Increasingly, American students find themselves caught between the pinch of guaranteed debt from college without the guarantee of a job to pay that debt off, and there’s no way out.
Enter New Jersey Governor Chris Christie, who, while speaking about student debt, school choice, and teacher accountability at Iowa State University on Thursday, suggested that debt-free college was not an answer — but debt-bondage was.
The Student Loan Bubble
The student loan bubble is the financial monster lurking under the bed. As of 2014, the debt total was greater than $1.2 trillion, and over 7 million people with student loans had defaulted.
While it doesn’t pose the same threats that the real estate bubble posed, it’s effects are just as damaging to the economy:
But, despite it’s search-engine popularity and the associated journalistic sensationalism, it’s not at all evident that we are witnessing the development of another speculative bubble. In fact, once you break down the facts, it turns out that the parallels are relatively few. That said, however, student debt loads are a problem, and a serious one. Not only do they create a significant drag on short-term economic activity, but they will stunt our long-term growth as well. And the situation is deteriorating. The disease is real, it’s just more subtle and insidious than a financial market boom and bust.
It’s unsustainable. And everyone except the most envious crab-bucket Republican understands that.
Chris Christie’s Bootstraps
After delivering an inspirational account of bootstraps, Christie told those listening to his speech in Ames, Iowa, on Thursday that debt-free college wasn’t a solution to the rising debt.
According to Christie, people who receive a degree that will improve their social standings shouldn’t earn it for free. He did, however, admit that students needed some sort of help, and held up Iowa Governor Terry Branstad’s Student Debt Reduction Organization tax credits as a potential model.
Now, whether Branstad’s program even works is a question that doesn’t have a clear answer; according to a new paper from the National Bureau of Economic Research, they didn’t boost college attendance in eligible households, likely because they’re not as accessible as grants.
However, it was his other suggestion that raised eyebrows:
Christie also mentioned income share agreements, which allow students to essentially issue stock in themselves. It allows people to invest in college students, or to “own human capital contracts,” which means that an investor could pay a portion of the student’s tuition to attend college in exchange for that student giving the investor a certain percentage of their income for so many years.
Christie is legitimately suggesting that students sell themselves to investors to cut their debt. If you can’t find any investors — I don’t know any huge investors, do you? — they presumably suffer under huge debt.
And while Republicans and big business can pretty it up with “human capital contracts,” history calls it something else: indentured servitude.
Featured image via Wikimedia Commons
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