Banks want to keep Americans stupid and in debt. A lesson in economics.

The first lesson we learned from the current economic collapse is:

The market does not solve everything. Despite what the neo-cons like Ronald Reagan and George Dubbya told us, turning all state responsibility over to the market means that the entire country is motivated by profit and therefore operates under a value system of greed. This market-first government has not benefited most of us. In fact, it's only really benefited the super rich, like Reagan and Dubbya.

The second lesson is:
A government unduly influenced by the market, by corporations' and banks' lobbying and political contributions, will not be able to fulfill its responsibility as regulator of the market.

A case in point: student loans.

The banking industry is lobbying Congress (and to a lesser extent, the American public) to convince us that the current system of student loans is working just fine. Last Thursday, the House passed a bill that would stop giving money to the banks so they can no longer extract wealth from students. The House bill would give money directly to the students.

The banks are trying to convince us that this will be "bad for students" and "end competition" and "cost the US taxpayers more money." The banks are, of course, lying through their teeth, but again, their motive is profit, not truth.

Brainstorm - Increasingly Desperate Arguments Against Student Loan Reform - The Chronicle of Higher Education.

The truth about student loans is that they became, under the incredibly pro-market policies of Ronald Reagan, a way to extract profit from students. At this point, the average graduating college student is about $24,000 in debt in commercial loans to banks as well as another couple of thousand dollars in credit card debt. That's because the government student loan subsidies started going to commercial banks (rather than being distributed through Pell grants and other state-run programs) so banks could make a profit off of students and their families.

Some will say: yes, but that college student will earn on average a million dollars more in her lifetime than someone who doesn't have a degree and therefore it's "worth it." But that is, of course, a misrepresentation of what "average" means. Most college grads will not earn huge sums. Some (and probably mostly those who did not take out loans in the first place) will earn spectacular sums. Furthermore, a larger percentage of students who take on loans will drop out and never finish college. Makes sense- you take on loans because you're poor, you also take on a job or two, have trouble finding a place to live near campus, commute long distances, etc. and not surprisingly, you drop out.

Then there's the other lie about averages: rich students don't go into debt for college so the $24,000 is often misleading. Many students are more than $100,000 in debt before they even get their college degree. If they even get their college degree. For some research I was doing on an unrelated topic, I interviewed college students and recent college grads at a state university. Many of them had more than $60,000 in student loan debt. When I asked them about taking on such huge debt loads, they said "I was born in debt. I'll die in debt. What difference does it make how much debt." Okay, they weren't econ or accounting majors, but really? Is that the lesson we've taught the next generation?

And imagine starting your life out with this sort of debt burden. According to Jose Garcia of the Demos Organization,

According to the Survey of Consumer Finance, the average debt for families 35 years old and younger in 1989 was $50,000. By 2007, the average debt carried by the same age group doubled to an astounding $100,000.

The recession has certainly not helped. Recent data from the U.S. Education Department shows that the 2008-9 academic year saw a 25 percent increase in the total of student-loan disbursements to $75.1 billion, making it the largest increase in recent memory.

And what if you never even finished that degree or the degree is more or less worthless because it's from a school with no prestige? So then you get some job that does not pay a livable wage and without health insurance so you can take on even more debt through credit cards. Or when a medical issue comes up your "friends" at the bank will now give you a medical credit loan. And then when you die, heavily in debt, your family can take out a funeral loan. That way the banks can continue to extract wealth from poor Americans though out their lives and afterlives.

Brilliant, for the banks. No wonder they want to keep Americans stupid and in debt. That way the banks keep themselves profitable and in power.

Crossposted from TrueSlant