The debt trap : how student loans became a national catastrophe

The debt trap How student loans became a national catastrophe

Josh Mitchell

Book - 2021

"In 1982, a new executive at Sallie Mae took home the company's financial documents to review. "You've got to be shitting me," he later told the company's CEO. "This place is a gold mine." Over the next four decades, the student loan industry that Sallie Mae and Congress created blew up into a crisis that would submerge a generation of Americans in $1.5 trillion in student debt. In The Debt Trap, Wall Street Journal reporter Josh Mitchell tells the untold story of the scandals, scams, predatory actors, and government malpractice that have created the behemoth that one of its original architects called a "monster." The tale begins in 1957 with the launch of Sputnik. Afraid that America was fa...lling behind the Soviets in science education, Congress created the first major federal student loan program to enroll more students in college. What followed were a series of well-intentioned government actions that created a cycle of reckless lending and runaway tuition. Easy access to loans allowed colleges to raise tuition to unheard of levels, which in turn led Congress to increase loan limits and interest rates and expand who could borrow. This spiral continued as the private banks that fronted the money made huge profits on interest. "Nobody was pure in this business," one former college president said. As he charts the gripping seventy-year history of student debt in America, Mitchell never loses sight of the countless student victims ensnared by an exploitive system that depends on their debt. Mitchell also draws alarming parallels to the housing crisis in the late 2000s, showing the catastrophic consequences student debt has had on families and the nation's future. Mitchell's character-driven narrative is required reading for anyone wanting to understand the central economic issue of our day.

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Subjects
College costs > United States.
Student loans > United States.
Finance, Personal > United States.
Education, Higher > United States > Finance.
Published
New York, NY : Simon & Schuster 2021.
Language
English
Main Author
Josh Mitchell (author)
Edition
First Simon & Schuster hardcover edition
Physical Description
260 pages ; 23 cm
Bibliography
Includes bibliographical resources (page 245) and index.
ISBN
9781501199448
  • Introduction
  • 1. The Visionary (1957-1969)
  • 2. When Ed Met Sallie (1969-1990)
  • 3. Our Greedy Colleges (1974-1990)
  • 4. American Dreamer (1991-1995)
  • 5. The Lord of Wall Street (1994-2008)
  • 6. Hope and Hubris (2006-2016)
  • 7. The Great Unequalizer (2014-2015)
  • 8. State U Inc. (2014-2018)
  • 9. The Trap (2016-2018)
  • Conclusion
  • Acknowledgments
  • Notes
  • Bibliography
  • Index
Review by Booklist Review

The news is full of stories about the student loan debt crisis, but how did it all start? Wall Street Journal reporter Mitchell digs into the history and drives all the way to the current state that has Americans owing $1.5 trillion in student loan debt. It began when the Soviets launched Sputnik and Congress felt that American students were falling behind in scientific innovation and so created the first federal student loan programs. Without much oversight, this industry went from trying to help poor and middle-class students get an education to making money. Mitchell follows lending groups, such as Sallie Mae, that wooed financial aid directors to increase loan numbers and lobbied to remove bankruptcy protection for borrowers. Also, the rise in financial aid meant that schools could increase tuition while encouraging students to borrow more. Mitchell uses several student stories to illustrate these points and show the effects on society. The book is sure to garner attention, as well as make readers take a close look at the cost of higher education. Parents, students, and educators will find it enthralling and possibly be moved to push for industry reforms.

From Booklist, Copyright (c) American Library Association. Used with permission.
Review by Publisher's Weekly Review

The $1.6 trillion Americans owe in student loans is greater than the size of the Canadian economy, notes Wall Street Journal reporter Mitchell in this meticulous, eye-opening history of the student debt crisis. Though the G.I. Bill effectively paid for mass higher education in the years after WWII, Congress rejected Harry Truman's attempt to make the first two years of college free. Instead, the U.S. government assumed all the risk of student loans, while banks and colleges profited. Universities raised tuition costs because consumers could simply borrow more to pay for it, and banks extended government-guaranteed loans to students who had little hope of paying them back. Mitchell poignantly recounts the stories of borrowers including Lisa (no last name given), a 54-year-old single mother of two who took out loans to pay for her undergraduate and graduate degrees and now is on the hook for $96,820, on top of dealing with breast cancer and anxieties over her daughter's student debt. Mitchell masterfully explains how America got itself into this debacle, though readers will wish for a more robust inquiry into the solutions he supports, which include forgiving interest on student loans, making community college "truly free," and government funding for apprenticeship programs. Still, this is an immersive and illuminating introduction to a hot-button issue. (Aug.)

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Review by Kirkus Book Review

Thoroughgoing report on the student-loan crisis. Wall Street Journal writer Mitchell writes that student debt in this country "is the size of Canada's economy," amounting to $1.6 trillion. That debt is coupled with crippling terms that burden many borrowers with payments that will last throughout their working lives, mostly to service interest, and higher education has not delivered jobs that pay enough to cover them. Indeed, "far from making college affordable, student debt enabled schools to raise their prices in perpetuity, creating a higher education industrial complex that has driven up the price of college--and graduate school--to unprecedented levels." It's a vicious chicken-and-egg situation: Student loans are easily obtainable, so easy that many workers in stressful economic times return to school simply to qualify to take out loans to survive; because the money is so abundant, schools, underfunded in the case of most public institutions, feel no restraint to curb their costs. Mitchell tells the story of one woman who married a man who took advantage of her financially, then returned to school in order to better her job prospects and wound up owing a huge debt. She was one of the few to be allowed to discharge her debt legally, but only because a collection agent sympathized with her as she battled cancer. Such circumstances of emergency were not in the design of the loan program, which dates to the administration of Lyndon Johnson. As its founder told the author, "we unleashed a monster." It's a monster indeed, and no president since has done anything to tame it. Mitchell notes that under the Obama presidency, "Black families got into debt more than families of any other racial or ethnic group." This urgent report makes a convincing case for reforming the loan program to allow students "a fair shot at college, at a reasonable price." An alarming study of an economic crisis long in the making--and entirely avoidable. Copyright (c) Kirkus Reviews, used with permission.

Copyright (c) Kirkus Reviews, used with permission.

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