Friday, July 4, 2014

Student Loan Debt: The Trillion Dollar Dog Collar

A Quick International Look At US Education
Perspective on Big Money and Thick Skin
After Reagan, the Debt Trillions no longer upset us...much.

Most Americans are somewhat confused about the US Constitution's handling of the issue of public education -- they think it mandates public education, and they are wrong. Further, when Americans think of public education, they are thinking of public schools [K-12 grades]. Of course, a Constitutionally mandated free education for just those grade levels would be better than what we have now, but for any rational intention to really land squarely in the competitive world of the 21st Century, MeanMesa thinks that even more education would necessarily be included in the concept.

Just as is the case with a heart breaking collection of other social/cultural necessities unmet, public education has suffered the debilitating journey through the dismal world of states rights. The results have been horrendous.

The current infuriating opportunity inequality fostered by this approach is an agonizingly visible carbuncle on the very hide of our pretentiously cosmetic "freedom and liberty for all." It's hard to imagine having either freedom or liberty in an economy without job opportunities when one couldn't even read ads for job opportunities if there were any.

Although this post is about the $Trillion dollar student loan fiasco now plaguing the country, MeanMesa considers the story one which reaches far beyond the common trappings of loans, payments and personal debt. Please  begin by having a look at the following "background" information [immediately below].

The following excerpts are from an October, 2013, article in The Atlantic magazine on line. [Read the entire article  here.]

The Atlantic
Stephen Lurie
October 16, 2013

Why Doesn't the Constitution Guarantee the Right to Education?

Every country that outperforms the U.S. has a constitutional or statutory commitment to this right.

For the American reader, once they scroll past the advice and best practices, finding the U.S. slot isn’t as pretty. By the report’s latest edition, in 2012, the United States education system sits at 17th place out of 40 countries, and it’s not just behind those socialist Scandinavians. In addition to the classic northern European bloc—Finland (1st), Netherlands (7th), Denmark (9th)—the superior contenders also come from Asia (2nd through 5th), Oceania (New Zealand, 8; Australia, 13), the rest of Europe, and indeed, even Canada (a respectable 10th).


Each of the countries ahead of the U.S. has a fundamental commitment in common, one that America doesn’t: a constitutional, or statutory, guarantee of the right to education. By centralizing education as a key focus of the state, these countries establish baseline requirements that set the frame for policy and judicial challenges, as well as contribute to what the Pearson report calls a “culture” of education: where “the cultural assumptions and values surrounding an education system do more to support or undermine it than the system can do on its own.” As the U.S. is about to embark on another national attempt at education reform in the Common Core, evidence suggests that a constitutional amendment, that rare beast, is both timely and vital to improved results. Comparing the American to the international approach to educational rights suggests that this reform might be a wise one.
Looking at the fundamental guarantee of education doesn’t just mean looking up the ladder. Thanks to the new Constitute Project, searching the global expanse of constitutions for a particular theme is now possible. “Education” is found in 174 country constitutions—i.e. nearly every single one. For some context, that’s just less than “free” (appearing 176 times), and just more than another term missing from the U.S. Constitution, “health” (170 times).

Every country that bests us in the education rankings either has a constitutional guarantee to education, or does not have a constitution but has ensured the right through an independent statute. Each has constructed law around education as a fundamental right of citizens, at least until the age of adulthood. Finland, the world leader, succinctly asserts, “Everyone has the right to basic education free of charge.”(Chapter 2, Section 16). South Korea’s Article 31 on Education has six sections. Switzerland’s constitution mentions education more than two dozen times. For countries with no formal constitution, many have included the right in supplementary documents like the Human Rights Act of the United Kingdom (1998) or the Australian Capital Territory Human Rights Act (2005). Others still, like New Zealand, form the basis for the right to education by incorporating international laws like the International Covenant on Economic, Social and Cultural Rights, whose Article 13 provides expansive assurances of education. In addition, each of these countries—well, almost every country in the world—is also party to the Convention on the Rights of the Child, the most widely accepted human rights treaty in history. The convention, which prohibits among other things the kidnapping and sexual exploitation of children, vigorously asserts the right of a child to education. Of UN members, only Somalia and the United States have not ratified that agreement.
[Links embedded in quoted content remain enabled.]

Public education costs money. Although most state constitutions guarantee citizen residents access to K-12 education, the predictable "states rights looting" has left millions of adolescents stranded with horrible education opportunities thanks primarily to legislative diversions of education money to alternative "favorite projects."

