How college loans exploit students for profit | Sajay Samuel

How college loans exploit students for profit | Sajay Samuel


Today 40 million Americans are indebted
for their passage to the new economy. Too poor to pay their way through college, they now owe lenders
more than one trillion US dollars. They do find what jobs they can get to pay off a debt
that is secured on their person. In America, even a bankrupt gambler
gets a second chance. But it is nearly impossible for an American to get discharged
their student loan debts. Once upon a time in America, going to college did not mean
graduating with debt. My friend Paul’s father
graduated from Colorado State University on the GI Bill. For his generation, higher education was free or almost free, because it was thought of
as a public good. Not anymore. When Paul also graduated
from Colorado State University, he paid for his English degree
by working part-time. 30 years ago, higher education tuition
was affordable, reasonable, and what debts you accumulated,
you paid off by graduation date. Not anymore. Paul’s daughter followed in his footsteps, but with one difference: when she graduated five years ago, it was with a whopping debt. Students like Kate have to take on a loan because the cost of higher education
has become unaffordable for many if not most American families. But so what? Getting into debt to buy
an expensive education is not all bad if you could pay it off with the increased income
that you earned from it. But that’s where the rubber
meets the road. Even a college grad
earned 10 percent more in 2001 than she did in 2013. So … tuition costs up, public funding down, family incomes diminished, personal incomes weak. Is it any wonder that more
than a quarter of those who must cannot make their student loan payments? The worst of times
can be the best of times, because certain truths flash up
in ways that you can’t ignore. I want to speak of three of them today. 1.2 trillion dollars of debts for diplomas make it abundantly obvious that higher education
is a consumer product you can buy. All of us talk about education
just as the economists do now, as an investment that you make
to improve the human stock by training them for work. As an investment you make
to sort and classify people so that employers
can hire them more easily. The U.S. News & World Report
ranks colleges just as the consumer report
rates washing machines. The language is peppered with barbarisms. Teachers are called “service providers,” students are called “consumers.” Sociology and Shakespeare
and soccer and science, all of these are “content.” Student debt is profitable. Only not on you. Your debt fattens the profit
of the student loan industry. The two 800-pound gorillas of which — Sallie Mae and Navient — posted last year a combined profit
of 1.2 billion dollars. And just like home mortgages, student loans can be bundled
and packaged and sliced and diced, and sold on Wall Street. And colleges and universities that invest in these securitized loans profit twice. Once from your tuition, and then again from the interest on debt. With all that money to be made, are we surprised that some
in the higher education business have begun to engage in false advertising, in bait and switch … in exploiting the very ignorance
that they pretend to educate? Third: diplomas are a brand. Many years ago my teacher wrote, “When students are treated as consumers, they’re made prisoners
of addiction and envy.” Just as consumers can be sold and resold
upgraded versions of an iPhone, so also people can be sold
more and more education. College is the new high school, we already say that. But why stop there? People can be upsold
on certifications and recertifications, master’s degrees, doctoral degrees. Higher education is also marketed
as a status object. Buy a degree, much like you do a Lexus
of a Louis Vuitton bag, to distinguish yourself from others. So you can be the object
of envy of others. Diplomas are a brand. But these truths are often times
hidden by a very noisy sales pitch. There is not a day that goes by without some policy guy
on television telling us, “A college degree is absolutely essential to get on that up escalator
to a middle-class life.” And the usual evidence offered
is the college premium: a college grad who makes on average
