Can a Higher Education be Repossessed? Katie Crabtree

Student debt in the United States has now reached a total of $1.3 trillion (Kamentz 2017). The reasons for this large sum are many; most noticeably, tuition fees have increased by 9% since 2011 (College Board 2017) and enrollment has […]

Student debt in the United States has now reached a total of $1.3 trillion (Kamentz 2017). The reasons for this large sum are many; most noticeably, tuition fees have increased by 9% since 2011 (College Board 2017) and enrollment has increased by 17% from 2004 to 2014 (National Center 2016). As such, more students going to college means that more are borrowing. In addition to this, the repayment of standing debt has slowed in the past five years which also adds to the total amount of debt. But why has repayment slowed? And, perhaps more pressing, why do borrowers have difficulty repaying?

The educational economist, Susan Dynarski (2014), suggests that the benefits of obtaining a higher education degree come slowly. This makes sense; first jobs that require a Bachelor’s or even a Master’s degree do not have high salaries and recent graduates are also flooded with the costs associated to starting life off campus. Further down the line, the degree and added work experience leads to a bigger paycheck and higher ability to repay. Dynarski argues that this mismatch between the costs and the delayed accrual of benefits to a university degree is the reason there is a repayment crisis as opposed to a debt crisis. She advises a revision of repayment plans so that borrowers have greater flexibility in making their monthly payments according to their financial situation. There are many repayment plans available to student loan borrowers, such as Pay as You Earn and Income-Based Repayment plans from the Obama Era. This expansion of repayment plans has led to a slowing of repayment but also a decrease in default (Kamentz 2017). As such, repayment options are crucial in alleviating the strain of student debt on borrowers.

As of late, Education Secretary Betsy DeVos, has been busying herself with issues of student loan repayment. In April, DeVos froze a plan from the Obama administration to consolidate student loan repayment in one national system, as opposed to the Department’s several contracts with different private firms; she also lowered the bar for private firms to obtain contracts with the Department of Education by deprioritizing allegations against firms for mishandling borrowers’ accounts (Cowley and Silver-Greenberg 2017). In March, the Department of Education overturned an Obama Era protection against collection fees for FFELP loan borrowers who have defaulted on their loans (Federal Student Aid 2017). Moreover, the future of the Public Service Loan Forgiveness plan, which would forgive remaining debt for those who have worked full-time in eligible public sector jobs and have made payments for ten years is uncertain; the 2016 Fiscal Report from the House of Representatives proposed ending the program (House of Representatives 2015). This poses a serious financial burden for those working in the public and non-profit sector. These jobs pay less than the private sector but often require advanced degrees; the low return for which was mediated by the promise of debt forgiveness. The student loan bubble seems to be on the verge: the amount of debt is rising, progress in streamlining repayment has been undone, and the future of forgiveness plans is uncertain. Meanwhile, the cost of college is rising. It seems likely that more and more borrowers will have trouble repaying.

Under this predicament, I would like to put forth a modest proposal. Let us repossess the degrees of graduates who cannot repay their student loans. This would follow the logic of other types of debt. For instance, if I borrowed money for a house I could not afford, the bank would simply evict me, repossess the house, and put it back on the market. Likewise, the student loan servicer could revoke the degrees of those graduates who are unable to repay. The debt is cleared and the borrower is in no different a position from leaving high school. Navient now has a stockpile of degrees demonstrating its newly acquired transferable skills and generic competence, much like banks that can add foreclosed homes to their list of assets.

This is of course, ridiculous. The economic term for the problem of student debt is, according to Dynarski (2014), a market-failure; “Students cannot put themselves up for collateral: they cannot contractually commit to hand over their future labor to a lender in exchange for upfront cash, because indentured servitude is illegal” (p. 4). To me there seems to be little difference between indentured servitude and a system which requires young people to go into debt to work, by charging them monthly installments for the training necessary to gain said job in the first place. Moreover, it seems that the relative job security of indentured servitude might be a welcome change to those borrowers struggling to repay in a time of precarity.

