Riding the “Tunnel of Debt”–The Commodification of Student Loans

Student loan debt has become a social problem in many advanced countries, affecting the long term economic prospects of students. Total outstanding student debt in the United States amounts to $1.749 trillion dollars and the student loan market has now surpassed credit card loans and auto loans in the United States. One in every four adults in the US holds some form of federal student loan debt (the number among millennials is higher at one in three). The average public university student borrows around $30,000 dollars to attain a bachelor’s degree Since the economic recession of 2008, there is widespread concern, regarding the unsustainability of the college educational system. In particular, the disproportionate level of student debt and uncertainties created from late home ownership and family starts, social mobility and potential lag effects to the economy. These problems have produced a fierce public debate in recent years, with many commentators openly questioning the relative worth of a university degree and the much vaunted “return on investment” argument. The higher education system has transformed from a publicly funded model to a publicly assisted model, and higher education is no longer considered to be a luxury, but a necessary requirement to achieve an adequate income. However, the imbalance of high tuition—high debt status sheds light on other worrying trends. For example as loans mature, a greater number of borrowers are making little or no payments. Also, certain borrowers are more affected by the debt crisis such as women, minorities and people of colour. This episode examines the underlying causes of the student debt crisis, such as the long-term disinvestment in public colleges and universities at state level. More importantly, how student debt has become “commodified” in the pursuit of sustainable profits in globalized financial markets. The “financialization” of student debt is almost never reported in the media and there is little public awareness that student loans are subsequently repackaged into a new financial asset. Furthermore there are other factors at work, which have contributed to the crisis in student indebtedness. The political ideology of neoliberalism has contributed to the decline in state funding to colleges and universities, and the four fold increase in tuition fees since the 1970s. Using the “students as commodities” model, student debt is now a tool of economic power in the neoliberal framework, creating a perpetual debt industry with profound social effects. Essentially, financing higher education via debt becomes a form of economic control and coercion, through late payment penalties and the use of debt collection. However to avoid the negative stigma of this financial reality, a cultural rhetoric is constructed to propagate the “golden ticket” of higher education, aimed at convincing students and their families that university is a social necessity to further individual welfare and the nation state.