56 percent more than a high school grad. Let’s look at that number more carefully, because on the face of it, it seems to belie the stories we all hear about college grads
working as baristas and cashiers. Of 100 people who enroll
in any form of post-secondary education, 45 do not complete it in a timely fashion, for a number of reasons,
including financial. Of the 55 that do graduate, two will remain unemployed, and another 18 are underemployed. So, college grads earn more
than high school grads, but does it pay for the exorbitant tuition and the lost wages while at college? Now even economists admit going to college pays off
for only those who complete it. But that’s only because high school wages
have been cut to the bone, for decades now. For decades, workers with a high school degree have been denied a fair share
of what they have produced. And had they received as they should have, then going to college would have been
a bad investment for many. College premium? I think it’s a high school discount. Two out of three people who enroll
are not going to find an adequate job. And the future, for them,
doesn’t look particularly promising — in fact, it’s downright bleak. And it is they who are going to suffer the most punishing forms of student debt. And it is they, curiously and sadly, who are marketed most loudly
about this college premium thing. That’s not just cynical marketing, that’s cruel. So what do we do? What if students and parents treated
higher education as a consumer product? Everybody else seems to. Then, like any other consumer product, you would demand to know
what you’re paying for. When you buy medicines, you get a list of side effects. When you buy a higher educational product, you should have a warning label that allows consumers to choose, make informed choices. When you buy a car, it tells you how many
miles per gallon to expect. Who knows what to expect from a degree say, in Canadian Studies. There is such a thing, by the way. What if there was an app for that? One that linked up the cost of a major
to the expected income. Let’s call it Income-Based Tuition or IBT. One of you make this. (Laughter) Discover your reality. (Laughter) There are three advantages, three benefits to Income-Based Tuition. Any user can figure out how much money he or she will make
from a given college and major. Such informed users are unlikely to fall victim
to the huckster’s ploy, to the sales pitch. But also to choose wisely. Why would anybody pay more for college than let’s say, 15 percent
of the additional income they earn? There’s a second benefit
to Income-Based Tuition. By tying the cost to the income, college administrators would be forced
to manage costs better, to find innovative ways to do so. For instance, all of you students here pay roughly
the same tuition for every major. That is manifestly unfair,
and should change. An engineering student uses more resources and facilities and labs and faculty than a philosophy student. But the philosophy student,
as a consequence, is subsidizing the engineering student. Who then, by the way,
goes on and earns more money. Why should two people
buy the same product, pay the same, but one person receive
half or a third of the service. In fact, college grads, some majors, pay 25 percent of their income
servicing their student debt, while others pay five percent. That kind if inequity would end
when majors are priced more correctly. Now of course, all this data — and one of you is going to do this, right? All this data has to be well designed, maybe audited by public accounting firms to avoid statistical lies. We know about statistics, right? But be that as it may, the third and biggest benefit
of Income-Based Tuition, is it would free Americans from the fear
and the fact of financial ruin because they bought a defective product. Perhaps, in time, young and old Americans may rediscover, as the gentleman said earlier, their curiosity, their love of learning — begin to study what they love, love what they study, follow their passion … getting stimulated by their intelligence, follow paths of inquiry
that they really want to. After all, it was Eric and Kevin, two years ago, just exactly these kinds of young men, who prompted me and worked with me, and still do, in the study of indebted
students in America. Thank you for your attention. (Applause)

