Student debt in the United States is estimated to hover at over 1.5 trillion dollars which makes student debt the second-highest consumer debt after mortgage debt. According to the Federal Reserve, 43% of college graduates are burdened by student loan debt with the average debtor still owing between $20,000 to $25,000 on their balance since 2018. Unlike the United Kingdom where student debt is payable upon earning a minimum income and where student debt is wiped away after 30 years, in the US student debt is harshly controlled, it is not dischargeable under Chapter 7 (bankruptcy). That is until earlier this month when Kevin Rosenberg’s $221,385 student debt was actually wiped away by a New York State judge after Rosenberg filed for bankruptcy, a case that is still viewed as an anomaly.
In the US, the solutions for the millions of people in debt with student loans, barely able to survive, the options are grim as the conditions of economic survival are getting worse. Today there is a plethora of new products entering the market to facilitate student and other forms of debt such as the Individual Voluntary Arrangement where individuals can consolidate their debts through an insolvency practitioner. And for student loan debt, there are income share agreements (ISAs) which have been offered as a solution to the current student debt crisis which is called “crazy” by some—and for good reason.
An ISA is effectively an agreement between a university and a student to repay a certain percentage of income to the university for a specific period, up to a fiscal limit. ISAs have created much debate over the past year given that they sound very much like indentured servitude contracts from centuries ago, probably because they pretty much share the same ethos. For instance, indentured servants in, say, in colonial Virginia during the 17th and 18th centuries signed contracts such as this one dated May 20, 1784, whereby that James Bracken, a linen weaver from Armagh, Ireland, agreed to serve a four-year term as an “indentured servant” in Virginia for Enoch Stickney or his heirs. In exchange for his services, the contract promises Bracken his passage to Virginia on the ship Washington with “sufficient Meat, Drink, Apparel, Lodging, and all other necessaries befitting such a Servant” adding that at the end of his years of service he will attain freedom. Only for students freedom is less than certain as they are signing up for ISAs and facing similar conditions of repayment against a future income that, unlike indentured servants, is not at all certain.
And if indentured servitude sounds like a more elegant form of slavery, it’s probably because those in power throughout history have merely tinkered with the legal limits of how to extract labor for the bottom line, if there is any line at all. Presently, we are seeing this practice of extracting monies from the most vulnerable being extended and rendered legally opaque as these new “financial products” are being used to exploit the desperate situation of millennials who are facing a grim economic future. Millennials are being squeezed by the mechanisms of capitalism that begin and end with higher education such that teenagers entering any number of universities today have, in addition to student loans, the “option” to sign a contract for income share agreements where they can pay for their education with a fixed percentage of their estimated future income for a set period of time. It is no wonder the ISAs was one of 2019’s more popular buzzwords among higher ed managers and entrepreneurs in Silicon Valley alike.
It gets even bleaker as universities are climbing on board with this new model of higher education becoming the space where students can both work toward a degree and then repay the institution directly for the favor of having lent them money at 2.5 times the original loan amount. Purdue University was one of the first universities to sign up for the ISA system in 2016 and since then dozens of other universities like the University of Utah and the University of Pittsburgh have signed on or are in the process of adding ISAs as part of their financial packages. Even questionable businesses such as Lambda School, an online coding platform, have joined in the gold rush of desperate millennials eager to study all for courses that are certainly not worth the $50,000 in fees.
And if this new trade-off for student loans were not cynical enough, some publications like TechCrunch are pushing ISAs by lauding the fact that they will “transform the labor market.” TechCrunch claims that ISAs will “create a new category of career accelerators that are more like scaled talent agencies for businesspeople. Across industries and seniority levels, we will see ambitious professionals choose to pay a small percentage of their future income to partner companies that promise to accelerate their career’s rise.” All this reeks of a future job placement based upon oligarchical structures of family wealth, social connections and educational where the alleged “American dream” is quickly becoming a twist on the recent “undoing” of royalty with Meghan and Harry “slumming it” in Vancouver. To be clear, ISAs are a rinse and repeat of older forms of control of economic and class arrangements and it will prove disastrous for those students who are unable to secure paid employment.
One unforeseen repercussion of ISAs is not the “career accelerator market” that TechCrunch predicts that will “prove effective at enhancing participants’ career prospects.” Instead, those students who cannot access these financial and business training programs with which ISAs are often intertwined will undoubtedly be less competitive in the job market and could likely be rendered unemployable despite holding the same degree or even better grades and skills than their ISA-holding peers. ISAs are viewed by many as better than traditional student loan debt while allowing higher education to be the arbiter of knowledge and survival. Moreover, these same institutions are allowing private businesses to enter into partnerships with university degree programs as these partnerships are widely viewed as filling a void in post-degree job placement where “skills training” offered by these companies has become more of a priority than university education itself.
I fear that higher education is in its last days as students attempt to find ways to earn degrees without going into debt while paradoxically entering into the greatest wave of debt we have ever seen. The repercussions for those students who do not enter into ISAs replete with skills training does not bode well for the university of tomorrow. We are currently witnessing big business hijacking every last drop of financial gain possible from one generation after the next while having the red carpet rolled out for them by universities across the country. The exchange is clear: businesses get access to most elite students while universities suck the economic of these students drys. It’s a win-win situation for both partners.
Meanwhile, students desperate to secure employment prospects even before finishing their degrees sign up for decades indebtedness to the very institution which cunningly puts eighteen-year-old into the position of signing on a dotted line least they face a lifetime of unemployment. All this, of course, is based on a lie and institutional blackmail that makes promises of a future can simply never be guaranteed.
