Student Loan Countdown:Beyoncé "Countdown" Parody

"went off to school to get my education

little did i know debt was part of the equation

could of dropped out but that's a bad situation

if you don't pay up they'll garnish your wages"

"sallie mae and the government make bank

if i default

but i can't find a job

so that's not my fault"

"me and my boo yeah we wanna get married

my debt is a load that we both gotta carry

didn't know my interest rate would be 12%

payments just high as New York City rent"

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EU summit: tales of fiscal union and financial adulteryby Jérôme E. Roos

"On Friday morning, a crucial EU summit — touted as the last opportunity to save the euro from collapse — ended in a dramatic split between the UK and the rest of Europe... The break-up marks yet another tectonic shift in European history. But it also reveals the extent to which financial interests have corrupted the minds of our leaders and soured their mutual relations."

"This was never a clash over the European interest versus the British interest, as both continental cosmopolitans and British euroskeptics like to portray it. Behind the veil of ideology lurk powerful financial interests dictating the choices of our double-crossing elites."

"More specifically, Cameron demanded that: (1) “any transfer of power from a national regulator to an EU regulator on financial services would be subject to a veto”; (2) “the European Banking Authority should remain in London”; (3) “banks should face a higher capital requirement”; and (4) “the European Central Bank be rebuffed in its attempts to rule that euro-denominated transactions take place within the eurozone.” Sarkozy rejected Cameron’s demands outright."

"The reasons for this are really quite simple: (1) Sarkozy doesn’t want UK-based banks to get a competitive advantage by dodging the European-wide financial transaction tax; (2) he wants the European Banking Authority to move to Paris; (3) he knows French banks are in a much weaker position than their UK counterparts; and (4) he wants euro-denominated transactions to take place within the eurozone so they will be routed via La Défense instead of the City."

"The bottomline is that this is a battle of banks; a clash of capital — it has nothing to do with the general European or British interest. If the eurozone were to break up, many German and French banks would collapse, hence the Franco-German push for fiscal union. Yet such a fiscal union would impose continental-style regulations on the free-for-all City of London. Fearing its competitive position vis-à-vis New York, the UK therefore strongly opposed participation."

"So whenever they tell you “there is no alternative”, don’t believe them — it’s a lie. As a European Central Bank official recently told Reuters, “what I think is important at the moment is not showing politicians that there might be an alternative, because in their mind that might be less costly than the options they have.” The attempt to naturalize and depoliticize this crisis is an ideological smokescreen meant to keep us firmly in a state of financial prostitution."

"The task is upon us to disseminate the truth and get organized. Another Europe is possible!"

NASDAQ: Student loans, America's next financial crisis

Update: This article was removed from the NASDAQ site within 48 hours after its appearance. The cached copy of the complete article has been placed in the second half of this post. 


"The problem of rising and unsustainable student loan debt remains largely unacknowledged by the powers that be, though it's a vital cause to many protesters in the Occupy movement."

"The standard argument is that student loans can't be dischargable, because there's nothing to secure them - you can't repossess someone's education. However, the financial industry has used its characteristic ingenuity to find a way around that - in effect, the collateral for student debt is now a lifetime of the debtor's labor, rendered via an unforgiving architecture of wage garnishings, penalties and a pervasive culture of shame. Perhaps the most worrying part of this burgeoning crisis is that it's now understood that many, perhaps most, current students won't be able to pay down their loans."

"And the financiers know exactly what's happening. In a Wall Street Journal article from last month, a hedge fund manager with expertise in the $242 billion student loan-backed bond market (sound familiar?) said he refused to get involved with assets backed by recent student loans because he "can't quantify the risk ." The historical average for default rates figured on a quarter to a third of loans going bust, but another trader said that will probably rise to 40 percent or higher, depending on economic conditions."

"Rising costs are one side of the coin. According to the College Board, tuition costs are set to continue shooting upwards. In-state tuition and fees at public four-year institutions were up by 8.3 percent at $8,244 per year in the 2011-12 year, while private tuition and fees rose 4.5 percent to $28,500."

"On the other side of the coin is unemployment. Among the 16-24 year-old cohort, that now stands at 18 percent; for those 16-19, it's above 25 percent, with a participation rate of less than half. Young people can't get jobs before college, can barely find work during their school years and then face a terrifying job market upon graduation - if they graduate at all."

"The ingredients: nearly a trillion dollars of debt on the books, rising tuition costs, a youth employment market in crisis, undischargeable debt, government-guaranteed loans and an asset -backed bond market worth a quarter of a trillion dollars."

