For most Americans student debt is a simple matter: you got the education, you agreed to pay for it, you can’t give back your brain, so suck it up and get to work.  Unfortunately, this sort of logic fundamentally misunderstands the systemic sources by which so much student debt has been incurred, and the long term inequality this debt is creating.  The misunderstanding most Americans have of the student debt cycle is particularly dangerous now that the amount of education debt is about to pass the 1 trillion dollar mark, which amounts to about four thousand dollars for every man, woman and child in this country.  According to the Project on Student Debt, of the class of 2008, 41% are either delinquent or in default.  Many recent reports have already begun to theorize student debt as the next bubble about to burst.  Unfortunately, this bubble has the potential to slowly ooze, causing unrelenting suffering for a generation, and even greater economic disparity for the 99%.

When you look carefully at the student debt crisis, you can see that it has been caused by complex relationships between four distinct types of entities:  governmental agencies, lenders, educational institutions and consumers.

Many Americans believe that because the federal government has either guaranteed or originated loans the system is benevolent, in other words designed in the public interest.  This could not be further from the truth.  Before the 1970s, government grants and programs like the G.I. Bill paid for most of the cost of education.  We believed that education was a public good, and one that should be made available to the masses.  Also, college level education was not as necessary as it is today, because manufacturing industries were far more prevalent.In 1972, using the neoliberal logic of “shrinking” government, Nixon established the Student Loan Marketing Association (Sallie Mae) as a governmental agency whose goal was to encourage banks to make loans to students for education.  Once this neoliberal logic of privatization entered education, it continued to expand from there.  As early as 1981, Sallie Mae began lobbying efforts and continued to expand its function.  And in 1997, Sallie Mae started making loans directly, rather than just servicing them.  In 2004 Sallie Mae wrested itself from government and became a private company, at least technically.

During this same period, loans to students increased, while consumer protections decreased, finally disappearing.  In 1996, Social Security became eligible for deduction in the event of default.  In 1998, bankruptcy became ineligible for federally backed loans; and in 2005 it was determined that bankruptcy protection would not apply to private loans as well.

Between 1995 and 2000, the same period during which the government ended consumer protections on student loans, lenders saw enormous profit.  Sallie Mae increased profits by 1700%, and by 2005, Sallie Mae was the second most profitable company in the country.  Its CEO, Albert Lord, famously had his own golf course built.  (See Meet 5 Big Lenders Profiting from the $1Trillion Student Debt Bubble (Hint: You Know Some of Them Already for an excellent account of these soaring profits.)

Between the 1980s and now, higher education tuition has increased by about 300%.  Whereas until 1976 City University of New York (CUNY) was completely free, today “public” education is paid for by private student debt.  Ironically, this debt, which is a form of privatization, has been encouraged by our government.  Interestingly, “private” institutions are also financed through student debt.  Although this debt financing is facilitated by our government, “private” institutions are completely unaccountable to the public.  Under close inspection, the lines between public and private have become so blurred that the distinction is a mere formality.  Furthermore, these tuition hikes are not checked by the consumer’s actual ability to spend.  Unlike buying a house, the customer’s income is not evaluated, and an education is not appraised.  Tuition hikes are solely contingent on the ability of the student to go into debt.  Furthermore, most tuition increases are authorized by boards of trustees comprised of wealthy individuals who frequently benefit from investment in financial markets that are buoyed by deepening student debt.

The final entity involved in the student loan business is the student.  More often than not, the student is not of legal age, and therefore, we are also talking about the student’s family.  Simultaneous with soaring bank profits, tuition increases and the loss of basic consumer protections associated with debt, student loan debt has increased tenfold (from nearly 10 billion to nearly 1 trillion) between 1997 and now.  Student loan debt currently surpasses all other forms of consumer debt, including credit card debt.  During the same period that student debt metastasized, the income of the middle and lower classes who have incurred this debt has remained stagnant or declined.

So, the student loan debt crisis is not a simple matter of the kitchen table logic of “you made your bed now go lie in it” that many Americans deploy.  Our government’s desire to shift the burden of education from the public sphere to the private individual was realized via its ability to make laws that favored banks and disfavored the people.  The government relieved itself of the responsibility of education by shifting the burden onto banks, who were able to make enormous profits from student debt.

As the job market has declined, yet required more education to gain access to it, students have been caught between a rock and a hard place.  The choice is taking your chances without a college degree, or going into debt and hoping things work out.  Currently, two thirds of students graduate with an average of $27,000 dollars of debt.

As the system currently operates it is both unjust and unsustainable.  It is unsustainable because these debts grow exponentially, if they are not paid.  Only 37% of student loans are paid without delay.  As of around 2009, five million loans were in default.  The system is unjust because it places an enormous and impossible burden on the debtor.  The burden of these debts often result in delaying of life stage events such as marriage, buying home, and having a child, and corresponding depression and anxiety.  The burden of this debt is creating a generation with far fewer ties to community and family.

The system of student debt is also unjust because it is a critical juncture in the growing inequality.  Once the systemic nature of student debt is perceived, it is easy to see how it has helped to widen inequality.  It is the middle and lower classes that have remained stagnant over the last 30 years, and yet are compelled to go into debt to pay for education.  As banks make obscene profits, students become indentured upon graduation from college.  Once indentured, they must work for whatever pay is available and under any and all conditions.  Frequently, this means underemployment, which often lasts a lifetime.  Workers with debt are easily exploited, and as a result, we are all caught in a race to the bottom, because there is always someone willing to do more for less.

Even though many believe that American society has high social mobility based on meritocracy this is factually untrue.  A son born to a father in the bottom 20% economic bracket has less than a 5% chance of ever earning $60,000 per year.  A critical factor in the lack of social mobility is the lack of access to education.

This system also reproduces race based structural inequality.  The CUNY schools graduate more African-American students than all of the historically black colleges combined each year.  When tuition is raised on this group of students, either they lose access to education altogether or are forced to take on more debt, frequently in the form of private loans, which carry higher interest rates and are subject to tougher repayment terms.  While all forms of student lending are predatory, private loans the worst offenders.

Once the student loan system is examined, it becomes obvious that it is by no means benevolent.  It is a system designed by our government in cahoots with the banking system and the boards of our institutions of higher learning.

The Occupy Wall Street movement has proved that there is power in our numbers, and that the 99% can unite to challenge systemic inequality and economic injustice.  The only way to change the system of student debt is to refuse to be complicit with it.  We need to make the system public again, by collectively refusing to feed the banks with our money.  Student loan debtors from all over the country are uniting to challenge this system by signing the Student Debt Pledge of Refusal.  For more information, please visit