Hyperbole and ire aside, I think it is high time we consider the nature of university education and the debt by which it is funded. Firstly, let us consider the reasoning for student debt. For many, college is too expensive at the point of access due to decreases in public funding and the steep competition for scholarships. Many students (and their families) must borrow to attend. We seem to think that university is worthwhile, which is why student loans are fronted by the federal government. As Chris Martin (2016) suggests, this rationale for the public funding of student debt is a ‘pragmatic approach’ to a just distribution of access to higher education: it does not pose an undue burden on the public to fund higher education access for those who could already afford it (by making it free) nor does it completely disbar potential students from attending due to inability to pay. This implicitly demonstrates that we view higher education as a quasi-public good, but the graduates are seen as disproportionate benefiters of their degrees compared to society at large. As such, the debt-funding of higher education is a public-private affair. The federal government provides the loans and contracts out the repayment servicing to private firms (Dynarski 2014). Private firms could not provide student loans at the scale of the federal government because there is no legal collateral; it is a very risky business venture. That the government encourages private financial involvement in the funding of a public good such as higher education is a crucial point at which to examine changes in our economic structure.

Before considering the case of educational debt further, I shall now consider the analogous case of the public-private funding of mortgages. In Ivan Ascher’s (2016) critique of Marxism, he displays the present cooptation of credit in our economic structure. Ascher suggests that the high rates of home ownership we see today are due to federal government efforts to increase homeownership through instating Freddie Mac. This agency “buy[s] mortgages and either hold[s] them to maturity or re-sell[s] them as mortgage-backed securities, thereby reducing risks to lenders” (p. 12). A knock-on effect of this is the need to consolidate the probability of default into a scoring system: the credit score. As Ascher argues, private lenders are then better able to predict when their share of mortgages will default and can use this knowledge to sell off the debt quickly and at a profit. This system compounds itself and the lenders can cash in on their stock of debtors’ credit. Here, the government’s efforts to expand a social good, increased home ownership, has furthered a system of increased profit for private firms and debt for individual citizens. At least in the case of homeownership, the home can be repossessed and the debt cancelled but in the case of the non-consumable good of higher education, this gets complicated

Reconciling education to that of the economy cannot happen without posing some sort of damage to education. Yet, we insist on commandeering the university with the logic of exchange.

In the case of educational debt, simply revoking the credential or diploma would not suffice; it would require some sort of sci-fi brain washing mechanism to erase the memories and educational experiences from the graduate’s mind . Without this sort of technology, graduates are left in chronic debt and quite unable to cancel it. This reveals something of the nature of education that we perhaps intuitively understand but fail to recognize, that being educated has no material reality to it. This indicates a differend between the economic genre of exchange and the genre of education. Here I use term of French post-structuralist thinker Jean-François Lyotard (1988) to bring our attention to the paradox of student debt: that in education, there is nothing to be exchanged. Reconciling education to that of the economy cannot happen without posing some sort of damage to education. Yet, we insist on commandeering the university with the logic of exchange. One of the many ways this occurs is the debt funding of higher education which has fundamentally altered the educational experience. This is at best an incorrigible imbecility and at worst a pervasive form of social control. It is likely a mixture of both.

That method of social control is the prevailing economic organization of the Western world: the form of capitalism that we know as neoliberalism. In fact, debt as we know it today is the making of late capitalism. As the Italian philosopher and sociologist Maurizio Lazzarato argues, in neoliberalism, money is debt (Charbonneau and Hansen 2014). Money no longer represents anything hard and material; money exists in ‘pure writing operations’. Lazzarato contends that the creditor-debtor relationship is the fundamental social bond of late capitalism; indeed, for Lazzarato the debt-funded American university system is a unique example of this. So why does this matter? How is this a form of social control?

Education is the site of encounter between the self and society. There is a myriad of ways to organize educational systems and many aims of the educational project. Education is an inherently social process that attempts to direct the development of the student. This is a distinctly unmeasurable and unending process. There is something beautiful and ephemeral in how studying changes us. As such, we intuitively understand that a degree has nothing to do with the diploma or credential received. Neoliberalism would have it that these changes are the acquiring of measurable competences and skills that are saleable on the labor market. The logic is that the capitalist state needs generally competent citizens able to fill gaps in the labor market, so they can have jobs to pay the taxes that make the government work and consume the goods to keep the system of capital running. University education appears to help people be generally skilled and knowledgeable, it should be accessible via publicly funded loans. The graduate reaps most of the rewards from this in elevated income and increased ability to engage in social life through consumerism, as such the student ought to pay for the degree through debt.

