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Welcome to the 2012 Hunger Games
Sending Debt Peonage, Poverty, and Freaky Weather Into the Arena
By Rebecca Solnit
Source: TomDispatch.comWednesday, May 02, 2012
http://www.zcommunications.org/welcome-to-the-2012-hunger-games-by-rebecca-solnit
Sacrificing the Young in the Arenas of Capital:
The Return of Debt Peonage:
The Labyrinths of Poverty:
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Welcome to the 2012 Hunger Games (Original Post)
polly7
May 2012
OP
"Since '78, the price of tuition at U.S. colleges has increased over 900%, 650 pts above inflation."
proverbialwisdom
May 2012
#1
proverbialwisdom
(4,959 posts)1. "Since '78, the price of tuition at U.S. colleges has increased over 900%, 650 pts above inflation."
Thank you for the informative and inspiring article.
http://www.zcommunications.org/welcome-to-the-2012-hunger-games-by-rebecca-solnit
EXCERPT:
According to the website for Occupy Student Debt ( http://occupystudentdebt.com/ ), 36,000,000 Americans have student debts. These have increased more than fivefold since 1999, creating a debt load thats approaching a trillion dollars, with students borrowing $96 billion more every year to pay for their educations. Two-thirds of college students find themselves in this trap nowadays. As commentator Malcolm Harris put it in N + 1magazine ( http://nplusonemag.com/bad-education ):Since 1978, the price of tuition at U.S. colleges has increased over 900%, 650 points above inflation. To put that number in perspective, housing prices, the bubble that nearly burst the U.S. economy, then the global one, increased only fifty points above the Consumer Price Index during those years. But wages for college-educated workers outside of the inflated finance industry have stagnated or diminished. Unemployment has hit recent graduates especially hard, nearly doubling in the post-2007 recession. The result is that the most indebted generation in history is without the dependable jobs it needs to escape debt.
About a third are already in default. You can only hope that this bubble will burst in a wildcat strike against student debt, and if were lucky, a move to force tuition lower and have a debt jubilee.
The rest of us, the 99%, need to remember that, when it comes to public education, the crisis has everything to do with slashed tax rates -- to the wealthyand corporations in particular -- over the last 30 years. We went into bondage so that they might be free. Getting an education to make your way out of poverty and maybe expand your mind is becoming another way of being trapped forever in poverty. For too many, theres no way out of the hunger labyrinth.
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http://nplusonemag.com/bad-education
25 April 2011
<...>
What kind of incentives motivate lenders to continue awarding six-figure sums to teenagers facing both the worst youth unemployment rate in decades and an increasingly competitive global workforce?
During the expansion of the housing bubble, lenders felt protected because they could repackage risky loans as mortgage-backed securities, which sold briskly to a pious market that believed housing prices could only increase. By combining slices of regionally diverse loans and theoretically spreading the risk of default, lenders were able to convince independent rating agencies that the resulting financial products were safe bets. They werent. But since this wouldnt be America if you couldnt monetize your childrens futures, the education sector still has its equivalent: the Student Loan Asset-Backed Security (or, as theyre known in the industry, SLABS).
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 investmentsthe kind financial advisors market to pension funds and the elderly.
With the secondary market in such good shape, primary lenders have been eager to help students with out-of-control costs. In addition to the knowledge that they can move these loans off their balance sheets quickly, they have had another reason not to worry: federal guarantees. Under the just-ended Federal Family Education Loan Program (FFELP), the US Treasury backed private loans to college students. This meant that even if the secondary market collapsed and there were an anomalous wave of defaults, the federal government had already built a lender bailout into the law. And if that werent enough, in May 2008 President Bush signed the Ensuring Continued Access to Student Loans Act, which authorized the Department of Education to purchase FFELP loans outright if secondary demand dipped. In 2010, as a cost-offset attached to health reform legislation, President Obama ended the FFELP, but not before it had grown to a $60 billion-a-year operation.
Even with the Treasury no longer acting as co-signer on private loans, the flow of SLABS wont end any time soon. What analysts at Barclays Capital wrote of the securities in 2006 still rings true: For this sector, we expect sustainable growth in new issuance volume as the growth in education costs continues to outpace increases in family incomes, grants, and federal loans. The loans and costs are caught in the kind of dangerous loop that occurs when lending becomes both profitable and seemingly risk-free: high and increasing college costs mean students need to take out more loans, more loans mean more securities lenders can package and sell, more selling means lenders can offer more loans with the capital they raise, which means colleges can continue to raise costs. 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.
<...>
25 April 2011
<...>
What kind of incentives motivate lenders to continue awarding six-figure sums to teenagers facing both the worst youth unemployment rate in decades and an increasingly competitive global workforce?
During the expansion of the housing bubble, lenders felt protected because they could repackage risky loans as mortgage-backed securities, which sold briskly to a pious market that believed housing prices could only increase. By combining slices of regionally diverse loans and theoretically spreading the risk of default, lenders were able to convince independent rating agencies that the resulting financial products were safe bets. They werent. But since this wouldnt be America if you couldnt monetize your childrens futures, the education sector still has its equivalent: the Student Loan Asset-Backed Security (or, as theyre known in the industry, SLABS).
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 investmentsthe kind financial advisors market to pension funds and the elderly.
With the secondary market in such good shape, primary lenders have been eager to help students with out-of-control costs. In addition to the knowledge that they can move these loans off their balance sheets quickly, they have had another reason not to worry: federal guarantees. Under the just-ended Federal Family Education Loan Program (FFELP), the US Treasury backed private loans to college students. This meant that even if the secondary market collapsed and there were an anomalous wave of defaults, the federal government had already built a lender bailout into the law. And if that werent enough, in May 2008 President Bush signed the Ensuring Continued Access to Student Loans Act, which authorized the Department of Education to purchase FFELP loans outright if secondary demand dipped. In 2010, as a cost-offset attached to health reform legislation, President Obama ended the FFELP, but not before it had grown to a $60 billion-a-year operation.
Even with the Treasury no longer acting as co-signer on private loans, the flow of SLABS wont end any time soon. What analysts at Barclays Capital wrote of the securities in 2006 still rings true: For this sector, we expect sustainable growth in new issuance volume as the growth in education costs continues to outpace increases in family incomes, grants, and federal loans. The loans and costs are caught in the kind of dangerous loop that occurs when lending becomes both profitable and seemingly risk-free: high and increasing college costs mean students need to take out more loans, more loans mean more securities lenders can package and sell, more selling means lenders can offer more loans with the capital they raise, which means colleges can continue to raise costs. 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.
<...>