Student loan debt is one of today's college students' biggest concerns, and no wonder: a report issued in early December by the Institute for College Access and Success (TICAS) shows average student debt is currently $29,400 upon graduation.
This kind of debt means new graduates face high monthly student loan payments, crippling their ability to buy cars and homes and eventually move out of their parents’ basements. In fact, the amount of student loan debt in the United States eclipsed our total credit card debt back in 2012.
That’s why it was so surprising to learn that for the 2013 fiscal year the federal government made a $41.3 billion profit on student loans, which, as USA Today was quick to point out, is “a higher profit level than all but two companies in the world: Exxon Mobil cleared $44.9 billion in 2012, and Apple cleared $41.7 billion.”
This report raises concerns about what role profit should play, if any, in higher education.
What the Figures Mean—and Don’t Mean
First, is the entire $41.3 billion purely profit? Arne Duncan, U.S. Department of Education Secretary, doesn’t think so. “It's actually neither accurate nor fair to characterize the student loan program as making a profit,” Duncan said, emphasizing these figures are essentially arbitrary.
As Benjamin Cosmin on PolicyMic.com explains:
“It depends how you calculate the interest rate yield on student loans. Projections are based on U.S. treasury bonds, which actually set the interest rates for student loans below the market rate, leaving money on the table. It’s suggested the current accounting method doesn’t totally account for delinquent or defaulted loans, or the risk involved with dispersing these loans (that, if taken into account, would be cause to raise the interest rate on loans). By some calculations, there is actually little profit – or even none at all.”
In other words, it all depends on how you cook the books, and if projected student loan payments are actually made. In this economy there’s no guarantee people can pay their monthly student loan bills. In fact, the USDOE reported this September that the rate of student loan defaults is now at its highest level in twenty years.
These figures are certainly abstract to many, but sadly, I see them play out in real time every day at the community college where I teach. One of my best students recently had to drop out because he could not afford to make his tuition payment or rack up more student loan debt, even though he had completed all coursework at a very high level of academic achievement.
My college is certainly not the only one with students caught in this trap. “A central problem is that two-year colleges are asked to educate those students with the greatest needs, using the least funds, and in increasingly separate and unequal institutions,” states TCF’s “Bridging the Higher Education Divide: Strengthening Community Colleges and Restoring the American Dream.”
Students everywhere, at every kind of college, are prevented from pursuing the very higher education everyone from President Obama to corporate leaders thinks they should have.
But an even more significant result of this crisis is a loss of faith in education as the great leveler and the cornerstone of a healthy democracy, and therefore something that should be an investment in the future of society, not a financial profit-generator for a few.
Thus when we, today, deny more public financial support to college students, we create a debtor class, leading to an uneducated and, perhaps, apathetic citizenry.
That’s really the crux of the matter: education isn’t a luxury in a democracy—it is a necessary prerequisite for the maintenance of a just system and the prevention of tyranny, to borrow the language of the American Revolution.
We can probably calculate the devastating cost to our nation if we don’t have equal access to education. We should think very carefully about whether we can afford the cost of that ignorance, instead of whether we can afford to provide more funding for colleges and their students.