One year later and $1 trillion of debt
Column | Thought Control Café
Thursday, April 25 marks the one-year anniversary of 1 Trillion Dollar Debt Day — the day that the total amount of student debt in America reached $1 trillion — and things haven’t gotten much better since.
The amount of student loan debt in America has surpassed total credit card debt, but unlike credit card debt, declaring bankruptcy cannot discharge these loans. In many cases, private lenders do not forgive loans even if the borrower dies. After the death of Christopher Bryski, an undergraduate at the University, KeyBank asked his parents to assume responsibility for the debt. KeyBank only forgave his debt after public pressure in the form of an online petition with over 78,000 signatures.
Much like the American mortgage crisis, student debt in our country has formed an economic bubble. Like the mortgage bubble, this bubble is in danger of bursting and sending our country into another economic crisis. Since the government backs most student loans, the risk rests on the backs of public — and this risk is getting riskier.
Student debt is increasing in risk as a result of immense volatilities and restrictions on economic growth, which in turn are a result of the increasing burden of the cost of tuition and student loans. A staggering number of college graduates face unemployment after entering the job market. According to a report by the Center for American Progress, the unemployment rate for Americans between the ages of 16 and 24 is at 16.2 percent — a number more than double the national average. It’s bad news that many graduates won’t have jobs and therefore, won’t have the means to pay back their loans. And nothing hampers economic growth quite like being too poor to pour money into the economy.
To make matters worse, some institutions are profiting off student debt — namely Sallie Mae, the nation’s top private holder of student debt (more than $160 billion and 20 percent of total debt.) Where does the profit money go? According to the Valley Advocate, Sallie Mae CEO Albert Lord received $225 million in compensation between 1999 and 2004, and according to the Baltimore Sun, Lord built himself a private 18-hole golf course in 2007 with money made from students who struggle to pay their loans. This is unjust.
Sallie Mae lobbies the federal government with the purpose of loosening restrictions and expanding their profit margin. In a Center for Responsive Politics report, Sallie Mae was found to have spent $27 million on lobbying since 2002. Much of this lobbying is centered around increasing interest rates on student loans.
On July 1, interest rates are set to double from 3.4 percent to 6.8 percent if Congress and the American people do not take action. This would result in an increase in Sallie Mae’s profit margin. If doubled, consequences for students and the economy will be dire.
Such consequences that are national in scope are not disconnected from New Jersey’s economy, or even from University. After the University’s merger with the University of Medicine and Dentistry of New Jersey —which came after pressure from Governor Christie and state legislators — millions of dollars in debt were absorbed with little foresight into the means of paying it off. Despite his pressure to pass the reorganization bill, Christie’s $1.38 billion higher education budget for the next fiscal year sets aside no money for the reorganization plan, according to The New Jersey Star-Ledger.
The amassing of hundreds of millions of dollars in UMDNJ debt is a huge concern to students at the University, especially when the debt burden falls onto the backs of students in the form of tuition increases. According to a New Jersey Spotlight article, both Christie and Barchi have promised that the cost “will not be borne by students in higher tuition bills.”
Students can raise their voices to ensure that this claim is followed through. Thursday, April 25 is One Trillion Dollar Debt Day. It is also the day that the University’s Board of Governors convene in a meeting and hear from students about tuition increases. The meeting will be at 6:30 p.m. in the Rutgers Student Center on the College Avenue campus.
This is a call to action. Come rally at Brower Commons on the College Avenue campus at 6 p.m. Thursday. Tell the Board of Governors that students cannot bear this burden. Speak up to demand an end to the tuition hikes!
Nat Sowinski is a School of Arts and Sciences senior majoring in Middle Eastern studies and minoring in philosophy. Her column, “Thought Control Café,” runs on alternate Tuesdays.