Student Loans Are Forever

student loans

Recently a mind boggling General Account Office (GAO) study revealed that 105,000 Americans had their Social Security benefits garnisheed due to unpaid student loan debt. The New York Federal Reserve reveals that two million US Americans over sixty are still paying off $36.5 billion in student loan debt. Over eleven percent of this debt is in default.

According to banking reform advocate Ellen Brown, some seniors incurred this debt by co-signing student loans for children or grandchildren. However a lot was incurred by middle-aged workers going back to school in the hope of finding employment in a bad job market. What they have wound up with is something much worse: no job, an exponentially mounting debt that cannot be discharged in bankruptcy, and the prospect of old age without a social security check adequate to survive on.

John F Kennedy’s Vision

It took me twenty years to repay the student loans that enabled me to attend medical school (1969-73). This was before the financialization of the American economy, when student loans became a profit center for Wall Street banks. President John F Kennedy, who started the Health Professions Loan scheme, believed that bright students who worked had as much right to attend medical school as the sons (only seven in my class were women) of wealthy families. He also wisely envisioned that patients would benefit from a more diverse medical profession.

Although student loans are issued by banks, they are guaranteed by the federal government. Theoretically this means the taxpayer is on the hook if the student can’t pay the loan. In practice, this rarely happens. Student loans can’t be wiped clean by bankruptcy, except in rare cases of permanent and total disability. Or even by death. Last week Senator Chuck Schumer (D-NY) introduced “Andrew’s Law,” new legislation requiring private student loan companies to forgive outstanding debt if a borrower dies. The bill has little hope of success in a Republican congress.

At a time when mortgage interest rates were over 8.5%, I only paid 3% interest on my student loan. In addition my medical school was scrupulous about limiting my outstanding debt to $26,000 – finding me work study jobs and private grants to reduce the amount I had to borrow.

With the advent of neoliberalism, education is no longer regarded as a basic right, but as an enormously lucrative commodity. Banks borrow money from the Federal Reserve for close to 0% interest. They charge homeowners 3-6% interest on mortgages, while students, who are more desperate, are forced to pay 4-10% interst. Moreover, unlike mortgage loans, student loan interest rates are fixed and can’t be renegotiated when interest rates drop.

The Student Loan Bubble

The New York Federal Reserve recently called a daylong conference to address the student debt crisis. In his opening address , New York Fed president William Dudley indicated that student loan exceeds $1 trillion dollars and has the highest rate of delinquency of any form of consumer debt. In the 2009 cohort of college graduates, only 17% of the original debt has been paid down. In fact, more than 20 percent of high balance student borrowers owe more than when they graduated.

In mid-March, Obama signed an executive order instituting a Student Aid Bill of Rights that will

1. provide a new website where all federal loans will be visible by July 2016.
2. require loan servicers to notify debtors when their loans or transferred or payments are late.
3. instruct loan services to apply prepayments to loans with the highest interest rate
4. offer a “state-of-the art” complaint system.

Beats me how any of this helps struggling seniors whose Social Security checks are being docked.

People can learn more about the student loan crisis at Student Debt Crisis, a non-profit organization dedicated to fundamentally reforming the student loan program. The weekly radio program Counterspin recently interviewed their executive director Natalie Abrams. Listen here (starts at 18:45).

photo credit: IMG_2589 via photopin (license)

22 thoughts on “Student Loans Are Forever

      • Pres. John F. Kennedy Exec. Ord. 05JUN1963. 11110. Authorizes the issuance of “UNITED STATES NOTES” backed by the U.S. Silver Reserves. Threatens to replace the Fiat Federal Reserve Note. Wiki spins this on its head and tries to make it as if JFK “promoted” Fed. Resrv notes and “take silver out of circulation” which was the furthest from the truth.

        Like

      • On June 4, 1963, a little known attempt was made to strip the Federal Reserve Bank of its power to loan money to the government at interest. On that day President John F. Kennedy signed Executive Order No. 11110 that returned to the U.S. government the power to issue currency, without going through the Federal Reserve. Mr. Kennedy’s order gave the Treasury the power “to issue silver certificates against any silver bullion, silver, or standard silver dollars in the Treasury.” This meant that for every ounce of silver in the U.S. Treasury’s vault, the government could introduce new money into circulation. In all, Kennedy brought nearly $4.3 billion in U.S. notes into circulation. The ramifications of this bill are enormous.

        With the stroke of a pen, Mr. Kennedy was on his way to putting the Federal Reserve Bank of New York out of business. If enough of these silver certificates were to come into circulation they would have eliminated the demand for Federal Reserve notes. This is because the silver certificates are backed by silver and the Federal Reserve notes are not backed by anything. Executive Order 11110 could have prevented the national debt from reaching its current level, because it would have given the government the ability to repay its debt without going to the Federal Reserve and being charged interest in order to create the new money. Executive Order 11110 gave the U.S. the ability to create its own money backed by silver.