Steve Keen on BBC: "We're already in a Great Depression"

"Sarah Montague talks to Steve Keen, one of the few economists to have predicted the global financial crisis, about the possibility of another Great Depression, and how to avoid it."

"'Another Great Depression is all but inevitable' - that's the view of Steve Keen. He's been called the 'Merchant of Gloom', but he's one of the few economists to have predicted the global financial crisis. While he used to be a lone voice in challenging the economic consensus, more and more people are now listening to him. His way of avoiding depression? Write off the debt, bankrupt the banks, nationalise the financial system, and start all over again."

Simon Szreter hits out at UK higher education policies

"Szreter is recollecting a time in the early 1990s when he was conducting research on how the UK's long-term economic performance is shaped by factors such as the education of its workforce. While "fishing around" for measures of investment in education, he stumbled across data showing that there had been "an enormous disinvestment" in state schools, with tens of thousands of teachers laid off during the 1980s."

"I wasn't aware that this had happened," he says. "Then I looked at the private schools and that's when I got … angry about this, because I realised that actually the private schools had been going in the opposite direction. By the time Labour took power in '97, it was true that private schools had almost exactly twice the numbers of teachers per pupil in their staff rooms as state schools had. They always had an advantage, but this advantage had now doubled. That's never been revisited," he adds."

"It is over a decade since the research, but that it galvanised Szreter to dig deeper into the education system is unmistakable. In the years since, he has, among other things, made his way to a professorship and founded the History and Policy website, an initiative designed to inject greater historical insight into policymaking, but it is his forays into education activism that have set him apart."

"Despite a postwar austerity far harsher than the one we face today – and a level of national debt over twice as high – the nation found the resources to massively expand and publicly fund its secondary schools and their teaching staff."

"Since the financial crisis of 2008, he has become noticeably more outspoken, accusing the coalition of "paying for the profligacy of the banks" while systematically undermining higher education by radically withdrawing public funds, and of "cutting at both ends" the state primary and secondary education sector by abolishing the EMA [education maintenance allowance] for 16- to 18-year-olds and closing Sure Start for infants."

"The big story," he insists, "is undoubtedly higher education and further education". The raising of university fees may be a clear focal point for protest, but what seems to exercise him most is what underlies it: the long-term shift from financing higher education directly out of general taxation towards raising funds via "risky" private finance. "There have been 20 years in which governments have very happily expanded the higher education and further education sector rapidly … but they have put nothing like commensurate resources into the system," he says. The corresponding "managerial revolution", which encouraged universities to be more corporate and show they are offering value for money, has starved it of essential resources, he argues."

"But it is the over-reliance by successive governments on structuring student loans through "complex financial instruments" that could prove most devastating for the future of higher education, he says, and it is this that people need to pay attention to. Talking about the fallout of the financial crisis, he says emphatically: "We are not even over this [crisis] and the government is already quite happily talking about packaging up our younger generation's futures into a set of complicated loan instruments that it will place with the very sector of the economy that's caused all this."

"Ever the historian, he points to the fact that in the past, momentous progressive changes to the education system – such as the provision of universal secondary education – were brought about despite ideological objections or cost."

Are student debt strikes coming? with Thom Hartmann and Sarah Jaffe

"Sarah Jaffe, AlterNet, joins Thom Hartmann. For the first time ever - outstanding student loan debt this year will top one trillion dollars. And with tuition for college soaring - and prospects for jobs after college plummeting - the situation for students across America looks grim. But now - with the Occupy Wall Street movement in full swing - student debtors are feeling empowered - and are striking back against the big banks that got bailed out three years ago but are unwilling to help their debt-saddled customers now."

Student debt story: "Dear Sallie Mae, I can't afford you" by Natalia Antonova

"I’ve been in a panic these last few months. Making minimum payments on my student loans serviced by Sallie Mae Inc. was no longer merely a challenge – it was getting impossible. After making some awful sacrifices to refrain from defaulting (see more on that below), I’m in a corner."

"And defaulting would not only mean a ruined credit history, it would mean that my debt would double, triple, quadruple, etc… I would be a slave forever. But I took a long, hard look at the numbers, and I realized that I am already a slave."

"I was done before I even knew it. And applying for more deferrals will send me deeper and deeper into debt. Decades and decades of payments – as I grow old. There’s no end in sight. The system counts on this. The people setting it up knew that most of us would not be able to sustain payments over time."

