An executive order signed by President Obama on Monday aims to lessen the burden of student debt for a maximum 5 million young Americans. The order expands a 2010 law, which currently serves only 200,000 indebted students, by lowering monthly repayments and capping the number of years students must continue to pay.
While the president said that he was "passionate" about helping students out of crippling circumstances, his passion only goes so far, and certainly not far enough. Nearly 38.8 million people are burdened by the cumulative national student debt which is now calculated at $1.2 trillion, eclipsing the national credit card debt load.
Obama's gesture, and it is little more than gesture, was accompanied by a call for Congress to pass stronger legislation than his order. This was populist rhetoric with little content. The bill in question, sponsored by Senator Elizabeth Warren (D-Mass.), and Representative John Tierney (D-Mass.), would let up to 25 million debtors refinance their loans at interest rates as low as 3.86 percent and save thousands of dollars in the process.
Yet the bill's chance of moving though our bitterly divided Congress is close to zero. The president's expressed support for the legislation was thus no more than partisan politicking. As the New York Times reported, Obama took a "gleefully political tone" in barbing Republican Congress members who will refuse to accept a tax increase on millionaires that would fund Warren's plan. I see little worthy of glee in knowing, as the president does, that stronger efforts to attenuate the student debt will not pass Congress. The executive order that he did sign will aid some students. When it goes into effect in 2015, it will expand the Pay As You Earn repayment plan (PAYE) to those who got loans before October 2007 or stopped borrowing by October 2011. It's a larger slice of borrowers, but a sliver still.
'There’s no escape from student debt, and the government and markets both know it. This is, then, the real plan for the education bubble: student debtors will be forced, in one way or another, to fill it in.'
It is crucial that Obama's order, part of what he calls a "Year of Action," does not work to placate anger at the student debt crisis. “Fiddling with interest rates or with repayment options is so far below the level of response that is needed,” New York University professor and Strike Debt activist Andrew Ross told Al Jazeera America. Strike Debt, a debt resistance collective, is pushing for a spread of actions to banish student debt entirely, including urging a mass debt strike movement and asking that the government invest $13 billion to offer free public education. The sum, Ross noted, is just a “a fraction of 1 percent of yearly spending.”
Strike Debt's logic is solid, working on the assumption that the government has a vested interest in ending the student debt crisis. But, alas, we can't help ourselves to this assumption. While struggling borrowers certainly stymie economic growth, it remains the case that student borrowers are a boon for the federal government. Fiddles and small fixes, like those of the latest executive order, serve to maintain, not end, a society of debtors.
Student debt is a bubble with no promise of burst. Most student loan debt is government backed and can never be discharged. So, as New Inquiry editor Malcolm Harris has rightly pointed out: "There’s no escape from student debt, and the government and markets both know it. This is, then, the real plan for the education bubble: student debtors will be forced, in one way or another, to fill it in. Not only are student loans not a burden on the federal government, they’re a good investment."
If only a few hundred, go volitionally into default, they will suffer the long-term consequences. But if a strike truly generalized, the government's hand would be forced.
Of course the Treasury and investors want to foster a generation of workers and consumers. But when there's a debt bubble that structurally cannot burst, the government will not join any aggressive fight to remove the student debt burden. In the service of campaign politics, there will be policy tweaks, earnest speeches, and high words about freeing the debt-encumbered youth. But the student debt crisis will not end and that's no big problem for the government. Demands for free education are DOA in the face of these realities.
With this in mind, the tall order of massive student debt strike appears radical but perhaps necessary. It's a prisoner's dilemma of sorts: If only a few individuals, or just a few hundred, go volitionally into default, they will suffer the long-term consequences — a life hounded by creditors and dirt-poor credit. But if a strike truly generalized, the debt collection and harassment system would be overwhelmed, and the government's hand would be forced. And, while the suggestion is radical, it's worth considering that 7 million student debtors are already in default. With these numbers growing, we have an aperture to politicize the fact of default, make it a positive act, and truly attack the student debt crisis.
Follow Natasha Lennard on Twitter: @natashalennard
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