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How the Banks Stole Higher Education

Student debt is big business for the banks, and it's fucking us all over.


Illustration by Marta Parszeniew

Most progressive-minded people share an inherent belief that education should be free, a universal human right rather than the privilege of a wealthy few. For the left, it's an article of faith. This is the way we progress in life, enhancing our enjoyment of the great things that the world has to offer. It's how we live a more enlightened existence as a free and informed citizen in a participatory democracy. And it doesn't stop when you're turfed out of school. Forgive the sad old bastard cliché, but yes, I was the first from my family to go to college, a circumstance I shared with many of that punk generation. Like urchins in a candy shop, we swaggered around our campuses in those pre-AIDS days, fortified by the notion that we were pioneers, breaking the ossified class structure of the stuffy old UK.

The right wing have seldom held education in such high regard. Of course, it's natural that some elites aspire to excellence, but a universally educated population asking questions about the world we live in, and the ownership and control of its resources? Not what they had in mind. Their preference was, and remains, a dumb, compliant population easily brought to rage or fear by some menace flagged up through their mainstream media, which supposedly "threatens our way of life." It's little wonder that Donald Trump "loves the poorly educated."

Yet elites in western society could tolerate, even support the growth of universal education, as long as capitalism was buoyant, producing high rates of economic growth. And in Britain, following the post-war settlement of the welfare state, they did exactly this. We had the great nationalized industries of coal, steel, and rail, the NHS, and most of all, education reform. There was the growth of comprehensive education, a meritocratic idea that the schooling system shouldn't slavishly mirror the class structure, that there should simply be schools where kids went to learn, irrespective of wealth or status.

From this came the expansion of higher education. After the Second World War, most Local Education Authorities (LEAs) paid students' tuition fees and provided a maintenance grant for living costs. The 1962 Education Act made the state payment of fees and means-tested grants compulsory. I had my fees taken care of and was given a full grant, which was about two-thirds of what my dad made from a 35-hour working week. And I could get a summer job. Those hellish strike-ridden days of late-1970s Britain, in a full employment, high wage economy, with strong unions and good working conditions: yes please. In my youth, old people moaned and told us that we were lucky and had never had it so good. Only the most brain-dead are seriously making that contention to today's young people.


Student protesters at UCL. Photo Chris Bethell.

Now we're in decline from that high watermark of industrial capitalism. The former juggernaut is a decrepit and wheezy old banger, not quite on its last legs, but certainly no longer possessing the dynamism needed for sustained high levels of economic growth. When the attack on the post-war settlement came, the bad guys, those supporting wealth and privilege, won the class war and the battle of ideas. But the rhetoric of a property-owning democracy didn't last long, as the free market capitalism that was supposed to accompany it was supplanted by a more corporate, risk-aversive mutation. In Britain, New Labour not only accepted the main tenets of neoliberalism, but, just as Bill Clinton's administration had done before him in the USA, Gordon Brown listened to the bankers, ending the division between high street and investment banking, and paving the way for the 2008 crisis.

As with the economy, so too with higher education; Thatcher might have set up the Student Loans Company, but it was Blair's government who introduced tuition fees with the Teaching and Higher Education Act of 1998. This was followed by the draconian act of 2004, which increased fees from £1,000 [$1,400] to £3,000 [$4,300] pounds. Since then, paid higher education has remained a political consensus in English politics (a Liberal Democrat pledge to abolish fees when in coalition partnership with the Conservatives was swiftly reneged upon), though not in Scotland, where remarkably, in the devolved parliament, the SNP administration still supports free tuition.


Cambridge University students protest against university top-up fees in 2004. Photo: Stefan Rousseau / PA Archive/Press Association Images

In 2014, the Organisation for Economic Cooperation and Development (OECD) predicted that world growth will slow to 2.7 percent between now and 2060. Some economists reckon that this is wildly optimistic, and quite a few speculate that it will be lower, but the one consensus in both the mid and long term is that growth is going to be slow.

For these four decades of stagnation to be consolidated, Europe and the USA each need to take in 50 million immigrants. Without them, the tax base shrinks to such an extent that countries simply go broke. Nothing in life is certain, but for the foreseeable future, logic suggests a stagnating western economy, dominated by low-paid, unfulfilling jobs in personal services.

So student loans and debts are not an incidental strategy. They represent the starting point of inducting people into a life package of debt-servitude, which includes mortgage and car loans. In more innocent and economically buoyant times, we used to call this credit. In the words of leading American-Canadian critic and social theorist, Henry Giroux: "Higher education is viewed by the apostles of market fundamentalism as a space for producing profits, educating a docile labor force, and a powerful institution for indoctrinating students into accepting the obedience demanded by the corporate order."

