Abstract
Federal and private lenders have issued college student loans, now rising above $1.3 trillion nationwide and, to gain revenues for continued lending, sell them to securitizers who in turn bundle them into asset-backed securities. This paper argues that the magnitude of debt, high rates of default and forgiveness, and uncertain long-term repayment by borrowers facing lackluster job opportunities replicate the techniques of neoliberal financialization (subprime mortgages, securitization, overstocked housing market) that triggered the 2008 economic meltdown.
Highlights
Federal and private lenders have issued college student loans, rising above $1.3 trillion nationwide and, to gain revenues for continued lending, sell them to securitizers who in turn bundle them into asset-backed securities
For nearly three decades the topic of college student loan debt circulated as an undercurrent in academic fields—economics, sociology, education, and especially progressive critiques of the neoliberal university for embracing corporate capitalism’s fiscal models, management techniques, and contingent labor
It burst onto the national scene with media stories about toxic debt—the role of subprime mortgages and home foreclosures in the 2007–2008 economic crisis, the Occupy Wall Street Movement protests against many forms of injustice, the Obama Administration’s tweaks to ease student loan crunches, and the 2016 presidential election
Summary
Until about 1980, financial institutions were disaggregated into sectors with governmentally limited activities. By taking out conventional mortgages at reasonable interest rates, young white couples could afford to buy houses in suburban developments, but minorities and low-income whites, who were rejected by lenders, continued to reside in rented slum and shanty units. To protect their assets, white homeowners signed covenants prohibiting home sale and rental to minorities, Jews, and some white ethnic groups who, they believed, would lower neighborhood quality and home prices. Even after passage of the Civil Rights Act of 1964, lenders continued to discriminate, not opening branches in minority and low-income white neighborhoods or marketing their services to these groups. Ladd reviewed academic concerns about whether the many variables and data pool size produced valid findings (Ladd 1998). Ironically, the fact that big data didn’t capture minute variations helped the courts move away from “pattern or practice” evidence
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