Here's the "red meat." This is a Republican habit, and the outrage exists most outlandishly in red states. Among these red states with horrible educational outcomes, there exists a group with even worse outcomes -- the Southern block of states are, by far, the most egregious of the violators.

Any ambition to address the monumental student loan disaster should set its ambitions high. The present situation highlights the Trillion Dollar Debt, but a comprehensive solution will include much more than just relief for the life-long "perpetual debtor class" of college graduates. America needs a break. Our national "reserve wealth" is essentially hollow after three decades of looting, and that "reserve wealth" isn't likely to ever be replenished by citizens with educational outcomes like the ones we have now.

When the US is officially finished with being "the richest kid on the block," we are going to have to start actually competing again.

We have tried patchwork "fixes" in the past with patchwork results, but now the "chicken has come home to roost." The countries with which the US is now competing internationally have already left us staggering around the starting gate while they race toward the finish line.

That "finish line" will be a global economy in which a plantation-like United States languishes in the throes of an all encompassing import economy driven by unmanageable credit debt and aggravated by a Third World illiteracy. Get ready. Most MeanMesa posts have something to do with oligarchy, and this one is no exception.

The Ugly Complicity of Colleges and Banksters

A corrupt Congress only represents the "middle men"

Right away, we must confront the reality of what's going on with the $ Trillion Dollars. It is debt. That means it is "collecting interest." Much of that debt has an interest rate around 6%-7% which means that someone is raking in around 6%-7% of one thousand billion dollars per year, or, in actual numbers, around $60 - $70 Billion dollars per year.

THAT is big business, indeed.

While it would be nice to simply blame the banksters, there really is another complicit party involved in the scandal. Universities -- back in the days of MeanMesa's youth -- were still subservient to the pressures of the free market. If they wanted students to attend, it meant that they would have to make themselves affordable. Even when MeanMesa was attending fairly reputable private schools in the 1960's, tuition, books and on campus dorm quarters could be purchased for around $5,000 per year or less.

   The "affordability" collision [chart source]
In a demand economic model a sensible "business plan" for "selling" a college education would normally design a product priced to reflect the purchasing power of potential consumers. The fundamental principle of a demand economy relies heavily on those "demanding" being able to purchase what they are "demanding."

[Accumulated inflation between 1962 and 2014 is around 620%. $5,000 in 1962 dollars would be around $35,000 in 2014. Link to Inflation Calculator.]

However, with banksters eagerly making debt available to today's college students, the usual "market pressure" to contain college expenses was removed. The current difficulty arose when statistics from previous decades showing that college degrees resulted in significantly higher incomes continued to justify modern debt decisions even after those rosy prognostics were no longer statistically accurate.

Student loan borrowers' decisions to take loans didn't, actually, make sense in these changed conditions.

The projected increases in income made $5,000 per year for college in the 1960's into what was actually a sensible "business plan" -- a "sensible investment."  Even $35,000 per year [today's dollars] to pay for a college degree might have actually made sense.

The "missing information" was that those statistics and especially the "forward trends" suggesting that these higher incomes would continue and increase did not account for what was destined to occur in the economy. Contrary to the "rosy picture" painted even as recently as a decade ago, salaries and wages first stagnated, then began to sink. Traditional expectations of US economic growth ["a rising tide lifts all boats"] became a thing of the past.

10% Middle class US income growth in 30 years [Chart Source]
The actual "performance" of the US economy as reflected in real income paints a dismal picture. The calculation that the higher income resulting from being a college graduate would justify going into debt to get that degree and provide the income needed for repayment faltered mightily when the money class emptied the economy in 2008.

The national reserve wealth in pension plans, real estate equity and the like plummeted 40% in a matter of two months. In the aftermath of the 2008 Bush Collapse, wages and salaries careened to a predictable "desperation level," and they stayed there. 

American workers -- with or without degrees -- became willing to work for less and less. Jobs which had been exported previously for lower labor costs began to be "repatriated" as domestic labor costs dropped to compete with those in China and Vietnam. [The US cost of living hasn't quite made that "adjustment" yet.]

2008 was a terrible time to be walking around with a degree and a student loan debt. 2008 was also a terrible time to be a freshman starting to go to school on borrowed money chasing an economic future which had officially evaporated. It gets worse. 2014 isn't showing any evidence suggesting an end of this. In fact, it's dismal outlook is beginning to look like the "new norm."

Let's take a look at the larger economic picture which is hosting the US student debt crisis. There are a number of additional aggravating factors, and most of them lead directly to an unsettling scheme to "rig" the domestic economy. The strategy is based on an alarmingly long time line for even the more typically short sighted billionaires, but it reveals the craven patience of those dreaming of becoming a permanent new American royalty class to accomplish their on-going economic coup d'etat.

