Archive for Friday, April 7, 2017

Opinion: Student debt situation is creating indentured servitude

April 7, 2017

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Perhaps as much as half of settlement in the British American colonies was by indentured servants. Mostly under the age of 25, they lacked the money for passage to the New World and “indentured” themselves to repay the cost of getting here. Their time and labor was owned by their masters; they were not free to go where they wished, work where they wanted, or marry without permission. Their debt could not be discharged or avoided. If one escaped and was caught, he would be sent back, where he could be legally beaten by his master. Remember the book and movie “The Last of the Mohicans”? There’s a good chance the character played by Daniel Day-Lewis, Natty Bumppo, was the progeny of fugitive indentured servants. For generations this underclass lived on the edge of colonial society, squatting on wilderness land, often integrating into Native American communities. The stories of indentured “pilgrims,” like Natty Bumppo, are not often told, but now might be a good time to reflect on the earliest American slaves: indentured servants.

What prompted this column was a recent two-part series by Tina Rosenberg in the New York Times about the college dropout rate. The point of the articles was to explain an apparent anomaly. With the clear economic evidence supporting the long-term value of a college degree, how do we explain the college drop-out rate? The series reports that 25 percent of people in their 30s who attended college have dropped out. Why, the NYT asks, would anyone drop out when a typical college graduate working full-time earns 54 percent more than a full-time worker who attended some college but has no degree?

When I arrived at KU in 1970 tuition was less than $400 per year, and for that you could take as many classes as you could physically get to. One semester I took 21 hours; another I took 20. Of course, prices were lower then, but not by that much. Compared with tuition costs today, college was virtually free. We were the Baby Boomers, children of the post World War II GI Bill. By 1956 approximately 8.8 million veterans had gone to school on GI benefits, with 2.2 million attending college. Schools like KU exploded, expanding tenfold. How many became teachers, doctors, engineers, lawyers and the like?

This continued into my generation. The generation before us did not pull up the college ladder, but left it down for us. My wife and I graduated from KU in 1974, and I from law school in 1978, with less than $3000 of debt. We had to work some, but received, in essence, a free education paid for by the taxpayers of Kansas. And when we went from Lawrence out into the world we were free to go where we wanted, to buy cars and houses, and start having kids. We had no indentures that bound us to the wills of others, but were free to work for ourselves.

I don’t have to tell you that we have not left the world of educational opportunity as good as we found it. The average student today graduates with over $37,000 of debt, and for kids who attend $40,000 per year elite private colleges, or who seek post-grad degrees, debt can exceed $200,000. Over 44 million now owe more than $1.4 trillion, and 25 percent are delinquent. Interest rates are 6.8 percent, though the prime lending rate for banks is far lower, 4 percent, and the Fed Funds rate, what banks pay the Fed, recently has been between .75 and 1 percent.

As with the indentured servants, there is no way out through bankruptcy. Lenders have persuaded a friendly Congress to close the door on college debt. Most other kinds of debt can be discharged in bankruptcy, but not college debt. Donald Trump gets to use bankruptcy, but not an underwater college graduate. We even let lenders garnish Social Security payments to delinquent student debtors. We are ruthlessly soaking this generation and stifling their futures. Many can’t buy cars and houses, and many are putting off having children. When Bernie Sanders campaigned on the issue of student debt forgiveness and free college education, he hit a nerve with Millennials. Too bad the selfish old Boomers are still calling the shots. Natty Bumppo could take his long-rifle and melt into the frontier; where can today’s indentured servants escape?

— William Skepnek is a longtime resident of Lawrence. He is a lawyer and taught Honors Western Civilization at the University of Kansas from 1991 to 2010.

Comments

Carol Bowen 8 months, 1 week ago

So true. How did we create indentured servitude and how do we get out of it?

From the supply side, grads and dropouts are paying down student loans instead of buying cars, houses, and refrigerators. The country's cash flow is all tied up in loan payments. That's got to have a major impact on the Consumer Price Index (CPI). We can either make it easier to close out debt or increase wages to improve cash flow. Conservatives will shoot themselves in the foot if they ignore this reality.

Brock Masters 8 months, 1 week ago

"We can either make it easier to close out debt or increase wages to improve cash flow."

Think about the last part you wrote. So one goes to college and incurs debt but can't earn enough with their college degree to easily pay off the debt. Well, maybe college is a bad investment for them and they should have not gone to college?

Going to college is not a right, it is an investment. Treat it as such and we'd have less students with debt.

Carol Bowen 8 months, 1 week ago

I don't disagree. I openly support vocational programs and their outcomes. However, how will we acquire enough grads to teach, practice medicine or law, design engines, ..., if not enough young people can afford college? There are personal needs and societal needs.

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