Student Loans: The Most Oppressive Kind Of Debt and Why We Have It
The culture of education in the United States is one that is unique and competitive. Students are groomed to be good college students and become productive members of society. In recent history, there has been a shift in demographics and types of students attending colleges. More and more students, with assistance from the government or other educational institutions, are attending college. The surge in college students has resulted in even more money being loaned to pay for these educations. Few however fail to realize the oppressive nature of this debt but incur it because they see it as a necessary asset in the job market. The student loan industry is not favorable towards students and prospective applicants. Those who find themselves in these positions must have a firm understanding of its history and the consequences of their decisions.
Education in the United States has only recently become accessible to most people. Before the 1940s, “the only education legislation was the Morrill Act, which created land-grant colleges and vocational education for disabled veterans” (Strach 65). A majority of the population in this country would finish high school and move into an industry or vocation immediately after. The first major piece of legislation that changed this culture was the GI Bill of 1944. The GI Bill provided among other things loan guarantees for homes and travel expensive. It also “covered college tuition…up to five hundred dollars per year and paid [veterans] monthly living allowances while they pursued their studies” (Collinge 2). This was the first instance in our nation’s history that the federal government provided aid for people who wanted to go to school. “By 1974, nearly 50 percent of all new college students were returning military personnel, and by the time the original GI Bill expired, in 1956, a remarkable 7.6 million Americans had utilized the program” (2).
Servicemen and women following the GI Bill had a greater opportunity to gain an education. However, demographics including low and middle-income families were still struggling. Doors would not open up for these groups until the Higher Education Act of 1965, specifically the work-study provision. Under the work-study program, “the federal government would pay 90 percent of the costs [of part-time student employment], and the colleges and universities would pick up the remaining 10 percent” (Strach 66). Realizing that most support for families came in multiple forms, the work-study program gave struggling students another avenue to not only pay for school but also to support themselves with a small income. Although work-study gave students a small cash flow, families could not guarantee they would get financial assistance. This would change with the Basic Educational Opportunity Grants/Pell Grants of 1972. These grants “guaranteed [students] an amount based on their college costs minus their expected family contribution” and were described “on a scale second only to the GI Bill” (Strach 67). With greater opportunity, lower and middle-income people now found it somewhat affordable to get an education, resulting in a great surge of college students in America.
Although government programs made it somewhat easier to afford university, some students were not prepared for this type of education. Community colleges in recent history have begun to take overflow from universities and colleges as an inexpensive education route. Community colleges have existed in the United States since the early 1900s, but “recently, community colleges have had [a] workforce training aspect…” (EduExec). With more and more industries looking for people with higher degrees, some community colleges have even started offering bachelor’s degrees. The upward trends in community college applications is a growing sign of a society that values education, and these institutions are trying to meet the public need. With the growing rate of students and the lack of employment, community colleges are turning away more and more hopeful applicants each year. To fill the growing demand, for-profit institutions have been gaining market share and capital.
For-profit institutions are different than regular educational institutions in regards to their ability to raise funds. Unlike traditional institutions whose cash flow comes from alumni donations and governments, for-profits sell shares of their school to raise capital. In essence, for-profit schools are businesses that sell degrees as products. For-profit education is the fastest growing sector in the industry, averaging 25 percent growth a year and totaling over 2.8 million students (Durrance). The reason for such an upsurge in for-profit schools comes from abundant aide and an easy application process. For-profit institutions collect 25 percent of the federal student aide funds but only have 10 percent of the nation’s student body. In actuality, most of the profit comes from federal aide. The University of Phoenix, the largest for-profit in the country, reports that 86 percent of its revenues come from federal aide (Durrance). These new types of educational institutions create easy opportunities for people to get an education. The downside of easy access education is the amount of people who want it. With a lackluster economy, the rise in higher education attendance has gone through the roof and saturated the market with degree-holding individuals. As a result, there are too many degree holders who go on to get jobs that do not require a degree at all.
