Let’s Talk About Debt

A risky bet is hard to be honest about after you’ve made it. Especially if the payoff—a college degree—gets its social value from appearing to others to be worth the risk. But the amount of total U.S. student debt—now more than $1.1 trillion—has grown to such a force in our society that we need to own up to it. Remaining silent about what could become a real economic crisis, by shouldering the weight of debt on our own, is delusional. Student debt is the outcome of decades-old economic pressures that have encouraged risk and separated those who take it on. While each of us has borrowed individually, we stand together under the weight of both the systemic force of capitalism and the structural forces of white supremacy and patriarchy. It may appear that hard work is the only way out, but to avoid serious crisis we have to better understand student debt’s collective nature.

Warnings about a student debt crisis have moved from the economics fringe to the mainstream press. And for good reason; total student debt is massive and growing. In 2012, student loans exceeded the total amount of all other ‘unsecured’ debt, e.g., credit cards and auto loans, combined. Since 2003, student debt has quadrupled. But are all these loans, like the mortgage debt crisis of 2007, a ‘bubble’ about to burst? I’m not sure the answer matters. Not only because the difference between $1.1 trillion and $11 trillion is hard to grasp, but because such a question ignores the role of credit in a capitalist economy. The only way out of this mess is conscious and collective action based on an understanding of how higher education fits into the overall economic system. And fear never makes good politics.

Like the ‘sub-prime’ mortgages that almost sunk the economy in 2007, executed student loans are packaged together as assets by lenders and sold in bundles to other investors. This offloads risk from the original lender, like Sallie Mae, onto the investor that purchased the loan. And through political power, investors have been able to shift even more financial risk to students. Political scientist Susan Soederberg has documented this political maneuvering. Get this: student debt is the only form of debt that the government can garnish social security payments to pay back. If you still have student debt when you’re old enough to receive a social security payment, the government can take that money, even if you’re poor. If you ever declare bankruptcy, all debt can be forgiven except student debt. So, lenders pass off their risk to investors who have used political power to decrease even more risk. But students have no protection from the whims of illness, a bad labor market, or the rising cost of food and housing.

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That might sound insane enough, but student debt is just one piece of a massive shift in political economy that began in the late 1970s when profit derived from interest and fees on lending began outpacing profit made from the production of physical goods. The empty factories in the rust belt are fossils of the prior era. It’s not an accident that the widespread expansion of credit over the past three decades—which includes the ballooning of student loans—has occurred as wages have stagnated. No total analysis of the U.S. economy can escape this fact: between 1973 and 2013, economic productivity grew eight times as more as wages paid to workers did. That means two things: growing profits for business owners and more stuff to consume. Consumers have needed more and more purchasing power (cash or credit) to buy all the new stuff (goods, services, and experiences), since a capitalist economy relies on demand to keep food and other commodities on the shelves. Paraphrasing Marx, Soederberg writes that the credit system “temporarily resolves the contradictions to which capitalism is prone.” So as wages have plateaued, credit cards, auto loans, and student loans have stretched purchasing power to keep the economy growing.

At the heart of a student loan is the student’s future labor power. Unless you start a business, you’ll pay off your loan through capitalism’s primary form of exploitation, a job. Wage labor is a social relationship, and inherently an unequal one. The worker offers her work for a certain amount of money, and the business owner profits from the difference between this amount and what the work product is worth in the market. When the worker owes student debt, part of their wage is going to yet another business owner but in a different form, i.e., an investor. As wages become more contested, structural forces, i.e., race and gender, collide with the individual burden of carrying student debt. For example, just like the mortgages at the center of the housing crisis, student loans offered for attendance at for-profit colleges—which most often serve the working class and people of color looking for alternatives to a dominant education system that ignores them—have spiked. Working class students, in particular, have been sold an opportunity to enter the ‘middle class’ not just through hard work but through credit—and the odds are they won’t be able to pay it back.

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But, affluent or poor, black or white, we’re all caught in the same system. Millions of students that gave up on college or haven’t found a job after graduation are suffering under the burden of thousands of dollars in debt. Over a million professors are teaching students to think critically and live meaningful lives, yet universities hire them on ad hoc contracts as adjuncts. Millions of workers, many of them black or Latino, are cleaning halls or making food at universities for little pay. But adjuncts, workers, and students are organizing. Students with heavy burdens, like those organizing with the Debt Collective, are talking openly about their debt. Raising consciousness is important, but material change is possible. An offshoot of Occupy Wall Street called Rolling Jubilee has ‘abolished’ almost $32 million in student debt by acting as investors but forgiving the loans once they’ve bought them.

We need to support these struggles against the neoliberal university and participate when we can. The burden is too much to carry alone. Collective struggle, as it has always been, is the only way out of collective suffering.

Short of consciously ending the exploitative systems of capitalism, white supremacy, and patriarchy, we should demand more public spending on higher education and serious protections for those that need to borrow to move up in the economy. We should demand that, since they derive their profit from the work we’re putting in at school and from an economy full of ‘skilled’ workers, banks and investors should be taxed at a higher rate to subsidize the education system. But all of that requires being vulnerable and honest about our debt first, so let’s talk.