The Soul Of Student Debt

This is the first installment in a three part series by DSA’s Chris Maisano. All three installments were originally published in Jacobin Magazine.

Janet Lynn Parker is a middle-aged elementary school art teacher from Arkansas. She graduated in 1991 from Arkansas State University with a degree in art education and $25,000 in student loan debt. Unable to find a job in her field of study, she bounced around from job to job until 1999, when she finally found employment at a public school at an annual salary barely over $20,000. Over that time, her financial mounting difficulties forced her to ask for multiple forbearances and deferments on her student loan, pushing the balance of her educational debt up to about $70,000.

To add injury to insult, Parker broke her back in a boating accident in 2000. It left her in a back brace for months after the incident, and reliant on pain medication to get her through the day. In spite of it all, she continued to teach and to care for her young granddaughters during the summer months, when school was out of session. Still, the strains took a toll on her family and her marriage. Parker and her husband separated in 2003 and divorced in 2004. With her student loan, credit card, retail, and medical debts running far beyond her ability to pay them, she finally filed for bankruptcy in 2004. Because of the peculiarities of U.S. bankruptcy law, she had to file a separate petition to seek a discharge of her student loan debt. Despite the long odds ranged against her, she actually won: the bankruptcy judge in her case agreed with her claim that her student loan debt constituted an “undue hardship” and should therefore be wiped out.

But the story didn’t end there. Parker’s creditor, the Student Loan Guarantee Foundation of Arkansas, appealed the bankruptcy court’s decision, bringing the case before a federal bankruptcy appellate panel. Despite the ample evidence that Parker’s educational debt was ruining her life, the panel decided to reverse the lower court’s ruling and compel her to continue making payments on her loans.

The reasoning behind the panel’s decision is revealing, and perfectly consistent with the merciless logic of capitalist rationality. According to the judges’ decision Parker failed to demonstrate undue hardship because—in their view—she failed to adequately maximize her income and minimize her expenses, a requirement of the test adopted in case. As the panel argued, “the Debtor has a duty to maximize her income…Although she is working as a full-time teacher, the Debtor admitted that ‘it would be possible’ for her to get a paying summer job. The bankruptcy court found that the Debtor was capable of summer employment and attributed to her additional net income of $100 per month.” No matter that the unpaid care work she performed over the summer months was a crucial source of support for her daughter, a single mother. For these Gradgrinds, the bonds of family and the imperatives of caretaking are, as Marx so vividly put it, to be drowned in the icy waters of egotistical calculation.

In the end, the bankruptcy panel directed Parker to consolidate her student loans under the William D. Ford Consolidation Program, which would reduce her monthly payments but leave her with only $15 after expenses at the end of each month. It would also her require her to make those payments for an additional 25 years—at which point she would be 76 years old.

The issue of debt generally and student loan debt in particular quickly emerged as a major concern of the U.S. Occupy movement. In June 2010, total outstanding student loan debt became larger than total outstanding credit card debt for the first time in the country’s history, and in the spring of 2012 this figure surpassed the astonishing figure of $1 trillion. This explosion in student loan indebtedness has been the logical result of the dramatic inflation in the cost of higher education (particularly public higher education) in recent decades. Economists estimate that the cost of tuition and fees has more than doubled since 2000, easily surpassing the rate of inflation in energy, housing, and even health care costs.

The driving force behind this explosion in higher education costs is the long-term disinvestment in public colleges and universities at the state level. While public higher education institutions have absorbed the majority of new undergraduate enrollments since 1990, the proportion of state spending on higher education has dramatically declined. According to a recent study by Demos, between 1990 and 2010, real funding per public full-time enrolled student declined by over 26%. This shortfall has not been filled by other sources of public funding, but rather by a marked increase of students’ out-of-pocket costs. Over the same period, tuition and fees at four-year public colleges and universities rose by 112.5% while the price of public two-year colleges increased by 71%. Because household incomes have stagnated over the previous two decades, students and their families have been compelled to turn to student loans to cover these costs. According to the Department of Education, 45% of 1992-1993 graduates borrowed money from federal or private sources; today, at least two-thirds of graduates enter the workforce with educational debt.

Even though college-educated workers tend, on average, to earn higher incomes than their less-educated counterparts, young college-educated workers have not escaped the pressures of wage stagnation. In the last decade, the average annual earnings of workers ages 25 to 34 with Bachelors degrees fell by 15%. New graduates, meanwhile, saw their as the average debt load increase by 24%. What makes this dramatic expansion of student loan indebtedness particularly troubling is the fact that unlike most other forms of personal debt, student loans cannot be discharged through the standard bankruptcy process. In the event of default on a private or federal student loan, borrowers face a range of invasive measures: wage garnishment, the interception of tax refunds or lottery winnings, and the withholding of future Social Security payments.

The leading intellectual lights of the Occupy movement have seized on the issue of debt as their leitmotif, organizing their analysis of the economy around what they’ve taken to calling the “debt system.” For them, the explosion in personal and public indebtedness that has occurred over the last three decades represents a break in the logic of capitalism and marks the revival of older forms of exploitation associated with feudalism. At an Occupy conference held shortly after the clearing of Zuccotti Park, David Graeber made the case succinctly:

I think there’s a fundamental shift in the nature of capitalism, where some people are still using a very old-fashioned moral logic, but more and more people are recognizing what’s really going on. They just don’t know the extent of it. It’s not even clear that this is capitalism anymore. Back when I went to college, they taught me that the difference between capitalism and feudalism. In feudalism they take the money directly, through legal means, and they just shake you down, pull it out of your income, and in capitalism they take it through the wage, in these subtle ways. It seems like it’s shifting more toward the former thing. The government is letting these guys bribe the government to make laws where they can pick your pocket, and that’s pretty much it.

Graeber is certainly correct to point out the ways in which debt and finance can be nakedly exploitative. Marxists have traditionally characterized capitalist exploitation as an abstract social process that takes place behind the backs of those it exploits. But there’s nothing indirect about a credit card or student loan bill. All of those seemingly extraneous charges and fees are right in front of you on your bill, chipping away at your income and your standard of living month after month for years on end.

Still, that’s not “pretty much it.” The critique of debt as neo-feudalism advanced by Graeber, the organizers of the Strike Debt campaign, and others fails to capture how debt and finance works under contemporary capitalism. It also echoes the misguided populist discourse that casts the financial sector as a parasitical growth on the productive, “real” economy. In the case of student debt, the neo-feudal argument also prevents us from properly understanding one of the main functions of debt and finance within neoliberal capitalism: the shaping of our economic souls. The social function of student debt is not to make us into serfs or indentured servants. It’s to teach us how to be investors and risk-takers, entrepreneurs who have taken on debt to finance our climb up the ladder of bourgeois success. The soul of student debt is not feudal, but capitalist through and through.

 Chris Maisano is the chair of DSA’s  NYC local and a contributing editor at Jacobin Magazine.

The next installment of The Soul Of Student Debt will be posted on May 22nd.