When the US media, such as the New York Times or the Wall Street Journal, discuss student debt, it's from a neoliberal perspective, with the question being: how can politicians prevent the banks from losing money on these debts? The invariable answer: by tightening the screws on the debtors. The banks got the government to guarantee such loans, which gives politicians the leverage to contend that they must protect the taxpayer and make these shiftless students pay. Even if the taxpayers in question are often the parents of the indebted students.


Barack Obama's "socialism" is to blame for student loans. Photo via Wikimedia.

The Wall Street Journal recently described student loans as just another example of Obama's socialism. A fairly ludicrous contention, as the American state neither runs the education system nor provides its financing. As in the UK, tuition fees in the US have risen steeply over the last decade. The socialism is reserved for the banks who benefit from this and other scams, as they are deemed "too big to fail" by Anglo-American capitalism. For everybody actually in the education system, the story is one of privatization and financialization.

In response to the debt crisis, the UK has borrowed an American strategy: selling off student debts at a fraction of their value, to private companies like CarVal Investors and Erudio. The latter is a partner of Arrow Global, a specialist debt recovery firm which buys soured loans from banks and credit card companies. The CEO of this company was quoted as saying: "This is an important step towards delivering this year's financial goals and positioning the business for future growth." This means that a student's debt is more than just a business opportunity, it's the raison d'être of the companies the government awards these contracts to. In the USA, as in the UK, student debt is a major new growth area for banking revenues. With no student bankruptcy permitted, this is akin to a low risk revenue stream for the financial industry, and now second in size only to mortgage debt.

The system owns, and can monetize, the potential of students.

So now the system owns, and can monetize, the potential of students. The war on the poor is long won; welfare cuts are just grinding the defeated into the dust. Now the more insidious assault is on the middle-classes, as the one percent, represented by the government, bankers, and financial institutions, expropriate their wealth. And primarily, they do this through the system of higher education.

It's in the DNA of people from modest means to assert that education is the key to the good life. This is no longer the case, but you would never know that from a university prospectus, and its pictures of toothsome, smiling students lounging in cafeterias, hunched over a laptop in a library, playing sport, or clad in graduation gowns and hats, clutching their degrees. The laudable desire for knowledge and training is converted into propaganda for a corrupt higher education system that lures people onto courses (often of questionable use to the individual) and off the employment register, while perpetuating the assets-to-debt swapping regime. The scam is straightforward. Parents send their kid to college, either through savings, or now, as is more likely, through taking on debt themselves. The student then racks up more debt, well into their post-college working life. When the parents downsize, retire, or expire, what would have been an inheritance for the offspring then goes straight to the bank to pay off those debts.

Research commissioned by the Sutton Trust in 2014 tells us that most citizens will still be paying back loans from their student era into their 40s and 50s, and many will never clear these debts. So, putting that another way, if you accept the concept of student debt as the new social indenture, you are, in all probability, in a long-term, flatlining economy, signing up to be in indebted servitude all your life, simply through enrolling in college.


The view from the top of Millbank on the day it was stormed by angry students in 2010. Photo by Henry Langston.

Over the next three decades, the Office of Budget Responsibility estimates that the cost to the UK in paying off student debts will rocket to billions of pounds. They are projected to almost equal the entire higher education budget. Interest payments on outstanding loans will rise, bringing the cost to almost one percent of the GDP. In 2009, an Independent Higher Education Commission described the current fees-and-funding system as "unsustainable," leaving three-quarters of students unable to pay off loans.

More than 40 million Americans are stuck with some type of student debt. Altogether, they owe more than $1.3 trillion. Some 25 to 30 percent of graduate income goes to pay this off. When graduates have to pay such a high proportion of their wages to the banks, this causes debt deflation, resulting in shrinking markets and rising unemployment.

Paradoxically, the overwhelming debt many graduates face leaves them unable to wait for lucrative employment, and instead taking lower-paid jobs in order to stop their repayments and interest from ballooning further. As with the UK, debt's impact extends beyond the students themselves, burdening their families for decades. This threatens the ability of current and future generations to build the successful careers and businesses that contribute to growth, and to buy the houses, cars, and other goods needed to sustain a dynamic consumer economy. It delays young people leaving home and getting married, and older generations saving for their retirement, building tension and potential conflict within households.