The US Economy's Manic Episode
Just don't invite him for Thanksgiving.
Maybe it'll be better next year.

The violent economic collapse of 2008 finally removed the "stained sheets" which had been very comfortably obscuring some reality Americans had been denying for decades. Prior to the Reagan years US family income and standard of living had followed a more or less steady path upward for a long time. This had artificially "cemented" the expectation that these trends would continue, and that unexamined expectation fostered other, equally destructive,  subsequent expectations.

As a result of this, 2008 suddenly left the American public with an almost incomprehensibly different economy. Personal wealth for all but the richest suddenly dropped by 40%. Real estate equity evaporated when the carefully manicured bubble blew apart. But, perhaps most importantly for this post, what had been even possibly "conservative" expectations at the time of future earnings collided with a permanent block wall.

The "upward trend" was dead and buried. It also was not, of course, temporarily buried. It was slowly rejoining the rest of the soil on a very, very permanent basis. Any American observing the pathos of this epileptic recovery sees no evidence at all that things are "slowly returning to normal" if, by normal, one is referring to conditions prior to the Reagan "turning point."

Student loan borrowing shows exactly this.

Student Loans compared to other debt [chart source]

Generally, other debt began to decline after 2008 [technically called "de-leveraging"]. US consumers realized that they no longer had the wealth or the prospect of continuing or increasing earning power, and consequently, they began "cutting back" whereever possible. Granted, these  "cut backs" could not be undertaken instantly, but the consumer trends did start right away.

Student loan debt, on the other hand, did not prove to be nearly as fluid. By its nature this debt was long term -- long term both with respect to realizing the "return on investment" and long term with respect to the duration of the re-payment.

Further, the banksters' obedient Congressmen had put in place legislation prohibiting bankruptcy protection or most refinancing for student loan borrowers unable to make their scheduled payments. [Read more here.] Added to this, the interest rates on student loan debt were high. The personal finances of many sincere borrowers simply collapsed under the simultaneous onslaught of low incomes and high payments amid the smoldering ruins of a wrecked economy.

President Obama was able to "scratch together" a little relief for some of these disaster cases with his plan to limit repayment amounts to around 10% of income, but that only helped those with loans taken under certain conditions. [Read more here.

Perhaps a little more promising, Senator Elizabeth Warren [D-Mass.] has been promoting the idea that the US Congress might pass legislation to lower the admittedly outlandish high interest rates. [Read more here.] Naturally, the sold out dead enders in the Congressional Republican caucus didn't even need to wait for their oligarch masters to call with instructions before they chucked this idea into their phony "job creator" bon fire. [Read more here.]

Surveying ALL the Damage
It's easy. Everyone without a lobbyist bleeds.

It doesn't require a slide rule and a research facility to realize that the United States is heavily dependent on a sustained population of well educated citizens, but it turns out that history has already shown us that this necessity is not exclusively met simply by educating large numbers of Americans.

Sputnik and the NDEA

The particular history which springs to MeanMesa's mind is what happened after the Soviets successfully orbited the Sputnik satellite in 1957. The US Congress was stupefied, rushing forward immediately with check books wide open in a frantic effort to "catch up." Of course part of this effort was a famously discouraging sequence of failures as US Vanguard rockets attempting to place a 1.8 kg US "grapefruit" in low Earth orbit failed, one after another. [WIKI: Read more here.] However, there was also another interesting part of the Congressional response.

Responding to a reported shortage of technical expertise, the Congress also addressed the contemporary difficulties with US higher education. This took the form of what was called the NDEA - President Eisenhower's National Defense Education Act. For the first time, meaningful Federal monetary resources began to be directed at supporting students pursuing university technical course work. Although specifically directed at creating more mathematicians, the program offered loans for about any technical field producing graduates able to assist with the faltering rocket programs. [NDEA: Read more here.]

The Soviets were graduating an impressive number of mathematicians, engineers and physicists, but most of the scientific talent driving the US space program came from imported Werner Von Braun-style European technical labor at the time.

In practically no time the effect of the NDEA became clear. The domestic economy saw a spike in the these technical fields, but, even so, most of the graduates couldn't find work. Happily, things leveled out, "catching up with each other" after a few awkwardly difficult years as the initially uncoordinated economic plans began to gradually absorb the new labor expertise.