        After Mr. Kennedy was assassinated just five months later, no more silver certificates were issued. The Final Call has learned that the Executive Order was never repealed by any U.S. President through an Executive Order and is still valid. Why then has no president utilized it? Virtually all of the nearly $6 trillion in debt has been created since 1963, and if a U.S. president had utilized Executive Order 11110 the debt would be nowhere near the current level. Perhaps the assassination of JFK was a warning to future presidents who would think to eliminate the U.S. debt by eliminating the Federal Reserve’s control over the creation of money. Mr. Kennedy challenged the government of money by challenging the two most successful vehicles that have ever been used to drive up debt – war and the creation of money by a privately-owned central bank. His efforts to have all troops out of Vietnam by 1965 and Executive Order 11110 would have severely cut into the profits and control of the New York banking establishment.

        Like

        • I’m a strong advocate of prohibiting private banks from creating money out of thin air. In fact, some of us in the NZ Green Party are hoping New Zealand, in coalition with 1 or 2 other small countries, will be among the first to restore sovereign money here. New Zealand actually had a system of sovereign money (operating alongside bank fiat money) during the depression when the first Labour government created sovereign money. It did so in 1936 to allow Kiwis to buy state houses at low interest. It stimulated the economy, put people back to work in meaningful jobs and New Zealand emerged from the Great Depression sooner and in better shape than many other countries.

          I recently became aware of Kennedy’s executive order issuing silver certificates. I actually saw some in circulation in 1964, and when I asked my history teacher why some dollar bills said “federal reserve note” and some said “silver certificate,” he couldn’t explain why.

          I’m sure your question about why recent presidents don’t restore Kennedy’s executive order is rhetorical, right? I’m sure you already know the answer.

          Like

      • Thank you for this citation, Rick. It looks to me like the Founders were hedging their bet as to whether they would go with private fiat money or with sovereign money. My understanding is that Hamilton wanted a private central bank from the gitgo. Jefferson, on the other hand, wanted to reserve that authority for Congress.

        Like

  1. The true nature of institutions are being revealed, and more revelations are to come as the looming world wide debt crisis hits…
    Can we, the People of the world, avoid the institutional war escalating into nuclear war?
    I see the greatest possibility to avoid the nukes rests with massive grassroots actions; be alert.

    Like

  2. Great post! This gets passed over all of the time!

    My student loan was fixed a 3% as well. And I paid it off within ten years of graduating. But that was in the late seventies, when everything was easier. Today, college students take on this kind of debt, and for what? When they graduate, there is no career waiting, and most end up working jobs beneath their education and skills!

    This is criminal and needs to be stopped! But it won’t be, not as long as these elite-swine are running the show!

    Liked by 1 person

    • That is true Sojourner because there are not many jobs that pay a ‘living wage’ much less one that allows you to get from underneath the never ending debt cycle and so on the hamster wheel, they stay, right up until they drop dead and even then, it’s not over. At least, not according to this post. So very sad!

      Like

      • Too true. Most college graduates are ending up with entry level jobs now, and there’s no way the debt can be paid on minimum wage. What happens for many people is the interest charges stack up till you owe more than the original loan. When you think that banks are borrowing all this money for 0 percent interest, all you’re left with is pure greed.

        What really gets me is that people on Social Security disability are having their checks garnisheed – though they’re obviously unable to work.

        Like

      • It is sad! When we graduated from college, we could still go after our dreams. But today, those dreams are dead!

        And you and I are ‘terrorists’ for pointing these things out, don’t ya know!

        Liked by 1 person

    • Sojourner, what also came out as I researched this post is the only reason Obama and the NY Fed are concerned about student debt is because they’re afraid of a student debt bubble developing, similar to the real estate bubble that crashed the economy in 2008. So this whole student bill of rights thing isn’t about struggling students and poor workers – it’s about protecting the interests of the financial elite. This is why Obama wants to set up a website, to make it easier for banks to track the total amount of debt.

      Like

      • Oh yes, I caught that. Anything Obama comes up with will not into consideration what is best for ‘we the people’. Everything in Merica is about the bottom line, the people be damned.

        Like

  3. Reblogged this on An Outsider's Sojourn II and commented:
    Today’s college students, and their unemployed parents are facing another evil that has been brought about by the elite powers that be.

    Our college students go into great debt getting their degrees, and then when they graduate, they find their career choices no longer exist. And yet, they are still expected to pay off loans, even though they have been completely ripped off!

    This is the Merican way, the Merican dream!

    Liked by 1 person

  4. Reblogged this on shelbycourtland and commented:
    Here is yet ANOTHER article to read and weep over! The shit never stops! These are YOUR children that this is happening to and where are YOUR children? Sitting at home with you because they can’t make it on a cashier’s salary from TJ Max. They can’t make it on a Micky D’s fry cook salary and 20 hours a week. They went to college for that?

    And what is happening to your Social Security checks, both retirement and disability? Being garnisheed because you were trying to help your kids get a better life than you were able to live and now, you’re both up shit creek without a paddle. And guess what? TPTB claim it’s YOUR fault! No, it’s not! The fact is that they are just some greedy ass, nasty, vile and evil assholes who don’t give a damn about anything but money and power. They got both and we got debt!

    Like

  5. Pingback: Bernie Sanders Introduces Robin Hood Tax | The Most Revolutionary Act

  6. Pingback: Bernie Sanders Introduces Robin Hood Tax | The Most Revolutionary Act | Tales from the Conspiratum

Leave a Reply to ashiftinconsciousness Cancel reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.