Francisco Reynoso is a gardener who lives near LA. In 2005, his son, Freddy, started attending Berklee College of Music—the first in his family to go to college. When Freddy died accidently, the collection agencies started hounding his father to pay off the rest of his student loans. Student loans—by law—cannot be avoided by bankruptcy.
Just like mortgages, Reynoso discovered nobody knows who owns the loan. Nor could he find out how much he supposedly owed. But the collection corporations still demand that he pay them off.
Thirty six million Americans have student debts; 94% of students getting degrees have become indebted. States increase student fees, which further increase debts and feeds private profits. Student debt was only $100 billion in 2010, incredibly just two years ago. Today it is over a trillion dollars, greater than credit card debt! It is growing faster today than sub-prime mortgages in the housing bubble.
Students go into debt so that corporations can profit. This is the inevitable result of turning a social good into a commercial process. Federal law guarantees these profits to Wall Street, since students cannot discharge student loan debt through bankruptcy. Further, the Department of Education underwrites this debt as a guarantee to the speculators. The student loan bubble may be the next hit to the economy.
Student debt is “securitized” (turned into a financial security like a sub-prime mortgage) into SLABS – Student Loan Asset Backed Securities. Like mortgages, SLABS are sliced and diced, sold and re-sold daily to turn students into an ATM for Wall Street. The speculative market on the trillion dollar student debt is estimated to be over $2.67 trillion.
Colleges at all levels are eliminating classes, making it harder to get a degree. Increasingly schools are denying students the chance to make up a course they fail. Turning people away from public higher education “creates the market,” commercializing education to benefit for-profit higher ed corporations that get most of their funding from student loans.
Forms of debt slavery have been essential to the U.S. economy for most of the history of this country. Most of the first European settlers were indentured servants, who worked for their masters for at least 7 years. Debt slavery was the economic weapon during the Jim Crow Era. The famous words “I owe my soul to the company store” from the song “Sixteen Tons” reflect this reality.
Wall Street, with the open assistance of government, is in the process of financializing everything they possibly can sell as speculative financial products. Once you are in debt, the state enters the picture to use its coercive police powers to criminalize the debtors. Entire cities, school districts, water boards are now indebted. This puts entire communities under a form of debt slavery.
In 2008, Americans bought out Wall Street’s debt for at least $16 trillion dollars. We paid off all debts with this money! Paying off any debt—state, local or individual—means that we are paying twice! All debts should be abolished! Nationalize all student debt! Higher education should be free!