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About the Author: Oren Garnes

50 Comments

  1. If this guy keeps talking like this he's going to end up committing suicide by shooting himself in the back of the head twice while on his knees….

  2. All my life, college was an absolute. You applied, you attended, you graduated. No mention of debt or overall expense. I never really wanted to go, but as soon as I voiced that opinion, someone would snap "Well, are you going to just work at McDonald's instead?!" I was under more pressure to go to college than to do literally ANYTHING else as a teenager!

    I did end up finding a college I really liked and I got in. I graduated in four years with a Bachelor's, and have had very little employment since then. Only now, watching this, am I realizing that it was never about "getting an education" so much as it was about "making more money." This degree will guarantee you a job. That degree will mean faster promotion. It's become a way to get more people in the workforce–or it WOULD be, if wages weren't down and the economy wasn't in the toilet.

    I had a small loan that I paid off by myself in seven years, but I know people who are hundreds of thousands in debt still struggling to get out. I never want to take out another loan for any reason.

    And frankly, I wish Sallie Mae and Navient would get Mr Robot-ed out of existence.

  3. Just make a fake Degree and keep trying most jobs just want a photo and never actually check into it. Unless you give reason.aka talk about it.

  4. Community college is cheaper. But most people don't want to go to community college because we are often told its for failures and people who won't amount to anything in life. It's bullshit that we act like someone is better than someone else based on their college education

  5. Do you think this is fair?

    Daniel is 20 years old. He's highly intelligent, He's in college, is 80K in debt and is struggling to find a decent paying job. His friend Mike is 21 years old. He barely graduated high school and dropped out of community college. He recently started a business growing marijuana and sells it to hospitals and medical treatment places. He offered Daniel a job there but Mike said no self respecting person would go into a business like that! And how wrong Daniel is for profiting off this stuff

  6. Another social justice warrior who doesn't understand economics and loves the sound of his voice a little too much. Another social justice warrior who hasn't done his research on WHY a college degree has become so expensive before he came to preach his morality.

    The government is always the problem! The government and the socialists need for equality through legislating morality. Good ideas do not require compulsion.

  7. I go to college just so the professors play YouTube videos to teach me, and my classmates, but of course I won’t be able to find a decent job if I don’t have the Diploma that certifies that I’ve been watching YouTube for four years.

  8. Here is one great solution..require all universities to guarantee the student a job in their profession within a year after graduating otherwise provide more schooling for free or a full refund..This will hold the higher learning institutions accountable and in check.

  9. The moment i realize, vampires are barely seen by human. Because they can not endure such harshness of life. Why do we have to donate our home as education fee? Oh… Models are dying where is my loved one

  10. The "Guaranteed" student loan is guaranteed to be paid back to the bank. The US Gov. underwrites these loans, that is the "Guarantee". The guarantee is to the bank not the student.

  11. The only one ISSUE that causes this insanity: based on foresights within next years almost 65% of jobs in America will need some college education. It doesn’t mean at all that in real any skills gained with higher education will be really needed but employers can require college just in case 🙂

  12. College in the United States has become a waste of time, waste of money, unnecessary debt and stressfull anymore. Only go to college only if you go into the STEM fields.

  13. University=non-dischargeable debt with high interest rates

    Going to college funds the operation of the university…and the professor's, dean's and regent's retirements and benefits.

  14. Education is a scam to steal more money from hard working taxpayers who already subsidize these greedy money hungry zero tax paying profiteering educational institutions.

  15. Somthing worth thinking about .No one is at the top with globalisation. You can get killed with kindness .So think on students !!!!!!

  16. I wonder how he would answer the point that when one finds the right, affordable, most effective college, that one cannot purchase it unless the product lets you in. Many students don't have the choice to buy the BEST degree, the one that will give them the highest return. They don't get in. Or they can't afford it. Overall, though, this was insightful as I approach my next degree.

  17. It is entirely possible to pay for college out of pocket and not rely on loans for school. I don't agree with the prices. I do NOT want anyone to think I believe the costs for college are reasonable.
    I do believe the cost of college, cars, houses, land, ect. increased out of control because it is fairly easy to get loans to pay for all of it.
    But back to my main point; if a person is single, with no children, does not currently have debt, and in some cases has a support system to allow them to not have to pay for rent or maybe pay at a reduced cost THEN 10k-15k dollars per year is managable.
    Jobs that require nothing more than a high school diploma or GED pay up to 12 sometimes 15 near cities where cost of living is higher.

    A job paying $12/hr is $10/hr after taxes. Working 40hrs/week yields $20,800/year. Subtract education, transportation, and food then you're left with $0. Again this is only managable under very specific circumstances.

    If I could do it over I'd have my degree already. I would have lived like a caveman, but I'd have it with no debt.

