Occupy Wall Street and Student Loans

One remarkable facet of Occupy Wall Street is how focused the protesters are on student loan debt. A few thoughts about this:

  1. Many college grads have good reason to be upset. Educational inflation has been running far ahead of general inflation, without improvements in quality. Most higher education is still a good value (at least at the undergraduate level) but it’s not as good a value as it used to be. And that’s really what complaints about student debt are—complaints about how much education costs the consumer.

  2. The persistence of this runaway inflation is mysterious to me. Consumers are not imposing discipline on the market in the way I would expect—they fail to shop around for the best education value, and sometimes they buy education products that are worth less than their cost. People keep paying small fortunes to attend Tier 3 law schools even though the job market for their graduates is terrible. I don’t know how to get them to stop, but it seems to me that downward pressure on education prices will ultimately have to be applied from the consumer side. I do my part by trying to dissuade my friends from going to graduate school.

  3. Megan McArdle makes a strong case that allowing student loan debt to be discharged in bankruptcy would both provide needed relief to people who can’t service their debts and discourage inefficient consumption of education in the future.

  4. Some of the rumblings from the OWS folks are toward the idea that there should be broader relief of student loan debt. This makes little sense. Unlike with the housing market, there was no general lurch in asset prices that went unmatched by a reworking of liabilities. The better avenue for relief is one targeted to people who can’t service their debts—i.e., bankruptcy.

  5. While there are major problems to do with education prices and related debt, these problems have almost nothing to do with Wall Street and little to do with the for-profit sector. Most student loan debt is provided (directly or indirectly) by the government, and education is mostly provided by government and non-profit entities.

  6. College graduates’ problems should be kept in perspective. The unemployment rate for people with bachelor’s degrees or higher is 4.3 percent. The really big consumer debt problem in America is with mortgage debt. As such, the degree of focus within OWS on a problem that is specific to the relatively well-educated is a misfire.

  7. Not everybody who is complaining was wronged. The We Are the 99 Percent Tumblr includes complaints like this: “My father (multiple PhD’s) lives in his car so that he can do what he loves for a living rather than be a slave to the system.” A Columbia graduate student complained to the Associated Press that she has to eat rice and beans. These are not people who got screwed. These are people who have gainful employment available to them and made follow-your-dreams life choices that reduce their incomes. That’s their prerogative; it’s not anybody else’s problem.

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