution of forgiving all student loans. As a current student myself, why would it be fair for people who graduated two years above me to have all of their loans forgiven while I continue to amass debt for my last two years? While you also referenced the Levy Institute Paper’s forecast of a GDP increase of $86-108 billion a year, a hypothetical government buyout of all outstanding private sector loans creates a precedent. As this buyout is very similar to being bailed out (with all delinquencies being paid off), the banks will assume that government intervention will support their risky financial decisions. Thus, there will be no incentive for the banks to stop charging their high interest rates on future loans, with the current interest rate already being at 6.8%. I suggest that instead filling up private bank’s asset accounts, the government should instead create a capped interest rate, making student loans far more payable. By lowering the current interest rate on the student loan, not only will it lessen the burden on borrowers; it will also benefit lenders such as the federal government in the long run by lowering default rate since a lower interest rate will make the loan payment more manageable and will increase the chances of borrowers repaying.
While you correctly pointed out that loan companies target students because they make vulnerable hosts and allow loan companies to extract as much money as possible, how do you purpose to help these inexperience students and ensure that they won’t fall into traps set by loan companies? It appears to me that there needs to be more hands-on guidance in the loaning process because these students who lack experiences might not be able to make the best financial decisions. Ellcestor, a counselor from Educational Opportunity Center in Norfolk, mentioned in an interview that many students “do not understand what they are getting themselves into” by getting a loan and are “often too embarrassed to seek help”, and thus, tumultuous future fiscal consequences are created for these targeted students. In order to prevent them from becoming susceptible targets to loan companies, I also purpose that there should be more workshops available and perhaps make mandatory entrance counseling sessions be in-person rather than being a 20-30 minute forgettable online survey. This can protect the interest of young adults who are interested in attaining a degree in higher education by ensuring that they understand the process, risks and the variety of financial aid options they have prior to taking out a pseudo-subprime loan. While I don’t believe there is a deus ex machina to student loan default rates, I would hope that a collective effort in both the implementation of government policy and a correction of educational guidance will help students become aware of the true ramifications of taking out a loan, while simultaneously making student loans more.