"You know what I am actually ashamed of? Gambling with my life and the life of my kid because of student debt. Check out this article I wrote for Foreign Policy about giving birth on the state’s dime in Russia. One detail I “forgot” to mention is that my husband and I had the money to pay for a private contract at a Moscow hospital – thing is, it was a lean summer, and I was terrified of defaulting. I was so brainwashed by the system that owned me that I wouldn’t touch the money meant for Sallie Mae. My father, who’s been struggling financially as well, wired me some cash – that was set aside for loans as well. I actually went against my husband’s wishes and put myself and my child at risk, because I was trying to be “financially responsible.”"

"My son’s face greets me every morning. It says, “I trust you, mother.” When he grows up, I’m going to have to explain the risks I took with him while he was at his most vulnerable, because I wanted to be a good little cash cow."

"This wouldn’t have been the first time I skimmed on health care. Because I could not invest in decent preventative care while having dental problems, I lost two teeth at the ripe old age of 26, to give one example. I have literally been falling apart, all of the sake of letting people make a buck off of me. Except I can’t afford to do that anymore – I have to be able to take care of my child."

"We have a myth of the “deserving poor” in our culture – it’s similar to the myth of the “good rape victim.”"

"Besides making my situation clear for the loan sharks who will come a-callin’? I want to make a public promise that I am not going to put student debt ahead of my needs and the needs of my family anymore."

Wall Street's Pitch to Profit on Federal Student Loans by Jason Delisle

(Oct. 12, 2011) "The investment banking industry – and its friends in Congress – have cooked up a scheme they are pitching to the “supercommittee” that they say would reduce the federal debt and cut federal spending. Supposedly, the plan would take the government’s $555 billion direct student loan holdings off of its books. In reality, the plan, which would allow the bankers to earn fees on a $555 billion deal, plus $100 billion more every year, would not reduce the debt or cut spending. But that hasn’t stopped Wall Street from trying."

"A proposal that could only have been be cooked up by investment bankers is circulating on Capitol Hill. It would refinance the $555 billion direct student loan portfolio with new debt backed 100 percent by the federal government. But this new debt would not be called U.S. Treasury debt, despite the 100 percent guarantee, and therefore not counted as part of the national debt. In other words, the new debt would be used to pay off the old debt (Treasury bonds) that the government issues to finance direct student loans. To be sure, the mechanics of the proposal are more complicated than that, but the effect of the proposal would be to move all outstanding and future student loans from bonds backed 100 percent by taxpayers to another set of bonds backed 100 percent by taxpayers but not counted as part of the national debt."

The Student Debt System by Pam Brown

"The misunderstanding most Americans have of the student debt cycle is particularly dangerous now that the amount of education debt is about to pass the 1 trillion dollar mark, which amounts to about four thousand dollars for every man, woman and child in this country. According to the Project on Student Debt, of the class of 2008, 41% are either delinquent or in default. Many recent reports have already begun to theorize student debt as the next bubble about to burst. Unfortunately, this bubble has the potential to slowly ooze, causing unrelenting suffering for a generation, and even greater economic disparity for the 99%."

"Between the 1980s and now, higher education tuition has increased by about 300%.  Whereas until 1976 City University of New York (CUNY) was completely free, today "public" education is paid for by private student debt. Ironically, this debt, which is a form of privatization, has been encouraged by our government. Interestingly, "private" institutions are also financed through student debt. Although this debt financing is facilitated by our government, "private" institutions are completely unaccountable to the public.  Under close inspection, the lines between public and private have become so blurred that the distinction is a mere formality."

"Furthermore, these tuition hikes are not checked by the consumer's actual ability to spend. Unlike buying a house, the customer's income is not evaluated, and an education is not appraised. Tuition hikes are solely contingent on the ability of the student to go into debt. Furthermore, most tuition increases are authorized by boards of trustees comprised of wealthy individuals who frequently benefit from investment in financial markets that are buoyed by deepening student debt."

"As the system currently operates it is both unjust and unsustainable. It is unsustainable because these debts grow exponentially, if they are not paid. Only 37% of student loans are paid without delay. As of around 2009, five million loans were in default. The system is unjust because it places an enormous and impossible burden on the debtor. The burden of these debts often result in delaying of life stage events such as marriage, buying home, and having a child, and corresponding depression and anxiety. The burden of this debt is creating a generation with far fewer ties to community and family.'

"As banks make obscene profits, students become indentured upon graduation from college. Once indentured, they must work for whatever pay is available and under any and all conditions.  Frequently, this means underemployment, which often lasts a lifetime."

"Even though many believe that American society has high social mobility based on meritocracy this is factually untrue. A son born to a father in the bottom 20% economic bracket has less than a 5% chance of ever earning $60,000 per year.  A critical factor in the lack of social mobility is the lack of access to education."

