Reinventing Education

and restructuring student debt

I recorded this episode in my daughter Cassandra’s bedroom, hence the witchy background. For years I had her fooled that she was born on Friday the 13th in October, until some spoilsport looked it up and found it had been a Tuesday. She’s still the soothsayer I’m counting on to tell the future in a way it can be heard!

Today I promised you Light & Fluffy so I’m going to talk about … economics and education! There’s been much talk about Biden’s $10K student loan forgiveness but student loans are only one symptom of the dysfunctional education system. This episode examines how to reinvent K-12 through university with self-driven curricula, edu-tourism, edu-travel and no debt. It uses the economic system of anarchy and federalism described in my book, How to Dismantle an Empire. It references The Student Loan Scam by Alan Michael Collinge, a TEDtalk by Sir Ken Robinson, a NY Times article by Nick Burns, and The Underground History of American Education by John Taylor Gatto. It ends by showing how existing student debt could be constructively restructured under my economic anarchy plan.

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What’s the problem with the current Biden plan to ‘forgive’ up to $10,000 and distribute that debt to the rest of us? An analogy I often use is that you can’t untangle a snarl from the middle—as soon as you pull one thread, it tightens the noose around someone else’s neck. You need to find the ends: the cause of the cause of the cause, and where you’d like to see it go for the third generation.

In an episode of my old Third Paradigm radio show called The Student Loan Mafia, I look at The Student Loan Scam by Alan Michael Collinge. Alan starts out talking about his own horrendous experience and then:

In 2004, something snapped and he started doing research. He found that Sallie Mae stock rose 1700% in the decade of 1995-2005. A major reason was the lobbying campaign that had stripped away the most basic consumer protections, including bankruptcy, repayment ceilings, truth in lending, and the right to refinance. They were given the power to garnish wages, Social Security, and disability benefits without even a court order. They could suspend professional licenses, and terminate public employment. Because of subsidies, they made more from defaulted loans than loans in good standing.

Executives had amassed fortunes that enabled Sallie Mae's CEO to bid $480 million to buy a baseball team. The Department of Education's Office of Federal Student Aid was run by ex-executives of student loan companies, with stock gifts and kickbacks greasing the skids at every level…. One of the collection companies proudly displays a shark tank in their lobby to illustrate their corporate culture.

If we transfer $10K from taxpayers to these government-sponsored scammers, all we’re doing is rewarding them. On my radio show I played an interlude by Modest Mouse called We Were Dead Before the Ship Even Sank that made me wonder if Modest Mouse had student loans. Then I went into the history:

In 1972, Nixon established the Student Loan Marketing Association, or Sallie Mae, as a government-sponsored agency. He increased loans and grant aid to students while defunding higher education. In the '90's, however, an ambitious CEO named Albert Lord privatized Sallie Mae but kept the subsidies. He gave kickbacks to universities if they made Sallie Mae their preferred lender. He gave perks to financial aid officials, like trips to exotic places, golf outings, parties, and even stock. Family members were given jobs. Federal Direct Loans, which were cheaper for the taxpayer, were strangled while Sallie Mae received enhanced subsidies. They started buying up all parts of the process—collection agencies and guarantors, who are supposed to oversee the process.

Usury and the Universal Lender

By 2006, they were four times the size of their closest competitor, Citibank. Their private student loans could charge interest rates approaching 30%. Using their clout in Congress, legislation allowed for massive penalties and fees for delinquent debt, which made it more profitable when students defaulted than when they paid. Student loans became the only type of debt to be nondischargeable in bankruptcy, no matter what hardship was proven, which was expanded to include private loans at exorbitant interest. All statutes of limitations were eliminated, so old loans from the '70's and '80's became new collectible debt. They were exempt from state usury laws, and the Truth in Lending Act. Guarantors could ignore the Fair Debt Collection and Practices Act when pursuing defaulted borrowers.

It became impossible to tell where the university ended and the student loan companies began. Lenders gave hundreds of thousands in university donations, and then ran call centers staffed with their own employees masquerading as the college's financial aid department. University nonprofits held hundreds of thousands of lender stock shares, which would gain or lose value depending on whose loans they promoted. Federal Direct Loans disappeared from these colleges' options. Financial aid directors were given lucrative fees for "consulting" with lenders. One section of the book, called Larry Loves Tequila, outlines other methods.

