Obama’s student-loan “reform” falls far short of eliminating debt burdens

The United States’ university and college system can most accurately be described as a continuous debt-generating apparatus.  Students enter into college or university under the premise that once they receive their degree they will find high-paying jobs, enabling them to not only pay back their tuition debt along with other fees but be able, at the same time, to live a comfortable existence.  Most recent graduates will tell you, that nothing could be further from the truth.

Currently, the average total debt incurred by students upon receiving their degree at a four-year institution can often be as high as $23,200.  Furthermore, on top of student loans most students have credit card debt they amassed from paying living expenses – $3,200 on average.  This system ensures massive profits for the parasitic banks and privately owned student-loan companies through exorbitant interest rates.

The current crisis of capitalism has undoubtedly led to a dramatic worldwide increase in unemployment and chronic underemployment.  Entry-level wages for formerly “high-paying,” post-graduate positions were slashed – if those jobs did not disappear altogether.  After their graduation, and with the onset of recession, more and more students have found themselves having to accept low-paying jobs in places like coffee shops or the retail industry just to cover their daily expenses.  The whole premise, therefore, under which students request loans for their education and training is entirely dysfunctional, oppressive, and, ultimately, exploitative.

The discussion and debate surrounding the recently passed health-care bill overshadowed an important aspect of it – a reform of the student-loan system.  Beginning in July, the state will take over a majority of issued loans stemming from private banks and corporate-loan companies.  Whereas now the government simply guarantees the loans issued by private banks, the elimination of this intermediary is projected to save millions of dollars in former subsidies.  Newly signed loans will also have a capped 3.4 percent interest rate.  Although that is a good start, the loans that already exist will not be affected by this cap, which means millions of students will still have to pay back their current loans with interest rates that can easily reach 10 percent or more.  New repayment terms will come into existence for loans signed only after 2014.  The current repayment cap of 15 percent of disposable income will be lowered to 10 percent.  Furthermore, the government can forgive some borrowers’ debt after 20 years whereas now lenders can forgive student-loan debt only after 25 years.

Public servants, i.e., nurses, soldiers, and teachers, could see more relief.  Their debt can be forgiven after only 10 years, and they can get assistance of up to $4,000 for tuition.  In addition, a portion of their loans can be forgiven if they make less than $65,000 per annum.

Another aspect of the student-loan reform is the increasing of Pell Grants for lower-income students.  As part of last year’s stimulus package, they were raised, but they would be lowered again once the stimulus money ran out.  The amount of Pell Grants is slated to increase from approximately $400 to $5,975 by 2017, correlated to fluctuations in the indices of consumer prices.

All these changes are starting points, but they are also very vague and do not really address the central problems most students find themselves in.  The estimation of the Consumer Price Index in 2017, for example, is an example of one of the vague features of the bill.  Moreover, millions of students remain saddled with incredible amounts of debt.  Most of the measures contained in the bill do not consider general inflation, and none of them considers tuition inflation.

All across the country colleges and universities are raising tuition and other fees – year on year.  The minuscule increases in the issue of Pell Grants during this time, for example, will be outpaced, unable to account for the massive increases in tuition payments and, thus, they will rapidly run their course.  Moreover, with the availability of subsidized loans issuing directly from the government, students could potentially end up paying more for tuition, as universities and colleges would not allow such an opportunity to pass them by without allowing for the raising of tuition payments even more to expand their profit-making potential.

As a student, therefore, by the end of your studies – even after the implementation of Obama’s student-loan “reform” program – you have the potential of amassing massive amounts of debt; and this debt gets harder and harder to pay back with the disappearance of high-paying jobs along with jobs in general.  One could realistically end up paying off undergraduate and or post-graduate debt decades after achieving a degree as a result.  If you do not have a job or have one that barely allows you to pay your rent, put food in your mouth and gas in your car, you can find it next to impossible to pay back any loans – no matter the terms of application.

This cannot go on. The system of trading debt to the richest banks and corporations on the planet for an education is bankrupt and needs abolishing.  Education must be completely free and open to everyone – no to tuition and no to any other university or college-related fees.  All student loans as well as credit card debts have to be abrogated immediately and retroactively.