The Whole Truth About US Student Debt
Prime Numbers with Oleg Komolov
Hi everyone.
For a while, the protests of the black population in the United States
became the main news item about the state of affairs overseas.
The news of another confrontation between rioters and cops was savoured by all the Russian media,
especially pro-government ones, for discussions on this topic are, firstly, completely safe for the  Russian ruling class.
There is no problem with racism in our society,
and even the nationalists of the 2000s do not show noticeable political activity,
and secondly, they allow one capitalist state to criticize another capitalist state
without touching the foundations of production relations
and explaining what is happening by the absence of a strong hand of the national leader,
the crisis of government, the lack of spiritual bonds in American society and so on.
And a far more unpleasant topic for official propaganda is the steady growth in anti-capitalist sentiment abroad,
especially among young people.
According to many studies, half of Americans under the age of 29
consider socialism to be a more progressive form of social relations.
And, as it often happens, the reason is not that there are suddenly lots of left-wing bloggers on YouTube affecting the weak minds.
The system itself cultivates its opponents,
who become witnesses of how the plots of Soviet posters are translated into their lives.
So what worries young minds in the US?
The problem of education, or rather its availability.
This complex manyoptional problem is often illustrated with one economic indicator:
student debt,
that is, the size of loans that Americans borrow for education.
The nominal value of this indicator is impressive.
By the beginning of 2020, it exceeded $1,540 billion
which is 11% of the total household debt.
This is the second place after the mortgage.
Debt is growing in real terms as well.
Since 2006, its ratio to GDP has doubled, to 8%.
And today, 45 million Americans are in debt for educational loans.
What is the reason for such growth?
It is not hard to guess that at the heart of many contradictions in modern society
(in the US and not only) there is  the problem of social inequality.
But here we need clarification.
In 1957 Soviet Union made a huge scientific breakthrough:
put the first artificial satellite into orbit and won the space race.
The president of US, Eisenhower, said:
' One of our greatest and most glaring deficiencies
is the failure of us in this country to give high priority enough to scientific education'.
In 1958, he signed a bill that, no, did not make higher education free,
but allowed college students to borrow up to $1,000 a year from the federal government,
which served as the basis for modern education loans.
Indeed, student loans have helped a lot of people go to college.
But as the demand for higher education has grown, its price has also increased.
And it keeps growing at a high rate, which is significantly higher than inflation.
Over the last 30 years the cost of a 4-year bachelor education in state universities has tripled in real terms.
At the same time, the average income of an American household grew by only 18%.
By the way, this is a common feature of most countries of the era of neoliberalism,
when, against the background of the cheapening of consumer trinkets, really important values,
in particular education, become much more expensive.
I recommend you one of our past videos on this subject.
College tuition is becoming more expensive.
However, the problem is not only about paying  for educational services.
For example, it only accounts for 60% of the expenses of a nonresident bachelor student at a public university.
Another 27% are for accommodation and meals,
3% for books and transport.
And for this you also have to take out a loan.
So, among American students who study for free, that is, their education is paid for by the state or special funds,
only a third has no debts.
For others, the average debt is $24 thousand.
Student loan rates, even those provided by the government on a non-market basis, are quite high,
and despite falling along with the FED's interest rate, they have exceeded its level,
making student loans less profitable than mortgages.
I often hear an argument:
'A credit is a great thing. It makes education available, and allows even poor people to get the most prestige diploma.
Study well, find a good job, and you can pay off your debt quickly'.
But this fairy tale has little in common with reality.
In fact, wealthy people are the main consumers of student loans in the United States.
6% of borrowers account for a third of the money borrowed for educational needs.
For poor people, educational loans are often unavailable due to their high cost.
And since the loan is often issued to the student's parents
more and more people in the US are being forced to postpone retirement to pay off debt.
The share of debtors, who have delinquency on educational loans,
is higher for this category than the average for the economy.
Since the mid-2000s the share of overdue loans has increased by one third.
This is more than 10% and indicates a relatively low salary of graduates
in comparison with the amount of education debt.
So, in 2019 the average annual salary in the US for university graduates with up to 5 years of experience
amounted to $49.5 thousand per year.
At the same time, the average debt after college graduation was $33 thousand.
The rise in student debt negatively affects the economy,
holds the demand of loaners for products and services.
Social research call the need to service these loans as one of the reasons
why American youth are delaying starting a family and buying a house.
The problem went so far that Senator Bernie Sanders' idea of ​​canceling all student loan debts
became one of the centerpieces of his election campaign,
and made him the most popular politician among the American youth.
There are special cases when an American can get debt relief now,
however only small amount of people have this opportunity.
In 2019, there were about 1000 such people,
and the amount of debts written off was only $70 million.
Let me remind you that the total amount of educational loans in the United States has exceeded the level of $1.5 trillion.
The problem of debt is also connected with the fact
that from year to year the material benefits of obtaining higher education on credit are becoming less obvious.
Average hourly earnings for US college graduates have risen less than $1 since 2001, adjusted for inflation.
And the increase in earnings for having a diploma stopped growing 20 years ago.
And this is not not surprising.
As American industrial capital migrated to countries with cheap labor,
the structure of the American economy continued to reform.
The investments to the basic capital were decreasing,
labor production growth rates declined,
and investment in new technologies stagnated.
The possibility of using the free labor of Asian workers
affected the structure of the labor market in the United States itself.
In the last decade, jobs in highly productive and highly paid areas of work have almost ceased to appear in it.
And the biggest growth was in the lowest paid and lowest producing categories.
As hundreds of millions of workers in Asia have entered industrial production,
many Americans joined the ranks of the unemployed.
An American anthropologist David Graeber introduced a new term - 'bullshit jobs' -
meaningless professions that have little public benefit,
and were artificially introduced into the economy.
The scientist notes that over the last century the number of productive workers in the West has declined several times.
However, this did not lead to the rapid shortening of the working day, as Keynes or Marx had predicted.
Capitalism found them something else to do instead.
The economy was filled with numerous controllers, policemen, bodyguards, secretaries, auditors.
The number of employees in the field of management, office work, service, sales has tripled,
from one fourth to three quarters of all employees.
Large-scale social research shows that at least a third of American workers understand
that their work is useless and see no social benefit.
And only one in seven gets satisfaction from their work.
When the demand for educated people decreases in the economy,
the system will not make conditions for a higher education to be more available.
All this is relevant for Russia also.
We still have a fragmentary Soviet legacy in education area,
and the percentage of students studying for free is higher than in the United States.
However, already more than half of the youth have to pay for education.
In large Russian universities, sometimes entire faculties either do not have budgetary places at all,
or they are represented there in a small number.
One can blame officials from the Ministry of Education.
But it is unlikely in an economy, where in the 21st century the most popular professions are the seller and the driver,
a different situation could develop.
The real reason for the education problem lies in the structure of the economy,
in the state of industries, which create a demand for an educated person.
That is why every factory bankrupted by 'efficient' owners,
every optimized plant
are nails in the coffin lid of our education.
