Students are now graduating with average debts of over $24,000. When I speak to families in mining towns in Appalachia, I ask how many have lost a job, how many face foreclosure, how many face costly medical bills. Many hands go up. But when I ask how many worry about student loans, the biggest portion of the audience stands up. It is working families — families stretching to give their children the chance that they never had — who are taking on the greatest debt and are at the greatest risk.
The banking industry has used its clout to make these loans the harshest of all debt. They survive bankruptcy. The lenders have broad collection powers, far greater than with a mortgage or a credit card. They can garnish wages or even Social Security payments. When payments are missed, penalties are brutal. Students who graduate and then lose their job suddenly find themselves owing twice what they signed up for.
The debt constricts normal life events. Students must put off moving out from their parents' home, buying a car or saving for a home or retirement. They delay getting married or having children.
Defaults have soared. In 2008, more than 238,000 defaulted on their loans. The number of loans that went into forbearance or deferment (when borrowers receive temporary relief from payments) rose to 22 percent in 2007.
President Obama and his wife, Michelle, struggled to pay off student debts long after they graduated. The president increased Pell grants and provided relief that would link government loan payments to income, and provide potential forgiveness for those taking public service jobs. But despite the largest increase of student aid since the GI Bill, the debts keep getting bigger.
The debt not only enslaves the borrowers, it threatens the economy. With millions of young people burdened by debt, demand for apartments, homes, cars and discretionary goods is reduced.
Occupy Wall Street can ask these hard questions:
Banks corrupted Congress with campaign contributions to facilitate their fleecing of the most vulnerable of students with the most onerous of provisions.
Why should big banks be able to get virtually interest-free money from the Federal Reserve, while students are forced to pay far higher interest rates? Why should bankruptcy courts be able to rewrite mortgages on the vacation homes of the wealthy while student loans are untouchable? Students need legislation to allow their loans to be refinanced in bankruptcy court, or forgiven. Why don't we provide students with the grants or low-cost loans the banks get?
Many young people forgo college. Others drop out, unwilling to rack up debt. If there is anything that is too big and too important to fail, it is our next generation.