Debt and depression have long been associated. Now a recent study at Northwestern University has uncovered debt's negative relationship with physical as well as mental health. "There had been a fairly strong and consistent link between debt and depression, debt and thoughts of suicide," Elizabeth Sweet, the study's lead author, explained in Time magazine. "But very little had been done to look at the impact on physical health." Following a group of young adults over a 15-year period, the study accessed 8,400 people's data on both personal debt and health. They focused on each individual's total debt except home mortgages, including student loans (which make up the greatest proportion of non-mortgage debt, especially for young people), credit cards, car loans, and medical or legal bills. People who owed more suffered higher levels of stress and depression and poorer overall health, particularly if the debt was more than the assets they owned (homes as assets and mortgages as debts were discounted from the equation). Those who subjectively judged their debts to exceed the value of their assets were also more likely to have higher blood pressure. This effect is significant, as even a small rise in blood pressure can strongly increase the risk of stroke and hypertension. Debt literally is a killer.


Student protesters in Birmingham in 2010. The Lib Dems backtracked on their promise to abolish fees when they went into coalition with the Tories. Photo David Jones / PA.

Debt destroys the carefree culture of being a student. At a time when people should be enjoying the beauty of irresponsibility before a lifetime of it, so many young people are now fearful and defeated, old before their time. Like generations past, they should be worrying about how they'll be able to adjust to a more structured life, not how they'll pay off the banker middle-man. I personally would never have gone to college, knowing that I'd leave under such a cloud of debt. I'd have done something much more rational and economically sensible, like dealt drugs.

We are so enmeshed in this global economic system, and our role as debtor nation, it becomes very difficult to see how we extract ourselves from it. Politicians, if not compromised by the lobby system, tend to be creatures of the present rather than visionaries; they are governed by the election cycle and the next set of polls. There is little currency for any of them in reminding their electorate of the bigger inconvenient truth, namely that we have to prepare for a world without paid work or profits.

I was the first from my family to go to college, a circumstance I shared with many of that punk generation. Like urchins in a sweet shop, we swaggered around our campuses, fortified by the notion that we were pioneers, breaking the class structure.

However, these are testing times for the established order. When a system is failing, people will take action, primarily out of desperation as no other course seems to present itself. In the US, Debt Collective—a remnant of the Occupy Wall Street movement—has helped thousands of debtors organize and go on strike, refusing to pay back over $182 million in student debt.

In the UK, the IFS report found that almost three-quarters of English college graduates will have at least some of their loan written off. In other words, the banks know that their own system doesn't even work. Of course, that won't stop them from continuing with it.

But the greatest threat to debt culture hasn't manifested yet, though it's surely on the cards at some point: that young people will simply do the arithmetic, and decide, en masse, not to go to college. For middle-class or ambitious working-class kids, it seems counterintuitive to tell their parents: I don't want to go to college. But what was once a rite-of-passage, a great social chapter in a person's life, has come to be a process by which the bank seizes both their parent's assets and their own future ones. The logic is sound: if a shit, low-paying job in a tanking economy is the best option anyway, at least leave me (what's left of) the equity on your house. Yes, this late capitalist dystopia is very far from Thatcher's 'property owning democracy.' I often wonder whether she would be delighted that the elites are creaming it off, or saddened that the modest aspirations of the petty bourgeoisie and skilled workers, which she encouraged, are now being crushed.

It's possible that a decline in student enrollment will render university campuses derelict, littering the green belt like abandoned ghost malls.

All this points to a future where more people will be educated through the network. A Wikipedia of free higher education, working on the principles of the Open University, must surely be about to come of age as a mass phenomenon. Learners don't need university bureaucracies, now reduced to meek tools of government, banks, and other corporate sponsors, offering a proscribed and limited (and in most cases vocationally useless) educational experiences. In the future, probably only engineering, science medicine, and fine art will be taught in traditional physical college locations. Already some of the grand old Victorian university buildings in UK cities have been sold off for apartments and hotels, replaced by cheaper, more functional constructions in greenfield sites. This is as much about the financial pressures on these institutions as it is about modernization. And it's possible that a decline in student enrollment will render many big, expensive university campuses derelict, littering the green belt like abandoned 'ghost malls.' Of course, the very oldest and most prestigious universities will survive, as the wealthy parents of those students are not paying for 'education' as such, but for access to the influential network of the ruling elite.

For people who worry about missing out on the social side through having their college experience online and in study groups, they should remember that Europe's railways, Ibiza, Miami beach, and India aren't going anywhere. We will still be allowed to have adventures, as well as just study, in our networked peer groups. Call me a deluded optimist, but I'll never lose faith in young people's ability to find ways to get drunk and fuck around. And if people are looking for an authoritative institution to vent their spleen on; don't worry, the banks and their political message boys will still be there, though hopefully with a greatly declining influence over our lives.

Irvine's fee for this piece has been donated to The Junction, the-junction.org. His new book The Blade Artist is out now published by Penguin.