    For the people who have kids or debt already then grants and loans are the way to go. The only comfort I can give is saying that if you really want to learn and you go to college then it isn't a total waste. You will be more educated and there isn't anything wrong with that.

    Get smarter, build networks, and intern. That's the way to get the job. Good luck everybody.

  18. How true. The banks want everybody in debt for the term of their natural life so that they can trade off of our toil. It's "The Big Short" all over again. No lessons learned by us that we'll once again be picking up the tab and the bankers will be rewarded for a job well done.

  19. Local university chief of staff near where I live gets more money than the prime minister makes you wonder

    Same people tell you money is evil and sell you gender study degrees

  20. Occupation: Postdoctoral Fellow in Cancer Research
    Salary: $47,800 per year

    May 2016 Balance: $51,000
    October 2019 Balance: $9,720

    Earliest Zero Balance Date: July 1, 2020

  21. Americans are too brainwashed to do 6anythinh about it. Most of them seem to be willing slaves to, and worshippers of, capitalism!

  22. Baby boomers got trapped into debt with the new “credit card” how wonderful, no money use this instead. Pay later. Sounded so good if used responsibly but as happened so many did not and ended up in debt. at least you could go bankrupt to ease the burden. But many young said no to the credit card so the government for better lack of whom to blame said, how do we pile on debt for the new young? Oh wow, let’s tell them a good future is only possible with a college degree. Thus the new American debt. Only no bankruptcy this time, “they” learned from the credit card bamboozle! Just a thought.

  23. My great uncle went to college, then to law school. He worked a part time job while he went to school. With that part time job, he was able to afford his tuition, his books, his housing, food, a car, gas, and everything else he needed. He graduated with $300 left to pay on his car and had that paid off within a month of graduating. That was back in the 1960s. He never even thought about getting a student loan.

    And he never had to take any social justice or diversity classes. He took classes that actually pertained to his chosen major.

  24. eh.. I was with him until he started talking about tying tuition to income. Screw that. How about we just get the damn government out of the student loan business? That way students won't have an unlimited amount of money they can borrow, and the colleges will HAVE to reduce tuition costs in order for student to afford tuition.

    Tying tuition to income just incentivises kids to not work and get the lowest possible tuition.

  25. Why does US subsidizes Indian students like Sajay to come to US and work as engineers rather than pay for its own student education? Oh right – coz its money! It doesn't want to educate its own people so it engages in education arbitrage where it takes other countries students and gets them here so it can save on educating them, and then on employing them.

    Viola. Capitalism is such a beautiful system isn't it?

  26. There are many low cost public options for a college education. Instead people choose to borrow money to pay for a college they can't afford.

  27. Disturbing issue that is predatory financial exploitation of hopefuls that are choosing this path out of perceived necessity. The entire system is self-designed/rigged as a profiteering machine. Yet, no one is speaking up that this dirty tactic is essentially financial molestation of those that are either too naive, too poor, or too ignorant of what is really going on, as they enter this lying, cheating, thieving system all bright eyed, and hopeful. It's exploitation, and these colleges are the exact opposite of all of the humanitarian liberal ideals they aim to teach. It's a hypocrite institution. Do as we say, not as we do ( never mind all of that behind the scenes dirty work…it's not in the marketing). Higher education is a self serving industry just like the rest of them. Each student is someone to be leeched for money. It's all a well orchestrated gate keeping system that can net an influx of guaranteed revenue. It's a self-designed industry bubble with a hyper-inflated price that doesn't reflect any market reality. I'm not quite sure why more people haven't gathered to derail this elaborate Ponzi scheme.

    Just wait, that money grubbing college will then have the nerve to ask alumni for a donation.

  28. Income Based Tuition only works when the admissions process rids itself of identity politics and racial quotas.

  29. Thank God I chose to opt out of Cowwege and drive a big rig instead, wanna hear my Dave Ramsey Scream 😱 I’m Debt Free Wooooo Hooooo

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