The Department of Education refuses to release more accurate default numbers. But outsiders think the DOE is lowballing it. The Chronicle of Higher Education charges that the government "vastly undercounts defaults." In 2010, it estimated that one in five had defaulted on their loans since 1995, that 31 percent of community-college students default and that an astonishing 40 percent of students attending for-profit schools end up defaulting. A report by the Inspector General of the Department of Education has come to similar conclusions about the reliability of the absurd and arbitrary "cohort" figure.
However high that default number really is, what's clear is that the state is still able to turn billions in profit on its lending, and expects to continue to do so for the next 10 years. The reason for that, again, lies in something everyone who has a student loan understands implicitly -- the state and its collectors are not squeamish collecting the money they're owed. The government is in the pain business, and business is good.
"They called me at work, sometimes two to three times a day, doing all the stuff they aren't supposed to do: threats, et cetera," says 41-year-old Shawn FitzGerald, who owes $300 a month and says he expects to be paying off education loans into his sixties. "They told the receptionist at my job that I was in legal trouble..."
"Sallie Mae has started sending letters to my deceased mother," says Thomas Daggett of Chesterfield, Massachusetts, who left school in the Nineties and owes $35,000.
"I have been told I made the wrong decision going to college, as well as being told I was a failure, an idiot and a mooch," says Larissa, a young woman from a blue-collar town outside Chicago. "I've had ex-boyfriends that I never even lived with contacted by collection agents, my childhood friend's distant relatives contacted by them, as well as distant relatives of my own..."
"I try not to look at the balances because the prospect of paying them off with my sh*t salary is so goddamn depressing it makes me want to chug vodka until I pass out," says Robert Boardman, a proud but underemployed owner of a doctorate from the University of Michigan.
There's a particularly dark twist to the education story, which is tied to the collapse of the middle class and the overall shittening of our economic landscape: College degrees are actually considered to be more essential than ever. The New York Times did a story earlier this year declaring the college degree to be the "new high school diploma," describing it as essentially a minimum job requirement. They found an Atlanta law firm that requires even clerks, secretaries and runners to have four-year degrees and cited research that everyone from hygienists to cargo agents needs to have graduated from college to get hired.
You can look at this development in one of two ways. One way is to see a college degree as a better investment than ever, which was the conclusion of the Organization for Economic Cooperation and Development, which noted that the difference in earnings between the poorly and well-educated has risen in recent years with the worsening economy.
But another way to look at this new truth is that, because of the poor job market, young people may have less of a chance than ever to actually get a good job commensurate with their education. If they don't have the degree, then they have no chance at all. So if they even want a clerking job, they must dive face-first into the debt muck and take their chances that they won't end up watching the federal government take bites out of disability checks while their law degree gathers dust downstairs somewhere. So, yes, a college education is a great thing, and you probably need one now more than ever -- the problem is that it may very well be mandatory, may have less of a chance of ever getting you a job, and you may still be paying for it on your deathbed no matter what.
There are powerful reasons for both the left and the right to be willfully blind to the root problem. Democrats -- who, incidentally, receive at least twice as much money from the education lobby as Republicans -- like to see the raging river of free-flowing student loans as a triumph of educational access. Any suggestion that saddling befuddled youngsters with tens of thousands of dollars in school debts is somehow harmful or counterproductive to society is often swiftly shot down by politicians or industry insiders as an anti-student position. The idea that limitless government credit might be at least enabling high education costs tends to be derisively described as the "Bennett hypothesis," since right-wing moralist and notorious gambler/dick/hypocrite Bill Bennett once touted the same idea.
"It is wrong to suggest that student aid is a cause for growing college costs, in any sector," David Warren, president of the National Association of Independent Colleges and Universities, wrote in The Washington Post last year, bemoaning the "re-emergence" of the Bennett theory. "To argue so is counterproductive to the goal of making higher education accessible and affordable."
Conservatives, meanwhile, with their usual "f*ck everybody who complains about anything unless it's us" mentality, tend to portray the student-loan "problem" as a bunch of spoiled, irresponsible losers who are simply whining about having to pay back money they borrowed with their eyes wide open. When Yale and Penn recently began suing students who were defaulting on their federal Perkins loans, a Cato Institute analyst named Neal McCluskey pretty much summed up the conservative take. "You could take a job at Subway or wherever to pay the bills," he said. "It seems like basic responsibility to me."
But conservatives most of all should hate the current system for any number of reasons -- for being a massive hidden tax, for being a market-defying subsidy artificially keeping ineffective and poor-performing institutions in business, and for being an example of arbitrary government power seizing not just money borrowed plus interest, but billions in additional fees and penalties from ordinary people.
Progressives should hate the predatory tactics of lenders and the sleazy way universities rely upon loan-shark collection methods to keep themselves in fancy new waterfalls, swimming pools and tenure-track jobs.
But nobody hates it enough, except for the people actually trying to pay the bills with increasingly worthless degrees. Instead, the credit keeps flowing and the debt bubble keeps expanding, thanks to leaders like John Boehner (whose daughter reportedly works at Sallie Mae's student-collections firm, General Revenue Corp.) and Dianne Feinstein (who introduced legislation to increase limits on Pell grants while her husband was heavily invested in for-profit colleges).
In a way, America itself is violating the Truth in Lending Act. It's cheering millions of high school graduates toward college every year, feeding them into the debt grinder under the banner of increased opportunity, when full disclosure would require admitting that there isn't a hell of a lot waiting for them on the other side, where the middle class has nearly vanished and full employment is going the way of the dodo.