More and more people feel as though it is necessary to have a college degree. There is a degree if truth to this statement because many employers look for degrees as a necessary component for hiring. As a result, students who wouldn’t normally go to college have flooded traditional, community, and for-profit colleges looking for a way to get a better job. In addition, a majority of these people can’t afford the tuition bill. As a result, taking out student loans and acquiring massive amounts of student debt has become a “necessary evil.” Without the debt, there is no way to get an education, and without an education, it is extremely difficult to get a job. The culture of student debt has become that many don’t weigh the options when taking out loans. Many do not do research and few realize the oppressive nature of the debt.
With the downturn in the economy, many people who have student debt have realized the significance of their decision. People are drowning in debt and there are very few consumer protection laws to shield them. Some claim the reason behind the lack of consumer protection comes from favorable legislation from Congress to benefit loan givers, specifically Sallie Mae. The federal government in 1972 created Sallie Mae as a government sponsored enterprise (similar to the Postal Service). Its main purpose was to create, service, and collect on federal student loans. In 1997 Sallie Mae began to privatize and eventually broke all connection with the government in 2004 (Collinge 5-14). Sallie Mae is now a privately owned bank that offers federally backed loans for a profit. Many people are unaware of its status with the government and feel that their loans are safer because they think Sallie Mae is a part of the government. In actuality, the laws regarding student debt allow Sallie Mae and other private loan givers to employ “draconian methods of collection” (Collinge 6).
The two biggest injustices done to loan holders are laws regarding consolidation and bankruptcy. Congress and private lenders like Sallie Mae have made the process so favorable for them that one can never be relieved of student debts. Most debts, including credit cards, are dischargeable in bankruptcy court. That means that the debt is forgiven or reduced to a more reasonable level for the individual. “[The] 1998 Higher Education Act reauthorization abolished [a dischargeable] provision…[which makes] student loans…the only type of loan in U.S. history to be nondischargeable in bankruptcy” (Coolinge 14). One debt holder who went to bankruptcy court said: “The judge told me not to come back unless I was in a wheelchair” (qtd. in Collinge 14). Student debt is also one of the only debts that can be consolidated once. “Once a student graduated and consolidated his or her loans, he or she could never leave that lender, even if there were other lenders who were willing to offer better terms (15). Students are bound to one lender and if they are unable to pay the rates, the company can garnish wages, lower credit scores, and affect your ability to get a mortgage or other loans. “The freedom to change lenders in order to find better terms for a loan is a consumer protection that is taken for granted in every other lending industry, but is nonexistent for student loans” (15). Without essential consumer protections in place, students are subjugated to the harsh policies of the lenders and government.
The fight over student loan programs in the United States has been one that is both partisan and emotional. Many times, true and effective legislation is defeated in Congress because of the strong legislative ties big banks have with Congressmen. A sign of hope came last March with the Health Care Overhaul bill. Written into the legislation were significant education reforms including dramatic changes to Sallie Mae’s federal subsidies. With this new legislation, Sallie Mae “will no longer be able to make student loans with federal money” (Herszenhorn). That money will now go towards endowing more Pell Grants and tie them to the national inflation rate. Although the amount a student can receive is only about one-third of the cost of public university for a year, it is a significant step in the right direction (Herszenhorn).
The problem of student debt is one with an extensive history that revolves around political and economic factors. The government, in an attempt to provide opportunity to returning veterans, created a culture that valued higher education. As time progressed, more and more people were able to afford a higher education. Because of the downturn in the economy, more and more people feel it necessary to get a higher education. Many of these people take out significant student loans without regard to their consequences. They soon discover the oppressive policies towards student loan holders and realize the difficulty there is in repayment. This problem is not an easy fix. The average student in America has over $26,000 in student debt after graduation (Herszenhorn). The mix between students, banks, governments, and educational institutions creates a situation where there are many agendas trying to be satisfied. The best way to fight the problem is for people considering higher education to understand the entire process and consequences associated with the system. Education is a good and necessary part of life, but not if it requires substantial loans that will linger for decades after graduation.
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