This was one of the reasons that the US economy mushroomed into amazing productivity and prosperity in the period between the Eisenhower administration and the privatizing, deregulating, divisive disaster of the Reagan years. This New York Times chart [below] shows the percentage of degrees earned in technical fields [2010.]

US Scientists: endangered species? [NY Times chart source]

Think of earthworms. It is a big job to gather them in the moon light, feed them each night, carry them around in buckets of mud, dig holes and so on to introduce them into a field. Further, the beneficial results don't appear with the next crop, but after a few years, the advantage they bring is steady and substantial, and could not be matched by any shorter term, alternate, agricultural approach. This was the case with the "injection" of the NDEA's domestic technical workers into the US economy -- space race or otherwise.

De-Professionalizing: Financial Sector Dominates Technical and Scientific

Well, that "Eisenhower prosperity" was also noticed by the American billionaires controlling the Congress. In fact, they liked every part of it with the specific exception of the high wages being drawn by all the scientists and mathematicians. Their dream materialized almost instantly. If the professionals could be "de-professionalized" and paid a blue collar wage, the billionaires could just pocket the savings.

Welcome Ronald Reagan. There wasn't a labor union ever created that he didn't want to demolish, and there were no teachers, scientists or engineers walking and breathing that he didn't think were over paid.

The scheme seemed to provide a truly strange attraction to the educational community, too. Reagan's de-professionalizing penchant was irresistible to university managers dreaming of gradually reducing professors' salaries while simultaneously increasing the cost of a college education. With NDEA out of the picture, there would be no "government interference" in the scheme beyond the quite manageable, dwindling issue of GI-Bill students, and even those could be transformed into a "profit center."

And so far as "profit centers" go, a large part of the student loan debt originated with shabby "on line" universities offering "at home" course studies but truly discouraging hiring potential for graduates. The "on line universities" promoted their "expertise" at successfully helping students get tuition loans, but the drop out rate at such places exceeded even the already troubling drop out rate at more conventional colleges. 

Dropping out did not effect the loan amounts. Those stayed in place -- leaving many of the "on line" students with debt, no degrees and really awful prospects for being employed.

Social Implications

A large debtor population has the anticipated economic consequences, but MeanMesa suggests that there are "social-psychology" consequences, too. Poor people have traditionally been locked into permanent debt, but in this case we are speaking of college graduates. In either case things "happen" when a lifetime is spent in debt.

Central among those consequences is what MeanMesa would consider a suffocating reduction in the "likelihood of risk taking." When student loans settle into an inescapable monthly payment for year after year, the hazard for risks which would have been considered acceptable and reasonable otherwise becomes paralyzing. The debt induces caution, but the traditional US economy has always elevated the value of risk.

Further, the risks we are considering here are not necessarily those associated with business ventures. Of course, a garage invention or an innovative small business start up may be the first type of such risks to come to mind, but there are others which are also vitally important to the country's future.

Think of a decision taken in, say, 1960 to join the Peace Corp after graduating from college or to temporarily set aside career work in favor of an effort to get someone elected to office. Such productive possibilities as the social rebellion of the 1970's become a "thing of the past." No one has time to "chase dreams" because everyone is too busy making enough to pay next month's student loan payment.

The onerous burden of unending student loan debt has the effect of seriously reducing what was previously the dynamic potential for some of the most creative, idealistic and passionate Americans. In this way the student debt strikes straight at the heart of exactly the national qualities which used to make the US competitive with other countries.

Educational Outcomes Falter

One of the decisions being edged "out of the picture" as debt ridden graduates plan their future is the choice to become a teacher. The career educator has been getting hammered for decades. The salaries for such job are evidence of the de-professionalizing mentioned above, but wages supported by collective bargaining in the teaching trade have also been practically eliminated.

The oligarchs very much prefer "training" to "education." While both are essential, we can consider "education" to represent a future potential which is not only more expensive but also more promising. College educated employees -- at least in previous years -- have been able to be more demanding for compensation and innovative freedom at work, both trends seen directly "eating into profits" by the new "owners" of the US economy.

More money might help if it didn't instantly become "profit" [Huff Post]

It is very tenuous to chart the path taken by the actual money of higher expenditures to the exact "pockets" where it ends its journey, but the "big picture" is chilling. The high interest, non-negotiable loans to college students are visible enough, but the structural re-allocation of resources right down to the preschool levels are a bit murkier.

Ironically, the money resources allocated to US education have actually increased as US competition with internationally comparative educational outcomes diminished. The picture is disturbing, indeed.

