Note: This was published as an op-ed in the December 4, 2011 edition of the New York Daily News
While the Occupy Wall Street protesters are mad about many things, student debt stands out. And rightly so — when reckless banks destroy the economy, the government bails them out. But when college graduates can’t pay their students loans back to banks because there are no jobs, due to banks destroying the economy, they’re out of luck.
Now a group of Occupy protesters has launched a campaign encouraging students to repudiate their debt. “There is no justice in a system that openly invites profiteering on the part of lenders,” they say.
I understand the anger. But the debt repudiators have identified the wrong villain. The real profiteers in the higher education system aren’t the lenders – they’re the colleges and universities. And they’ve already been paid in full.
It’s true that, until recently, most student loans were issued by private banks. But the interest rates were, for the most part, regulated and subsidized by the federal government. And after landmark reforms spearheaded by President Obama in 2010, private banks have been largely cut out of the system. Now the U.S. Department of Education does most of the lending, at relatively low rates.
Mass failure to pay back loans, then, will cost the taxpayers a lot of money and ruin the credit ratings of students who will need to be able to borrow later in life.
Not all student loans, moreover, are usurious or excessive. Many represent legitimate contracts that students should honor. Why should a lower-income student who avoided borrowing by enrolling in a cheaper public college and working two jobs get nothing, while an upper-class student who borrowed $100,000 to attend a private liberal arts college suddenly get a free ride?
Recently-released federal default rate statistics reveal that a growing percentage of students are already failing to pay their loans back on time. An increase in that number isn’t going to make the fantasy of mass debt forgiveness come true. Instead, we need more policies like the new federal loan consolidation program recently announced by the Obama administration, which will help move more outstanding debt away from private banks. Another Obama initiative will help students limit their monthly payments to a fixed percentage of their income, and forgive remaining debt after 20 years.
The Occupy movement should focus its attention on the root cause of rapidly increasing student debt: rapidly rising college prices. The non-profit College Board recently found that tuition and fees at public universities have increased by an average of 5.6% above the inflation rate every year for the last decade. Colleges have been pouring money into sports programs, increased administrative overhead and expensive facilities even as state legislatures have been cutting back on public support for higher education.
At the same time, college degrees have become increasingly necessary for people to pursue decent jobs. Colleges have students and parents over a barrel — and they know it. So they have raised prices without mercy.
It’s time for the recent college graduates in Zuccotti Park and elsewhere to train their sights back on their alma maters. Alumni should pledge to halt all contributions to the endowments of colleges that raise tuition excessively, or fail to make sufficient financial aid available to low-income students. And instead of debtors refusing to pay their loans, students should refuse to pay the extra tuition charges that stingy state legislators and greedy college administrators are foisting upon them, and then dare college officials to deny them access to classrooms.
That would be a protest movement worth supporting.