Is the Near-Trillion-Dollar Student Loan Bubble About to Pop?

“If you want to take a relation of violent extortion, sheer power, and turn it into something moral, and most of all, make it seem like the victims are to blame, you turn it into a relation of debt.” -- Economic anthropologist David Graeber, author of Debt: The First 5,000 Years

Tarah Toney worked two full-time jobs to put herself through college, at McMurry University in Abilene, Texas, and still has $75,000 in debt. She graduated in six years with a Bachelor's in English and wanted to go on to teach high school.

“Right about the time I graduated, Texas severely cut funding to our education system—thanks, Perry--and school districts across the state stopped hiring and started firing. It became abundantly clear that there was no job for me in the Texas public school system,” she told me. “After two months of job searching I got a temporary position in a real estate office.”

She continued, “In August my post-graduation grace period was up and all of the payments on my student loans amount to $500/month. Adding that expense to my monthly bills puts me at $2,100 per month. If I don't make my payments they will revoke my real estate license, which I need in order to do my job.”

Max Parker (not his real name) enrolled at Texas A&M in College Station, Texas to get a BA in economics and a BS in physics. His freshman year was great—his parents had saved some money to help pay the bills, and after that he was able to get “more generous” student loans. He took a job to help cover the fees and bills that his student loans wouldn't cover, and worked about 35 hours a week during his sophomore year while taking 15 hours of classes—but found that his grades dropped with his workload.

“Part of the reason I thought to take on such a heavy load was the university's newly (at the time) implemented policy of flat-rate tuition,” he explained. “This policy stated basically, no matter how many hours you enroll in (full time) for the semester, you will pay for 15. This means, you enroll in 12 hours or 20 hours, and you'll pay for 15 hours either way. Being economically minded, I wanted to make the best decisions I could with the money I had been loaned, so I enrolled in 15 hours.”

He adjusted his course load, but in the spring of his junior year, a family emergency led him to withdraw midway through the semester, taking incompletes in his courses.

“I am 25 years old now, and shacking up in my parents' guest bedroom,” he told me. “I have successfully made four payments on my student loans in the past three and a half years. I have over $48,000 dollars of student loan debt, and absolutely nothing to show for it. No degrees. No certificates. No qualifications. I have continued my education to the best of my ability since leaving A&M, but always at community colleges and always paying for everything out of pocket. As you can imagine, since I'm not 'qualified' for a decent paying job, my savings for school piles up very slowly, and then disappears when August and January roll around. I haven't been back to school in about a year now, and I currently work at Subway, making sandwiches. I don't make my loan payments.”

He's about to join the military because he sees it as his only option. “I am depressed at the idea of signing my life away for four years so I can fight someone else's wars. I am angry beyond belief that it's come to this,” he said. 

Kate Sternwood (not her real name) was recently laid off from a job at a nonprofit organization where she was making $55,000 a year. She has $40,000 in debt from the University of Massachusetts. “When I called my repayment program to tell them I was losing my job, they told me my payment would go from $400 a month to $384 a month because making $55K a year I already qualified for the "hardship" rate.”