"Profit centers" have been gradually insinuated into the education process. One revealing example is text books. The provision of text books has become one of these "profit centers." Instructors and administrators have, quite mysteriously of course, begun to routinely require expensive "new editions" of texts costing literally hundreds of dollars in many cases to replace "out of date" texts which were 99% the same.

"On line" studies costing equally high dollars were originally presented as money saving alternatives to traditional university work but have now become some of the most expensive possible choices. Far too much of the "on line" course material has been simplified to endless lists of nearly useless "bullet points" in most cases.

Corporate interests have also insinuated themselves into universities by means of grants to support everything from new buildings to entirely new -- and suspiciously proprietary -- course programs, but these tax deductible, "altruistic" plans are always trailed by raw influence in their wake.  But "insinuate?" Yes. When corporations or oligarchs are dangling seven digit "prizes" before university administrators, priorities shift from a pure, idealistic desire to educate students to meeting a template required to successfully land a new asset for the university.

It can all quite easily be characterized as "growth" or "strengthening" the university's financial foundation. Naturally, with "more to run" salaries go up, too.

Further, after these corporately sponsored programs are in place, generous tax deductible "scholarships" begin to appear for students willing to pledge their future employment. These scholarships may be "good business" for universities, but they are granted to students laced with strings on the university -- often conditions demanding quite sinister -- and quite subjective  -- course "adjustments" with content fostering some pet ideology or less that factual bias. Sometimes the examples are blatant: climate change, conflicted "religious" priorities,  right wing politics or obviously suspicious stock market philosophies.

The decaying influence of the conversion of college athletics into its own "profit center" is even more egregious. Once universities become dependent on the income and prestige generated by sports, everything must be sacrificed for "favors." Simply educating high quality graduates has ceased to be a sufficient ambition -- usually a failed goal first felt by student athletes.

None of these issues taken individually is solely responsible for the skyrocketing costs of university education, but, taken together, they have established "priorities" which now exist in a monetized educational culture. Business interests managed to embed their profit oriented philosophy into what had previously been an education oriented philosophy. The quality of the educational results has not been promising.

National Security Impact

There was a time when college graduates considered joining the military with a reasonable expectation that enlistment could lead to promotions and possible careers. When this period ended with the meat grinder of the Vietnam War, university enrollment became a means to avoid military service. Now, with the private economy in a continuing tail spin, military recruiters are focused on young men and women lacking the financial resources to go to school.

This has two important ramifications. First, the scope of the military's efforts to train recruits -- including remedial education in many cases -- has mushroomed. The skills required to operate the modern, technology heavy, US military are not commonly taught in civilian colleges. Further, US citizens of military age have grown more and more likely to have already "abandoned" the visibly empty promise that education leads to higher incomes before they see a recruiter.

Second, a major recruiting asset offered by military service has been financing for a college career after leaving the military. However, although this might at first appear as a "win win" situation for both the military and the national economy, its actual financing has been fraught with Congressional mischief. MeanMesa has spoken with far too many young men just discharged from service attempting to actually utilize such opportunities who are sorely frustrated by the administrative and institutional complexities and by the arcane limitations incorporated in legislation making these promises.

Sold out tea bag Congressmen love looting "win win" opportunities, and they are experts at it.

National Economic Future Undercut

We may have all, at some time or another, wished that certain research had become available. In this case MeanMesa would like to see a correlation between educational outcomes and GDP growth. Each year -- for decades now -- we have been confronted with the continuing slippage of US educational outcomes in comparison with countries which are our competitors. Each year we seem to groan momentarily and then immediately slip into full blown denial. Each year we return blindly to plans to continue US education in roughly the same form as last year.

It is the frog bathing in water slowly being heated to a boil. Well, the "water" has officially become quite hot now. The slow, systematic failure of our educational system may have taken a while to reveal its depth and gravity, but now -- in 2014 -- that "revealing" has become "the elephant in the living room." The US economy is faltering for a variety of reasons, but high on that list we can easily see an unsettling shortage of creative, innovative, ambitious college graduates.

The US economy runs on powerful new ideas and powerful new thinkers. We are now apparently determined to run it on desperately in debt, frightened wage slaves. We can recall the hopelessness American youth faced in the sterile dystopian Bar B Que pit society of the 1950's and their "drop out, turn on" response to it. What comes next in this more modern "dog collar" generation may well out do anything the hippies put together.

Widespread "disaffection" to social norms rather than being something to dread, might prove to be the only "passive" force capable of wresting the country back from the oligarchs.

The Peoples Republic of China is graduating 160,000 engineers annually. We don't have forever to solve this.

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