Latest Federal Data Confirm: College NOT Road to Prosperity

College educated people do have higher incomes and lower unemployment rates, on average, than those who have not been to college. However, the goal of achieving prosperity by obtaining a college education is becoming less attainable and secure than ever before, primarily because of staggering levels of student debt and a stagnant labor market offering mostly low wage jobs in the service sector, but also because of growing competition for limited space on college campuses.

“A college diploma no longer guarantees a direct pathway to the middle class, making it harder to justify the expense of a degree,” National Center for Education Statistics (NCES) Commissioner Jack Buckley told Diverse Education. Student loan debt is the only type of loan debt that has increased since the recession started. In 2012, total student loan debt reached $1 trillion, surpassing credit card debt, becoming the second largest source of personal debt after home mortgage debt. Consequently, even for those lucky enough to earn a college degree and find a job, high monthly loan payments can easily force them into the ranks of the working poor.  Considering that the average undergraduate owes more than $25,000, a repayment schedule of 10 years at 6.8% comes to $288 per month, which is a lot of money for someone earning only $30-40,000 per year.

Despite his dire assessment, Buckley went on to repeat the cliché that most of the “good” jobs are going to those with college degrees. Yet, he does not define “good,” which, today, generally means “a steady salary,” regardless of the amount of that salary or the working conditions. Today people are working longer hours than they did 30-40 years ago and earning less in constant dollars, even with college degrees, so a more precise statement would be that people with college degrees are more likely to have just plain jobs, not necessarily good ones. Furthermore, even those who have college degrees are finding it harder to get hired and to hold onto their jobs. What good is a “good” job if it barely pays ones living expenses and college loan debt and leaves one with no time or energy to spend with family or leisure?

College For All: A Pathway Toward Unemployment and Lower Wages

While the growing expense of college and the ensuing debt burden are certainly good reasons to question the assumption that college is a good investment, one must now consider the job prospects that are possible with a college degree, as well, since many of the jobs that require a college degree are expected to decline over the next decade. This could result in a labor surplus in those fields and drive down wages, while forcing many graduates into other fields or the ranks of the unemployed. For example, over 250,000 bachelor’s or master’s degrees in education have been awarded yearly since 2000, though there will only be 539,100 teaching jobs available through 2020, and nearly ten times more advanced degrees in psychology will be awarded than there will be jobs in this field. Ph.D. scientists are already feeling the pinch of job and grantshortages, forcing them to look for other sources of income. (Statistics from National Center for Policy Analysis) And college graduates, in general, are having a tough time finding work in their fields of expertise, with 50% of all recent college graduates currently unemployed or underemployed in low wage jobs unrelated to their training like bartending or retail, the San Jose Mercury News reported last year. Roughly 1.5 million, or 53.6%, of those under the age of 25 with bachelor's degrees were jobless or underemployed last year—the highest rate in more than a decade.

One might reasonably wonder why legislators and reformers have been pushing a school reform agenda of “college for all” when college graduates routinely cannot find work in their fields of expertise and must then accept low-wage, unskilled jobs to repay their $25,000 of student debt. College may no longer be such a good investment for young people, but it is a huge boon to the banks and lending agencies that profit from the $1 trillion in student debt (a debt that cannot be erased through bankruptcy) and to the institutions and businesses that will be able to increase their profit margins as wages decline because of the increasing competition for scarce STEM jobs and other fields requiring highly educated workers.

Get Good Grades and to College or You’ll Wind Up a Ditch Digger

It used to be (and perhaps still is?) common for teachers to chastise shirking students with the threat that they’ll wind up digging ditches if they don’t start doing their homework and paying attention in class, yet the median income for a heavy equipment operator (e.g., backhoes, tractors, bulldozers and other ditch digging machinery) is $60,483, according to salary.com. The fact is there are lots of jobs that pay relatively high wages that do not require a college education and many of these industries are projected to grow considerably over the next decade, according to the Bureau of Labor Statistics (BLS). Jobs in masonry, for example, are expected to increase by 40%. Jobs in plumbing and pipefitting are expected to grow 26%. Jobs operating construction machinery are expected to increase by 23%. (Statistics from National Center for Policy Analysis)

Go To College (If You Can)