"Once the student loan system is examined, it becomes obvious that it is by no means benevolent. It is a system designed by our government in cahoots with the banking system and the boards of our institutions of higher learning."

GAO Audit: At least $16 trillion in secret bank loans since 2008

"The first top-to-bottom audit of the Federal Reserve uncovered eye-popping new details about how the U.S. provided a whopping $16 trillion in secret loans to bail out American and foreign banks and businesses during the worst economic crisis since the Great Depression. An amendment by Sen. Bernie Sanders to the Wall Street reform law passed one year ago this week directed the Government Accountability Office to conduct the study. "As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world," said Sanders. "This is a clear case of socialism for the rich and rugged, you're-on-your-own individualism for everyone else.""

Writing on the Wall by Vijay Prashad

"One of the most difficult elements of advanced capitalism and modern society is that it is hard to identify the culprit for one's sorrows. In feudal days, there was always the baron's castle or the moneylender's office; they could be located, and the peasantry could convert their agricultural implements into weapons as they rushed to these sites. No such ease in our times.

"Abstract social domination makes it harder to point precisely to the cause of one's distress. Banks often stand in for the problem, being the front lines of financial capital – it is banks, after all, that foreclose on houses and deny credit. But the banks are only a cog in a complex system that is built upon the simple premise that only a few people are able to wield power and property for their betterment, whereas the vast mass of people have only the illusion of property and the hopes for power."

"The banks stand in for the system in general."

"Events in the U.S. are linked closely to the convulsions in the rim of southern Europe, from Greece to Spain via Italy. The root cause of the older crisis and the more recent one is the same, as pointed out by the Greek economist Yanis Varoufakis in his new book, The Global Minotaur: The True Origins of the Financial Crisis and the Future of the World Economy (2011): it has to do with the failure of the world economic system to have a surplus recycling mechanism that would redistribute accumulated surpluses across the world."

"Rather than have such a mechanism, the mandarins of the world order in the 1970s and 1980s preferred to allow vast surpluses to get sucked into the world of finance (with New York's Wall Street as its centre). This institutional failure was the cause of the new culture of greed (and not the other way around). That the political class in the Atlantic world prefers to see the solution in austerity policies against the ordinary people rather than in terms of institutional failures (let alone the system's failure) demonstrates the vacuity of its leadership. Since it offers no new political and economic project to earn the trust of the population, it must resort to the baton."

"The baton offers no solutions. The writing for the Street is on the wall."

Paul Krugman Asked About #OWS Debt Refusal On The Brian Lehrer Show

"Lehrer then asked Krugman what he thought about that branch of the Occupy movement — that is, the group that is encouraging a million students to default on their student loans."

“To be honest, I haven’t done enough homework to figure out what I think,” Krugman replied. “I think the idea that it is a threat to the economy is wrong. It’s just not that big of deal in terms of the economy one way or another, and there is a lot that is wrong with how we handle student debt. Basically, we’ve been using public funds, but running them through the private sector for no good reason, except to provide some extra profits to the financial industry.”

Honest Chung: Student Debt is a Form of Violence

"When they raise our fees, they raise their profits!"

Debt or One Kidney?

"For Sale: One kidney. $30,000 plus all expenses. White, male, BS with dual major in physics and mathematics. I personally know this student. He is serious, not crazy. As an honors student, he worked part time for four years. He has been entirely self-supporting and has graduated with a $30,000 student loan debt. In his words: "I only need one kidney, and I want to start out even.""

"It is not an individual's responsibility to have to choose between debt and one kidney, or between forgoing education and avoiding debt. It is, however, the responsibility of government to be a buffer between the public good and predatory Wall Street practices of creating artificial financial "products" to make money at taxpayers' expense, or as cumulative debts to be paid for by our children."

Occupy Columbia by Yoni Golijov and Sumayya Kassamali

"Let’s not kid ourselves about how the beautiful space that is our university is paid for. Despite the tuition you are paying, the accumulated largesse of oligarchs of Manhattan continues to fund a large share of Columbia’s operations. The slew of named buildings and endowed chairs reflects how much Columbia University’s endowment is the combination of illicit wealth it has accumulated from Caribbean slavery in the past all the way to the financial crisis in 2008."

"This larger fact is the background for many smaller connections between Columbia and Wall Street. Columbia’s endowment depends on good relations with the financial Masters of the Universe. For example, all of the five vice chairs of the board of trustees are financiers, from Goldman Sachs to real estate. Then there is the infamous Columbia Business School, where professors of finance reap enormous salaries from outside consulting gigs and positions on corporate boards of directors."

