Thursday, October 17, 2013

The Difficult Escape from Student Loan Debt-Serfdom

Longtime correspondent E.S. submits an insider's perspective of student loan debt-serfdom.

In my analysis, the self-reinforcing dynamics of neocolonial and neofeudal financialization are the key forces of debt-serfdom. The most blatant example of neofeudal debt-serfdom is the vast student loan industry which has burdened college students with over $1 trillion in debt that cannot be discharged by conventional legal means--for example, bankruptcy.


Recently, enforcing this debt-serfdom exploitation has been offloaded onto the Federal government, which now holds roughly 2/3 of the total debt ($674 billion).This is of course the core of the neocolonial financialization model--the state enforces what is essentially a for-profit exploitation of debt-serfdom.

A number of correspondents have observed that there are a few ways to reduce the burdens of student loan debt-serfdom, but these are not that easy to pursue. One is to pay the minimum long enough to qualify for some dispensations, and another is to act as one's own attorney and wind your way through multiple layers of legal maneuvering through bankruptcy. The few who have succeeded at this received enormous publicity, but this does not set a precedent that is useful to others.

Longtime correspondent E.S. submitted an insider's perspective of the more realistic alternative: paying off the loan.

I wanted to weigh in on this student loan issue. I used to work in the student loan industry. When I was in it, Clinton was still president. We always figured that the Feds took over the industry to wrest the profits away from the evil (Republican, for-profit) lenders who were making fortunes on the loans. 
In those days, there were still student loan guarantor agencies which had two basic functions: 1. to pay the lenders when the loans failed and 2. to shut down schools that failed to comply with the Federal regs. 
Then de-regulation came along and we have what we have now--the Dept of Education issuing loans. In the 1970's they tried this and failed. Loans defaulted left and right and the Feds never could track them down. The students blew off their loans and that was the end of it. 
Later, in the 1980's, the regular banks got back in the business and started making massive profits. The guarantor agencies guaranteed the loans, the banks had nothing to lose. (The guarantor agencies were government sponsored agencies anyway.) Everyone was fat, dumb and happy. 
One thing the guarantors did well was shut down bad schools. You don't see that today. After de-regulation, the guaranty agencies went away for the most part. They aren't around now to shut down bad schools. That's why you see so many kids getting worthless, expensive degrees. It's shameless. But, the private and public 4-year schools are really no better. They're still peddling the same liberal arts, none-marketable degrees in 14th century French poetry, as lovely as it is. 
I was an older student and graduated from college in 2000. I've spent the last 13 years trying to pay off my onerous loan from a private, liberal arts college in Oregon. It's been hell. 
Luckily, because I've worked in the industry, I knew precisely what I was in for if I defaulted. I used to make collections call on delinquent and defaulted borrowers. 
Last summer I made up my mind to do WHATEVER it took to get out of this slavery. And it is SLAVERY. I've worked, scrimped, saved, and nearly starved myself at times to pay this loan. It is now 50% lower than it was last year. But, my sum was modest compared to kids now. 
Let me tell you this--no one who is in their twenties is ever going to have the wherewithal to pay off $100-200k in student loan debt. On the minimum payments, none of them will live long enough to ever see it finished. 
And fewer still have the courage or the stubbornness to make the sacrifices necessary to put their debt behind them. Or, perhaps, with the job situation as it is, they just don't have a shot at it at all. I don't know. 
Next year my loan will be gone, by hook or by crook, and probably just in time for the first round of student loan "jubilees." C'est la guerre. 
I will never take out another student loan as long as I live.
Thank you, E.S., for an insider's perspective on student loan debt-serfdom. The only sure way to avoid debt-serfdom is to not borrow money in the first place.

Posts and email responses will be sporadic in October due to family commitments. Thank you for your understanding.



The Nearly Free University and The Emerging Economy:
The Revolution in Higher Education

Reconnecting higher education, livelihoods and the economy

With the soaring cost of higher education, has the value a college degree been turned upside down? College tuition and fees are up 1000% since 1980. Half of all recent college graduates are jobless or underemployed, revealing a deep disconnect between higher education and the job market.

It is no surprise everyone is asking: Where is the return on investment? Is the assumption that higher education returns greater prosperity no longer true? And if this is the case, how does this impact you, your children and grandchildren?

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We must thoroughly understand the twin revolutions now fundamentally changing our world: The true cost of higher education and an economy that seems to re-shape itself minute to minute.

The Nearly Free University and the Emerging Economy clearly describes the underlying dynamics at work - and, more importantly, lays out a new low-cost model for higher education: how digital technology is enabling a revolution in higher education that dramatically lowers costs while expanding the opportunities for students of all ages.

The Nearly Free University and the Emerging Economy provides clarity and optimism in a period of the greatest change our educational systems and society have seen, and offers everyone the tools needed to prosper in the Emerging Economy.

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Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify. We will cover the five core reasons why things are falling apart:

go to print edition1. Debt and financialization
2. Crony capitalism
3. Diminishing returns
4. Centralization
5. Technological, financial and demographic changes in our economy

Complex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).

We are not powerless. Once we accept responsibility, we become powerful.

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