Another obvious problem with the College for All agenda is that it is impossible for everyone to go to college. Even before states started to slash contributions to their public universities there weren’t enough teachers and classrooms for every high school graduate. At the same time, large numbers of young people are either not graduating from high school, or graduating without the necessary skills to succeed in college. This problem has only been exacerbated by the recession and years of federal policies prior to the recession that favored the interests of older Americans at the expense of younger Americans. For example, the federal government now spends $480 billion on Medicare, but only $68 billion on education, according to Esquire. As a whole, the U.S. government spends 7 times as much on its seniors as it does on its children, per capita, according to a 2009 Brookings Institution study. Mike Males writes that younger workers are currently contributing 15% of their payroll income to pay for Social Security and Medicare payments for seniors, since Congress gutted the Social Security Trust Fund (originally designed to cover future generation’s benefits) to pay for current government needs.

As a result, the wealth gap between younger and older Americans is now the largest on record. In 1984 Americans who were sixty-five and over made ten times as much as those under the age of thirty-five. By 2008, older Americans were earning nearly forty-seven times as much as the younger age group. Older Americans suffered far less under the current recession, with the median net worth of those under 35 falling 37% between 2005 and 2010, while falling only 13% for those over the age of 65. This wealth gap is not small, either. The median net worth of households headed by someone 65 or older has increased 42% since 1984, to a comfortable $170,494, while the median net worth for younger households has declined 68% to a desperate $3,662, according to the Pew Research Center. (For more, see the following articles in Esquire and Newsweek).

The road to prosperity for young people today, if there is one at all, may be taking care of their parents in their old age and hoping they inherit whatever wealth they may have had.

Youth Poverty At An All-Time High

Empty Pockets (Image by barbaranixon from Flickr)

A new report from the Washington DC-based Urban Institute indicates that the overall percentage of wealth of those in their 20s and 30s has been dropping steadily and is now at its lowest level since records have been kept, the WSWS reports.

The study, “Lost Generation? Wealth Building Among Young Americans,” found that young people aged 29-37 saw a 21% decline in their accrued wealth over the past few decades, while those who are 74 and older saw their wealth increase by 150%. One explanation is that older Americans are more likely to have defined-benefit pensions, which have become increasingly rare for younger workers. Younger workers are also saddled withthe highest amount of student debt ever, with the average 25-year-old owing$25,000. Young people have also been particularly hard hit by the housing crisis and unemployment. The majority of new jobs created since the “recovery” started pay less than $15 per hour. Meanwhile, the number of mortgages held by 25-30 year-olds has dropped from 9% to 4% of all mortgages.

America’s Class War Against Youth

Huck/Konopacki Labor Cartoons

If the Occupy Wall Street (OWS) movement accomplished anything it was to focus public anger on America’s extreme and growing wealth gap, portraying it as the product of the greed and selfishness of the richest 1%.

This overly simplistic view obscures the actual socioeconomic relationships that are responsible for the transfer of wealth from the majority to the few, as well as who comprises this “few.”

The wealth gap is actually the by-product and goal of capitalism and the sociopolitical institutions that bolster it. All bosses in private businesses, regardless of how rich they may be, make their profits by paying their employees less than the value of their labor and pocketing this surplus value as profits (i.e., exploitation). The owner and employer classes transfer additional wealth to themselves through a taxation system that allows them to pay a lower effective tax rate than their employees pay, and through a legislative and legal system that facilitates their acquisition of more capital, sometimes even if it injures, sickens or kills others.

Exploitation of workers is the primary source of the wealth gap, particularly between employers and employees and the source of the so-called obscene wealth we see among the “1%.” However, wealth is also transferred from the young to the old, resulting in a growing wealth gap between older Americans and the young.

The wealth gap between younger and older Americans is currently the widest on record. In 1984 Americans who were sixty-five and over made ten times as much as those under the age of thirty-five. By 2008, older Americans were earning nearly forty-seven times as much as the younger age group. (For more, see the following articles in Esquire and Newsweek).

This wealth gap is not small, either. The median net worth of households headed by someone 65 or older has increased 42% since 1984, to a comfortable $170,494, while the median net worth for younger households has declined 68% to a desperate $3,662, according to the Pew Research Center.

