Friday, August 26, 2011

Education & class: can you say “indentured servitude”?

While it is well known that “education pays,” at least for the seasoned worker, the barriers to entry into well-paying jobs are being raised.  The popping of the student debt bubble promises to be extremely unpleasant, with many heavily indebted graduates entering a state of virtual indentured servitude.  Like health care, education in America seems to be only for those that can afford it.  The ruling class tightens its grip on the country.

A few excerpts from articles worth reading in their entirety:

Student debt in America will surge past $1 trillion next year and has already surpassed credit card borrowing, promising to turn out the most hocked generation of college graduates in history.

Student loans are tough. They can follow you for a long time after graduation and can be hard to manage with other debts you take on. Generally, you can't get rid of student loan debt in bankruptcy. This is non-dischargeable debt, which means it remains after bankruptcy and you must pay it.

However, there is one exception you should know about. Some student loans may be considered an undue hardship, and can be discharged, or eliminated, if the loan payments put an extreme burden on you or your family.

Show Your Hardship to the Bankruptcy Court

The first step to filing for undo hardship is to file a separate motion with the court and then meet with the judge to explain your hardship. This isn't easy to do. You have to show three things to prove undue hardship:

  • That in your current situation, you can't maintain a minimum standard of living and repay your loans
  • Your bad financial situation is likely to continue
  • You made honest efforts to pay off the loans

It's almost impossible to show undue hardship unless you're physically unable to work and your situation isn't likely to improve in the future. So, if your student loans make up most of your debt, it probably isn't wise to attempt this unless you're disabled.

In the past, some privately funded student loans could be discharged in a Chapter 7 bankruptcy. However, the law changed with the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Now, any education loan that qualifies for a tax deduction is non-dischargeable, unless you show "undue hardship."

Just like the labor force as a whole, recent college graduates have seen a near doubling of their unemployment rates. This pattern is similar to the labor market experience of recent college graduates during the cyclical recession of 2001.

Now evidence is emerging that the damage wrought by the sour economy is more widespread than just a few careers led astray or postponed. Even for college graduates — the people who were most protected from the slings and arrows of recession — the outlook is rather bleak.

Employment rates for new college graduates have fallen sharply in the last two years, as have starting salaries for those who can find work. What’s more, only half of the jobs landed by these new graduates even require a college degree, reviving debates about whether higher education is “worth it” after all.

“I have friends with the same degree as me, from a worse school, but because of who they knew or when they happened to graduate, they’re in much better jobs,” said Kyle Bishop, 23, a 2009 graduate of the University of Pittsburgh who has spent the last two years waiting tables, delivering beer, working at a bookstore and entering data. “It’s more about luck than anything else.”

The median starting salary for students graduating from four-year colleges in 2009 and 2010 was $27,000, down from $30,000 for those who entered the work force in 2006 to 2008, according to a study released on Wednesday by the John J. Heldrich Center for Workforce Development at Rutgers University. That is a decline of 10 percent, even before taking inflation into account.

Of course, these are the lucky ones — the graduates who found a job. Among the members of the class of 2010, just 56 percent had held at least one job by this spring, when the survey was conducted. That compares with 90 percent of graduates from the classes of 2006 and 2007. (Some have gone for further education or opted out of the labor force, while many are still pounding the pavement.)

Even these figures understate the damage done to these workers’ careers. Many have taken jobs that do not make use of their skills; about only half of recent college graduates said that their first job required a college degree.

The choice of major is quite important. Certain majors had better luck finding a job that required a college degree, according to an analysis by Andrew M. Sum, an economist at Northeastern University, of 2009 Labor Department data for college graduates under 25.

Young graduates who majored in education and teaching or engineering were most likely to find a job requiring a college degree, while area studies majors — those who majored in Latin American studies, for example — and humanities majors were least likely to do so. Among all recent education graduates, 71.1 percent were in jobs that required a college degree; of all area studies majors, the share was 44.7 percent.

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