Student loans and the new dependent class

27 10 2011

To all those students burning the midnight oil for midterms, here’s something to help keep you awake at night: Student loans outstanding will exceed $1 trillion this year.

Back in April, I reported that student loan debt had surpassed national credit card debt and was set to hit the big $1 trillion before the end of 2011. Looks like student debt accumulators gave it the ol’ college try, and might beat the projections by a few months, leading to a renewed round of fretting about the “higher education bubble” and its impact on recent graduates hobbled by financial obligations.

No one can predict precisely when the bubble will burst, but at this rate, it won’t be long before the increase in costs to a firm hiring a college-educated worker will offset any supposed gains in productivity said worker might provide. It might begin to make sense to simply hire non-credentialed employees at lower rates and train them. Of course, this will only make it more difficult for indebted graduates to pay off their ever-growing debt load. Since student debt is virtually non-dischargable, it’s not immediately clear what impact failure to meet student loan obligations will have on credit markets – but it isn’t going to be pretty.

Amidst all of this, it’s no surprise student loan debt is one of the chief concerns of the economic illiterates at the Occupy protests. Rather than recognizing the proliferation of subsidized loans and grants as the rocket fuel that drives tuition (and thus, debt) ever higher, the young and indebted would prefer, predictably, loan forgiveness and increased subsidies.

A bizarre new segment of the electorate is beginning to take shape: a highly credentialed, deeply indebted class resentful towards the “corporate jobs” that allow them to pay their bills–a class eager and willing to support any politician that nods in their general direction and tantalizes them with the hope of student loan debt relief.

True to form, Obama is already vying for the votes of this disillusioned, credentialed elite with a completely ineffective student reform loan plan. The ineffectiveness is, of course, a feature and not a defect; one of the first rules of effective politicking is that it is better to offer the promise of relief every election cycle than to actually follow through and provide it.

Until the tuition bubble bursts, a college degree will continue to look less like a symbol of personal empowerment and ever more like a badge of membership to a new dependent class.

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