The Pew study attributes some of the wealth transfer to timing: The older generation benefited from living and working in a strong economy and a long rise in housing prices. Conversely, older Americans have suffered far less under the current recession, with the median net worth of those under 35 falling 37% between 2005 and 2010, while falling only 13% for those over the age of 65. The recession has also forced many older Americans to continue working longer than they would have in the past, squeezing many younger workers out of jobs. The percentage of the workforce under the age of 25 has declined 13.2% since 2008, while rising 7.6% for those over 55.

However, the trend began decades before the current recession and has been facilitated by changes in government policy, which have been promoted by an aging politician class (today’s Congress is the oldest since World War II). For example, the federal government now spends $480 billion on Medicare, but only $68 billion on education, according to the Esquire article. As a whole, the U.S. government spends 7 times as much on its seniors as it does on its children, per capita, according to a 2009 Brookings Institution study. Mike Males writes that younger workers are currently contributing 15% of their payroll income to pay for Social Security and Medicare payments for seniors, since Congress gutted the Social Security Trust Fund (originally designed to cover future generation’s benefits) to pay for current government needs.

The transfer of wealth from young to old has been a hallmark of the Republican Party and would have been taken to new extremes under the Ryan tax plan. According to Males, younger Americans would have suffered under this plan in direct proportion to how young they are. Virtually every federal program designed to benefit the young and the poor would have been gutted or eliminated, including food stamps, Medicaid and job training. Federal spending on education would have been slashed by one-third. But Social Security and Medicare for today’s seniors would have been preserved. At the same time, median-income households headed by people 55-65 would have received tax breaks of roughly $1,200, while median-income households headed by people under 25 would have lost hundreds of dollars.

However, the Democrats have also contributed to the generational wealth transfer. Under Obama’s 2012 budget, for example, Medicare and Social Security were left alone, while the Adolescent Family Life Program and the Career Pathways Innovation Fund were ended. Likewise, the AmeriCorps program was slashed and had to turn away 75% of applicants last year, while recent changes to the Pell grant program will cost students an estimated $100 billion over the next ten years, according to the Esquire article. Similarly, Obama’s plan for avoiding the “fiscal cliff” involves raising the age of eligibility for Medicare benefits and cutting benefits for future recipients of Medicare and Social Security. In other words, the benefits of today’s seniors would be preserved and subsidized on the backs of today’s youth.

So far I have only discussed the tangible, present-day ways younger Americans have been screwed. They have also been saddled with an enormous debt they will be paying well into the future through higher taxes, reduced benefits and services, and delayed retirement (or no retirement). The per capita debt in the U.S. is now $50,000, with much of it going toward paying for the longest wars in U.S. history (i.e., Iraq and Afghanistan) and huge tax breaks for the wealthy. Yet, the average student also owes $12,700 to the credit card companies and will owe $27,000 to college loans creditors, according to the Newsweek article. And despite incurring all this debt, college graduates’ income has dropped 11% over the last decade for men and 7.6% for women.

While some of this wealth transfer has merely helped middle class baby boomers live comfortable middle class retirements, much of it is really about helping banks, Wall Street investors, and large businesses reap ever larger profits on the backs of youths. Skyrocketing student debt, for example, contributes to the poverty of younger Americans. Yet, Obama’s student debt repayment plan may actually increase debt payments for many students, while his plan to cut spending on higher education by $10 billion could increase student need for loans, thus increasing profits for lenders and the hedge funds that trade students loans.

Education Cuts for California Despite Prop 30 Victory

Image from Flickr, by Double-M

The California Teachers Association (CTA) lobbied heavily for passage of Proposition 30, mobilizing thousands of teachers to phone bank and canvas neighborhoods. Together with other state unions, they spent $50 million to get the initiative passed. They claimed it would save public education and restore funding to the schools. However, with more than $18 billion slashed from K-12 education since the recession began, the $6.6 billion in projected revenues from Prop 30 won’t even come close to restoring public education funding to pre-recession levels, especially considering the state budget deficit is now estimated at more than $15 billion. It will do nothing to bring back the 80,000 teaching jobs lost since the recession began nor reopen any schools that were shut down, the WSWS reports.

