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We Owe, We Owe 

Student loan debt has now surpassed credit card debt in the U.S., with job prospects bleak even for graduates with degrees. As defaults increase, can anything be done?

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"Those stories have been my education into the injustices that exist with student loans," he says. "As time has gone by, I've pretty much heard every story you can imagine. I get frustrated by the number of people who are suffering."

Applebaum's activism began soon after he wrote an essay titled "Forgive Student Loan Debt to Stimulate the Economy" and posted it to a Facebook group that he formed in 2009. After the essay was written up on the Huffington Post and recieved mention in the New York Times and The Economist, the group reached 300,000 members. Subsequently, Applebaum became the leader of a movement to forgive student loan debt as a way to resuscitate the economy.

"This is a problem that we can address proactively, for a change, or reactively, like we did with the housing market crash," he says.

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In July of 2011, Applebaum reposted a video of Rep. Hansen Clarke, D-Mich., calling for student loan forgiveness as a means of economic stimulus. By the end of the day, the two men were on the phone, talking about how they could "work together to address this crisis."

The result, HR 4170, the Student Loan Forgiveness Act of 2012, currently has 1.1 million petition signatures. The act calls for federal student loan debt to be forgiven after 10 years of income-based payments. It would ensure that interest rates on federal loans are capped at 3.4 percent. Future borrowers would be subject to a maximum forgiven amount of $45,520. According to the authors, student loan forgiveness would "free many of these Americans to invest, buy homes and start businesses."

Applebaum says that the plan would also benefit people without student loan debt. "If it worked to stimulate economic growth, then everybody benefits," he says. "If they do nothing, in five years or so we're going to be talking about $2 trillion in student loan debt. We're on this unsustainable path, and the taxpayers are footing the bill because of federal guarantees on these loans."


Mitt Romney introduced his own solution to the crisis during a campaign speech before the Latino Coalition. The extremely wealthy Republican presidential candidate proposed the reintroduction of private competition as a way to solve the debt crisis. Since 2010, private companies have been eliminated as intermediaries in the federal loan process; they can still offer student loans, but without government backing. Romney's plan would "welcome" private-sector participation in providing "information, financing and education itself."

If you look at Romney's support base and where he makes his money, this is no surprise. The student-lending industry has donated almost $30,000 to Romney's campaign, according to the Center for Responsive Politics. And when Romney was chief executive, Bain Capital invested in EduServ Technologies, which processed student loans for repayment.

But it was the private lenders that helped students get into this mess in the first place. As with the subprime mortgage fiasco, these lenders handed out loans left and right, especially in the for-profit college industry, without enough attention to whether borrowers would have the ability to make loan payments after graduation. According to the Department of Education, 25 percent of borrowers who went to for-profit colleges default within three years. Compare this to 10.8 percent at public institutions.

"Subprime-style lending went to college, and now students are paying the price," said Education Secretary Arne Duncan after the July 20 release of a scathing report on the private lending industry.

A joint effort between the Department of Education and the Consumer Financial Protection Bureau—a one-year-old agency that's been tasked with the responsibility of educating consumers on credit, mortgage and student debt—the report paints an unsettling picture in which private lenders practiced risky lending at the expense of students' well being. Since 2008, lenders have tightened up underwriting practices, but that still leaves borrowers from 2005 to 2008 with unresolved debt issues.

Rising debt, skyrocketing tuition, decreased job prospects and increased default will lead the United States into even more financial disarray, asserts Glenn Reynolds, a law professor at the University of Tennessee, in his new book The Higher Education Bubble.

  • Student loan debt has now surpassed credit card debt in the U.S., with job prospects bleak

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