Of course, the student must be wise and calculating when it comes to their four years of undergrad. They must gain the skills the labor market is projected to need at graduation. These are often found in the STEM subjects. Studying history, art, and literature are only justifiable in that the student can develop critical reasoning skills and problem-solving skills. Students should also consider extra-curricular activities to develop interpersonal communication skills. Employers are reported to value these skills. You must educate yourself accordingly to ensure that you are able to pay back the money you have borrowed to earn this degree in the first place. But repayment is increasingly difficult, more and more credentials are required for entering jobs and this subsequently delays repayment.

Is there not something deeply pervasive about all this? According to Lazaretto (Charbonneau & Hansen 2014), chronic indebtedness is a manipulation of subjectivity. It places the debtor in an unending position of repayment. This is certainly true in the case of student debt, in which you are in debt to become someone in a certain way (the neoliberal subject) and your ability or inability to repay the debt is a ramification of your success or failure as a neoliberal subject. That student debt is publicly funded and privately managed makes little difference. The neoliberal reasoning and rhetoric around university education co-opts what it could be and how it edifies those who attend it. This market of debt indeed crushes alternatives in higher education by subjectivizing students to become players in the market of capitalist exchange. What then are we missing? What then goes unthought at the university? Can we educate ourselves to be anything but pursuers of skills and the obtainers of useful knowledge? Can the pedagogic relationship go past an economic exchange of dollars for credit hours?

It is beyond the remit of this humble ‘think’ piece to offer a solution for this problem. It is my hope that perhaps this has unsettled some of the assumptions that go unaddressed regarding higher education and the (shoddy) logic of student debt. Meanwhile, student debt is rising, interest accrues, and borrowers have fewer options to repay, both in terms of the repayment plans offered and the neoliberal system that consigns them to a social bond of debt.

References

Ascher, Ivan. 2016. Moneybags Must Be So Luck’: Inside the Hidden Abode of Prediction. Political Theory, 44(1), p. 4-25. DOI: 10.1177/0090591715613387

Charbonneau, Mathieu and Magnus Paulsen Hansen. 2014. Debt, Neoliberalism and Crisis: Interview Maurizio with Lazzarato on the Indebted Condition. Sociology, 48(5), 1039-1047. DOI: 10.1177/0038038514539207

The College Board. 2017. Tuition Feeds and Room and Board Over Time, 1976-77 to 2016-17, Selected Years. The College Board, https://trends.collegeboard.org/college-pricing/figures-tables/tuiti…nd-fees-and-room-and-board-over-time-1976-77_2016-17-selected-years

Cowley, Stacey and Jessica Silver-Greenberg. April 2017. DeVos Haults Obama-Era Plan to Revamp Student Loan Management. New York Times.

Dynarski, Susan. 2014. An Economist’s Perspective on Student Loans in the United States. ES Working Paper Series.

Federal Student Aid. March 16 2017. Withdrawal of Dear Colleague Letter (DCL) 15-14. https://ifap.ed.gov/dpcletters/GEN1702.html

House of Representatives. March 20 2015. Concurrent Resolution on the Budget- Fiscal Year 2016: Report of the Committee on the Budget House of Representatives. http://budget.house.gov/uploadedfiles/fy16res.pdf

Lyotard, Jean-François. 1988. The Differend: Phrases in Dispute. Minneapolis: University of Minnesota Press.

Kamenetz, Anya. 4 Apr 2017. A New Look at the Lasting Consequences of Student Debt. NPR, http://www.npr.org/sections/ed/2017/04/04/522456671/a-new-look-at-the-lasting-consequences-of-student-debt

Martin, Chris. 2016. Should the Public Pay for Higher Education? Justice, Educational Debt, and Cooperative Obligations. Philosophy of Education Society of Great Britain Annual Conference, Oxford, 1-3 April 2016.

National Center for Education Statistics. 2016. Fast Facts Enrollment. US Department of Education, https://nces.ed.gov/fastfacts/display.asp?id=98 Accessed 9 July 2017.

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