What Proposition 30 will do is prevent $6 billion in trigger cuts that had been built into the last state budget as a way to blackmail California voters into approving the tax hikes. Rather than restoring public education, Prop 30 simply maintains the status quo of an $18 billion hole in the state’s K-12 funding and one of the very lowest per pupil funding rates in the nation. While it does raise taxes on those making more than $250,000 per year, the increase is only a nominal 1-3% increase on their payroll taxes (i.e., the taxes withheld from their salaries) and it leaves the tax rate on their capital gains (which makes up the majority of their income) unaffected. At the same time, Prop 30 raises the state sales tax from 9.25% to 9.75%—a regressive tax increase that disproportionately affects poor and working class people.

While the California State University (CSU), University of California (UC) and state community college systems are all planning to increase course offerings and some, like CSU, are planning modest tuition refunds ($249 per semester, according to the Los Angeles Times), they are also planning other fee increases and service cuts. CSU, for example, is still planning to implement fee increases for students taking more classes than they need to graduate, and the UC system is planning on increasing fees for graduate and professional programs by 1.5% to 35%. UC, which threatened 20% tuition hikes if Prop 30 failed (and promised no new fees this year if it passed), is leaving open the possibility of raising undergraduate tuition again next year.

In response to the proposed cuts and the unwillingness of UC to go beyond a tuition freeze and actually lower tuition, UC students have been protesting at UC campuses and at meetings of the university’s regents. Students staged a sleep-out in Berkeley on Wednesday night. Hundreds of students were joined by faculty and unionized workers on Thursday to protest budget cuts that have resulted in slashed course offerings, layoffs and large tuition hikes. They blocked roads leading to the meetings and then disrupted the meeting so effectively that the regents had to call a temporary recess.

Students do not simply want a reduction in tuition—many want a completely subsidized higher education system. Last Friday, KPFA’s “Up Front” news program broadcast protesters chanting, “No cuts! No fees! Education must be free!” Until recently, California did subsidize both the UC and CSU systems to the point that neither charged tuition and both charged fees that were relatively affordable for middle income families. Back in the early- to mid-1980s, for example, it only cost $1,000-1,200 per year to attend UC. By 1995, it was over $4,000. By 2010, it has risen to more than $11,000. Last year, tuition at UC was $13,218. (Click here for more on the history of UC tuition).

With the passage of Prop 30, Los Angeles Unified (LAUSD) is planning on restoring the five school days that had been cut from the school year the Los Angeles Times reports, as well as restoring teacher pay for the 10 days which they had lost to furloughs. However, Superintendent Deasy warned of a new round of cuts (implying the furloughs and pay cuts could return) if Congress and President Obama cannot resolve the “fiscal cliff” crisis, as this would leave LAUSD with a new $60 million budget shortfall.

Of course, if this happens, many districts in the state could suddenly find themselves with large deficits, too. This is because Prop 30 is only a bandage over a gaping wound. Education at all levels, from pre-K to graduate school, has been eviscerated over the past decade and Prop 30 does nothing to restore the cuts. Prop 30 does little to close California’s current budget deficit and it does nothing to stabilize California’s revenue stream or prevent future deficits and education cuts.

There is a glimmer of hope for education funding in the future. One of the reasons California has had so much difficulty in balancing its budget for the past decade is that voters approved a law requiring a two-thirds supermajority in the legislature before any new tax increases can be approved. The most recent election, however, gave the Democrats just such a supermajority in both houses of the state legislature for the first time in nearly 80 years. This will not only allow lawmakers to pass tax increases, but it also gives them the power to override the Governor’s veto.

Whether or not they will use their power in this way remains to be seen, but seems unlikely considering that every one of them would be negatively affected by a serious tax increase on the wealthy. This is not only because they are all wealthy themselves, but because they would be biting the corporate hand that feeds them, keeps them in office, and provides them jobs when they get termed out.

Obama’s Crushing Student Debt Repayment Scam

The Department of Education recently enacted new rules for Income-Based Repayment (IBR) of student loans. The hallmark of this “reform,” according to the WSWS, is that a small fraction of students will now be able to repay their loans in 20 years instead of 25 and their rates will go down from 15% of their discretionary income to 10%. The change will have no effect on undergraduates and may end up costing more for those who go on to earn graduate degrees if their starting salaries upon graduation are under $33,000 per year.

While tuition has been rising faster than the rate of inflation for the past decade the amount of student aid has been declining. Federal grants dropped 5% over the past year, the first decline in five years. Federal work study fell by 4% to $972 million—the first time it fell below $1 billion in over a decade. The Obama Administration has also implemented cuts to Pell Grants and interest rate subsidies.