But perhaps the deepest cut of all was legislation that required a lender to consolidate their loans with the original lender and never leave, even if other lenders offered better terms. For a short time, a loophole was found called the Super Two-Step, and borrowers rushed to refinance their debt. But the head of the House Education Committee, John Boehner, then received the largest amount of student loan PAC money and his daughter got a job with a subsidiary of Sallie Mae. And so the loophole was closed.

Making the Mafia Blush

There are reasons they didn't want students to pay off their loans. Legislation provided for collection rates of up to 25% to be added to the debt as soon as it went into default. Congress provided the loan guarantors and collection companies with "powers that would make a mobster envious," according to Harvard professor Elizabeth Warren.

They included wage, Social Security, and disability garnishment, tax seizure, suspension of state-issued professional licenses, and termination of public employment. Full, permanent disability was the only circumstance under which the loan could be absolved, but it then showed up as taxable income, fully burdened with fees and interest, so the tax payment was more than the original loan.

So where are we now? There are more than five million defaulted student loans on record with the US Dept of Education, totaling $40 billion. Millions of more graduates have bought their way out of penalties and fees, to be just barely out of default. The stories range from those resentful of not being able to refinance, to those who decided that life wasn't worth living under this insurmountable weight. Increasing numbers are coming forward who've been driven out of the country, while an untold number have gone off-grid, working under the radar.

Keep in mind that I wrote this in 2009 when Collinge’s book came out. It hasn’t gotten better. It also rewards the Board members of Universities for keeping college education at an unaffordable rate. An 8-part series on The Berkeley Daily Planet was called The Investor’s Club: How the University Regeants Spin Public Money into Private Profit by Peter Byrne. It’s also from 2010 and starts with this quote: “As universities become glorified vocational schools for corporations they adopt values and operating techniques of the corporations they serve.” – Chris Hedges (Empire of Illusion, 2009). It continues:

Last fall, amid an unprecedented state budget crisis, the University of California Board of Regents took extraordinary measures to cut costs and generate revenue. Lecturers were furloughed, classes eliminated. The board reduced admissions for in-state students, while increasing the admission of out-of-state students, who pay higher fees than state residents. And to the consternation of tens of thousands of students, undergraduate tuition was raised by 32 percent, with more hikes to come.

It now costs about $30,000 per year to attend the University of California (UC) as an undergraduate, including tuition and expenses. Even with student aid, it’s a sum beyond the means of many students and their families.

While education took a beating, the regents authorized $3 million in bonuses to a handful of top administrators, and reduced the salaries of janitorial staff. The regents approved new construction projects, including a sports stadium. They assured Wall Street bond underwriters that periodic tuition increases would help pay off hundreds of millions of dollars in new construction loans.

Objecting to the tuition increases, UC students, employees, and professors staged demonstrations at regents’ meetings and on campuses across the state. Some protestors accused the regents of “privatizing” the university to benefit industrial corporations and Wall Street investors. While it is true that the university’s ties to corporate and banking interests are many and legion, there is a special kind of privatization taking place behind closed doors.

Our eight-month investigation reveals that some members of the regents’ investment committee, who are also Wall Street heavy-hitters, have modified long-standing investment policies in a way that benefited their own financial holdings. The fallout: multiple conflicts of interest. 

A separate doctoral dissertation looked at those construction projects and found that UC Regeants were investors in the firms that made the loans, so reaping backdoor profits. Meanwhile, the compensation for investment officers isn’t shabby:

The Committee recommends approval of an incentive award of $1,384,416 for Plan Year 2020-21, under the Office of the Chief Investment Officer Annual Incentive Plan (AIP), for Jagdeep Singh Bachher as Chief Investment Officer and Vice President – Investments, Office of the President. The recommended incentive award represents 200 percent of Mr. Bachher’s total salary paid as of the end of the 2020-21 Plan Year of $692,208.

