No, They Can’t Renege on Student Debt

Sometimes the left is onto something. Take, for example, the
latest twist in the “Occupy” movement: Occupy
Student Debt. The new activism front, which began in with a Nov. 21 rally
at Occupy Ground Zero, New York’s Zuccotti Park, is trying to collect a million
online signatures from debtors pledging to refuse
to repay their student loans. That’s supposed to be only the beginning.
Down the road, according to the campaign’s organizers (members of the student
debt subcommittee of Occupy Wall Street’s Empowerment and Education working
group) are proposals to pressure Congress into writing off all existing student
loans and making future student loans interest-free–or better yet, having the
federal government subsidize tuition completely at all public colleges and
universities.

Good luck, you might say. Still, the Occupy Student Debt people
have focused public attention on the alarming growth of the federal
student loan program over the past few years. As USA Today recently
reported, the amount of student loans taken out in 2010 alone exceeded $100
million. Before the end of 2011, the total amount of outstanding student debt
is expected to exceed $1 trillion for the first time in history. Furthermore, USA
Today reported, students are borrowing twice what they borrowed only a
decade ago, even adjusting for inflation….

…That $1 trillion in outstanding debt
is double what it was five years ago–“a sharp contrast to consumers
reducing what’s owed on home loans and credit cards” during the current
economic downturn, reporter Dennis Cauchon wrote. According to data from the
U.S. Education Department, the overall default rate on student loans was close
to 9 percent in 2010, up from 7 percent in 2009. That’s highly troubling. But
it would be nice if the Occupy people would focus more closely on the factors
that undoubtedly led to the student-debt explosion–such as rampant tuition
inflation and a lack of borrowing responsibility on the part of students
themselves–rather than taking potshots at Wall Street fat cats and other members
of the Occupy rogues’ gallery.

That seems unlikely, though, given the predictable
ideological proclivities of the Occupy crowd. The highest-profile leader of the debt strike is Andrew
Ross, a professor at New York University. On Oct. 16 Ross led a teach-in titled
“Is Student Debt a Form of Indenture?” in the atrium of a Wall Street
office building near Zuccotti Park. Ross painted a lurid picture of a predatory
banking industry growing rich on federally subsidized interest payments,
fat loan-collection fees and default penalties, and a 2005 overhaul of federal
bankruptcy laws that made it nearly impossible to get rid of student debt in
bankruptcy court. Ross gave
his blessing to Occupy Student Debt and its defiant slogan: “Can’t
Pay! Won’t Pay! Join Us! Don’t Pay!”

Ross’s information was slightly out of date. In early 2010
Congress forced commercial banks out of the student-lending business, and the
sole fat-cat lender in the student-loan market is now the federal government
itself (although the banks still collect and service loans made before the
overhaul). And even before the government takeover, student loans were
typically purchased by Sallie Mae, a federally backed entity. That sort of
financial ignorance figures for Ross, who is not an economics or political
science professor as one might think, but an
English professor who leads NYU’s American-studies program. Ross’s academic
specialty is supposedly modern poetry, but like many an English professor over
the past two decades, he apparently got bored with literature and turned to the
trendier field of “cultural studies,” where he rose to academic
stardom writing about such topics as pornography, the Weather Channel, the
plight of globalized workers, and Celebration, the Disney planned community in
Florida. Ross was one of the editors of “Social Text,” the
cultural-studies journal that, under his editorship, ran the famous 1996
article on “postmodern physics” that turned out to be a hoax perpetrated by
one of Ross’s own colleagues, Alan Sokal, a physics professor at NYU.

Because the proposed debt strike, if effective, would leave
taxpayers–that is, you, me, and our offspring–on the hook for yet another
trillion dollars’ worth of federal debt–Ross has outraged his critics. Diane
Auer Jones, a former Education Department official (under President George
W. Bush) and a current vice president of the Career Education Corp. blasted
Ross’s encouragement of students to default on their loans as “an act of
educational malpractice” in a Dec. 1 blog entry for the Chronicle
of Higher Education. “Dr. Ross doesn’t seem to understand that
defaulting on a student loan does not eliminate the obligation to pay, but
instead increases the amount an individual will owe,” Jones wrote. She
called on NYU to “take action to silence” Ross: “Does he also
suggest that [students] steal and evade taxes as well?”

Jones may not need to fret. As of this writing, more than
two weeks after Ross issued his call to action, only 2,144 people had signed
the “Debtors’ Pledge” on the Occupy Student Debt website. For many
students and recent college graduates, any possible satisfaction gained from
sticking it to the Man is likely outweighed by fear of wage garnishments,
government confiscation of tax refunds, ruined credit ratings, and a dearth of
sympathy from working people who managed to pay their own debts. Furthermore,
as Judith Scott-Clayton, an assistant professor at Columbia University’s
Teachers College, noted in a Dec. 2 online post for the
New York Times, 90 percent of recipients of bachelor’s degrees graduate
with less than $40,000 worth of debt. That’s not a good figure, but it’s
generally manageable, what with the fairly generous loan repayment plans that
the federal government currently offers. Of the remaining 10 percent, many are
either from not-so-wealthy families who chose to attend pricey private
colleges, or attend for-profit colleges notorious for their high student-debt
loads. “If you have more than $75,000 in undergraduate debt, you are the 1
percent–just not the 1 percent you might have been hoping for,”
Scott-Clayton wrote.

That suggests that the real problem with escalating student
debt might be unwise choices made by youthful borrowers who would be better off
attending a cheaper public college and working part-time and summers rather
than heedlessly piling up loans. The other problem is ever-escalating tuition
and fees. This year alone tuition and at U.S. public universities rose by 8.3
percent, twice the rate of inflation, to an average $8,244, while tuition and
fees at nonprofit private colleges rose 4.5 percent to $28,500, according
to Bloomberg News, which used figures obtained from the College Board. The
reasons for the tuition hikes are many: strapped state budgets, bloated
university administrations, fancy campus facilities, too much subsidization of
faculty research instead of teaching. Those University of California-Davis
students who got pepper-sprayed were protesting tuition increases that could
total 81 percent over the next few years. Encouraging students to make smarter
loan decisions and university administrators to trim their costs ought to be
the focus of any move to reduce student debt. But those ideas obviously aren’t
sexy or Marxist enough for the class-warfare-obsessed Occupy movement.