Despite declining federal aid for students, need has actually been growing. A new report from the Project on Student Debt suggests that 66% of students must now borrow in order to afford a higher education. Student debt has risen by $303 billion since 2008, while the default rate has increased over 53% over the past several years. This has resulted in a recent series of new laws in some states to curtail recruiting scams at diploma mills (see here).

Obama’s student debt plan is clearly not designed to put any kind of dent in the problems of student indebtedness or defaults. Rather, its main goal is to protect the interests of the banks and investors that profit from student loans. The initial lenders are able to borrow from the Federal Reserve at just over 0%, while charging students anywhere from 3.4% to more than 10%. At the same time, hedge funds have been trading in student loans much like they do with mortgages and profiting handsomely from it.

Downsizing For-Profit Colleges

For-profit college giant Career Education Corporation (CEC) recently announced that it will close 23 of its 90 campuses, according to the Bay Citizen. The move comes in response to a $33 million decline in revenue and 23% drop in new student enrollment this quarter and will result in the loss of 900 jobs. Other for-profit colleges have also announced downsizing in response to declining revenues, including University of Phoenix and Corinthian.

CEC has not yet stated which of its 6 California campuses will be closed. CEC owns the California Culinary Academy in San Francisco and the Cordon Rouge culinary schools in Southern California, as well as the International Academy of Design and Technology in Sacramento.

According to Kevin Kinser, professor of higher education policy at the University at Albany, SUNY, the wave of closures and downsizing at for-profit colleges is due in part to tighter regulation of the for-profit education sector. For example the U.S. Department of Education imposed a ban on incentive pay for recruiters last year. This has undermined these colleges’ business model which is based on admitting as many students as possible, charging them exorbitant tuition and sidling them with massive student debt.

Additionally, many for-profit colleges, including CEC, have recently gotten in trouble with accreditors for inflating job placement rates for their graduates. When CEC released its new accurate rates, most of its campuses had rates below the 65% minimum required by the Accrediting Council for Independent Colleges and Schools. Once a school loses its accreditation, its diplomas become less credible and students are less likely to enroll.

Another factor is that some schools are losing access to state or federal Grants because too many of their students are defaulting on their loans. Under a new law in California, for example, a school’s loan default rate must be 15.5% or lower. As a result of the new law, the International Academy of Design & Technology in Sacramento lost eligibility for Cal Grants this fall because 20% of student borrowers were defaulting. The Academy of Arts College, in San Francisco, also lost Cal Grant eligibility this year. There were 154 institutions [PDF] (mostly for-profit) that were booted from the program this fall. This has likely contributed to the declining enrollment at these schools since few students can afford their expensive tuition without grants and loans.

None of this should be considered a sign that the for-profit college industry is going away. For-profit colleges are a $25 billion a year industry, with an average profit margin of 19.7%, according to the WSWS. Their CEOs earned an average of $7 million last year. Even with the new laws, it will continue to be a highly profitable sector. What we are actually witnessing here is their attempt to maximize profits in the face of a few unfavorable lawsuits and legislative changes.

Global Education Strike

The International Student Movement is calling for global education strikes on October 18th and November 14-21 to protest education privatization schemes and the corporatization of public education. They want the teachers to join their movement and are asking teachers to check out their website and plan solidarity actions for these dates.

Some of their demands are tangible and achievable—like increasing education budgets, decreasing student debt and slowing or halting the giveaway of public education resources to private business—but not from a couple of days of street protests. Rather, achieving these goals will require either a remarkable change in public sentiment and political action or significant and prolonged strike actions by teachers and other education employees.

At the same time, much of their program is naïve or incoherent. For example, they bemoan that public education is being turned into a commodity and that school employees are being exploited, as if this wasn’t always the case? In order for employees to not be exploited they must cease to be employees and for education to not be a commodity it must be entirely free. These are both good goals, but they are not attainable without social revolution and certainly aren’t going to result from a few days of protests.

They also argue that education should “primarily work for the emancipation of the individual, which means: being enabled to critically reflect and understand the power structures and environment surrounding him-/herself.” Yet shouldn’t emancipation involve freedom from domination by these “power structures,” and not just an acknowledgement of their existence?