"Finally, there is the conflict of interest of President Bollinger’s chairmanship of the board of the New York Federal Reserve. Bollinger was appointed to fill the shoes of Denis Hughes, state president of the AFL-CIO, to “represent the public” in the Fed. But how can Bollinger, whose job involves befriending the ultra-wealthy and convincing them to write checks to the University, carry out responsibilities that could endanger that very wealth (like pushing for higher inflation or large-scale student debt relief)? This is just the tip of the iceberg, and many more connections could be discussed."

Bad Education by Malcom Harris

"Since 1978, the price of tuition at US colleges has increased over 900 percent, 650 points above inflation. To put that number in perspective, housing prices, the bubble that nearly burst the US economy,  then the global one, increased only fifty points above the Consumer Price Index during those years."

"Student Loan Asset-Backed Security (SLABS) were invented by then-semi-public Sallie Mae in the early ’90s, and their trading grew as part of the larger asset-backed security wave that peaked in 2007. In 1990, there were $75.6 million of these securities in circulation; at their apex, the total stood at $2.67 trillion. The number of SLABS traded on the market grew from $200,000  in 1991 to near $250 billion by the fourth quarter of 2010. But while trading in securities backed by credit cards, auto loans, and home equity is down 50 percent or more across the board, SLABS have not suffered the same sort of drop. SLABS are still considered safe investments—the kind financial advisors market to pension funds and the elderly ... The result is over $800 billion in outstanding student debt, over 30 percent of it securitized, and the federal government directly or indirectly on the hook for almost all of it."

"Analyst accounts have only 40 percent of the total outstanding debt in active repayment, the majority being either in deferment or default. Next year, the Department of Education will calculate default rates based on numbers three years after the beginning of repayment rather than two. The projected results are staggering: recorded defaults for the class of 2008 will nearly double, from 7 to 13.8 percent. With fewer and fewer students having the income necessary to pay back loans (except by taking on more consumer debt), a massive default looks closer to inevitable."

"Unlike during the housing crisis, the government’s response to a national wave of defaults that could pop the higher-ed bubble is already written into law. In the event of foreclosure on a government-backed loan, the holder submits a request to what’s called a state guaranty agency, which then submits a claim to the feds. "

Student Loans: The ARM Industry’s New Oil Well?

"While the Department of Education debt collection contract has been one of the most highly sought after contracts within the ARM industry for years, I believe it is now THE most sought after contract within this industry, centered within the most sought after market – Student Loans. ...The great part is once you gain a sufficient amount of experience collecting on student loans in the private sector, you may be able to obtain a sub-contracting relationship with an existing Department of Education servicer and ultimately win the contract ... The student loan market is a $1 trillion opportunity for the ARM industry that is not going to decline anytime soon. And it produces debt that can’t be discharged in bankruptcy."

More drooling bankster talk after the jump!

WSJ: ~ 40% Default Rate on Student Loans

"Historically, investors have assumed 25% to 30% of student loans bundled into their bonds will default. But today they are baking in between 30% and 40% default rates among the current crop of graduates ... Even those assumptions are a best guess and defaults could ultimately go higher if unemployment rises ..."

"Uncertainty about student defaults has essentially frozen the market for bonds backed by student loans that aren't guaranteed by the government. The volume of such bonds secured by loans made by SLM Corp., also known as Sallie Mae, is at just 16% of the level in 2009, according to rating firm DBRS Inc."

"In many cases Sallie Mae is refusing to lend to students unless they can get parents to co-sign on the loans. Almost 70% of students who took out private loans with Sallie Mae since 2008 were forced to have a parent co-sign, compared to just half the students who borrowed with the lender from 2002 to 2007."

"What this boils down to for prospective students is that banks are lending less, and charging higher interest rates for the loans they do make. Colleges, on the other hand, aren't charging any less."

A Republican Appointee on the Sallie Mae Board

"It is important to understand that this is not all children. This is the children of people who cannot afford to pay for university. The children of the rich are fine."

"Student loan debt, under current law and national economic circumstances, is a way of handicapping the children of working people and ensuring that they become dependent on corporations, corporate law and accounting firms and the military to service their student loans... This is the end of entrepreneurship, the end of innovation, the end of meritocracy. Instead of the best and the brightest reinventing and reinvigorating our culture and our economy, they will be entrapped early to serve old, vested interests."

The Student Loan Scheme: A Chart

"Since defaulted loans are a net gain to the government and its collection agencies, they have no incentive to moderate school prices. Higher prices means higher loans. Higher loans means more defaults and profit for everyone."