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But the debt is just one symptom of a problem that our curriculum, from kindergarten on, serves the interests of creating an obedient class, something we’ve seen with the ‘pandemic’ response. In other episodes I’ve talked about John Taylor Gatto, author of Dumbing Us Down and An Underground History of American Education. He writes:

Keep in mind, this scheme was never intended ... to be destructive, just the reverse. By converting Americans into specialized economic and social functions, into incompletely human human beings, this nation eventually achieved the most reliable domestic market in the world. The human mutilations of schooling are a trade-off for this prosperity. Comfort and security are achieved at the price of personal sovereignty and wholeness. That's what makes extended childhood a paradox—give it up and people will enter a zone of great turbulence, since most people don't have a clue what to do to make a living or how to entertain themselves. And the resolution of that turbulence nobody can predict.

Well-schooled people have a low threshold of boredom; they need constant novelty to feel alive. With only the flimsiest inner life, they must stay in touch with official voices ... They cannot sit still without their minds wandering off to some commercial world or to the stock market ... Well-schooled people must be poorly-trained in history, philosophy, economics, literature, poetry, music, art, theology, and anything known to develop a personal inner life ... [It converts] spirits designed for independence into whiny, greedy, bored children who define themselves by what they consume... When you next find yourself appalled by infantile and irresponsible behavior that you see all around you, think of school as its forge and try to get rid of it.

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The system I explain in my book and episodes like The Economics of Anarchy operates by the principle of federalism that pushes decisions down to their lowest common denominator—in education, the family. Using commonwealth banks that can lend up to 10X their capital, I buy back mortgages and student loans, turning them from debts to the bankers to debts to the community. The repayments can be then issued as monthly subsidies for locally produced food, wellcare, home improvements and education.

The education subsidy will vary by the local housing debt, but should buy 20 hrs a month of instruction, taught by anyone you want who agrees to the rate. This enables you to demonstrate that you’re putting in the time but control what you learn. In the comments on Muskrat Love & Anarchy, Guy Duperreault writes:

And it is important to remember that the current educational model was built and then fully established by the elite to serve their purposes. There are two purposes, although Kenneth Robinson talks about only the first one in his great TED talk about how the school system kills creativity. And I would add that school kills curiosity and imagination. The longer we are in school, the more that perhaps three of the most human characteristics have been removed: creativity, curiosity and imagination. The second purpose is linked to the first, which is to create the enforcers of the elites' power structure. The leaders who unthinkingly enforce the structures of power as if it is the only way and has always been this way.

Evidence of that is in the successful dissemination of things like the covid narrative: the most educated are often the most asleep, in my experience and the enforcers. …

Chomsky was asked once why the editors and writers in the journals of news and education do not even see that they are disseminating lies and propaganda. His answer is an interesting one: because people do not live comfortably with being a liar. And to live comfortably with themselves, simply stop seeing the truth.

In that TEDtalk by Sir Ken Robinson, he mentions a girl who isn’t doing well in school but, while her parents and the counselor are out of the room, starts humming and dancing. She’s sent to dance school and becomes the choreographer of Cats, among other things. But as someone who didn’t discover dance until I was 60, I think that dance shouldn’t need to lead to a career, and should be part of all our lives.

In my doctoral work on the psychology of creativity, one study that made an impression showed that when something with intrinsic satisfaction is given an extrinsic reward, like a grade or job, it stops it being done when the reward isn’t there.

I think that kids, from pre-school on, should earn their right to go to kindergarten by showing they can be an asset to their household—helping prepare meals, clean, garden. And it’s ridiculous that our kids have adult servants who feed them and clean up after them. A NY Times editorial by Nick Burns (Aug 2, 2022) makes the point:

Letting the university take care of all of students’ needs—food, housing, healthcare, policing, punishing misbehavior—can be infantilizing for young adults. Worse, it warps students’ political thinking to eat food that simply materializes in front of them and live in residence halls that others keep clean.

It also results in training students that it’s their job to learn and someone else’s job to take care of them. We need to end that right now!

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To put this into context, a bachelor’s degree requires 180 credits or 60 3-credit classes with 40 hrs of instruction, or 2400 classroom hrs and about the same of independent study. At 10 hrs of instruction a week, or twice the subsidy amount, someone could get a 4-year degree in 5 years, averaging one 3-credit class per month. Even with 10 hrs of homework, they’d have 20 hrs/ wk left to make a living and do work for a neighbor or parent in return for their subsidy so the student would be debt-free.

Instead of leaving home for a four-year sleepover with your friends, I think education should be a lifelong endeavor involving travel! There could be global sibling cities that agree to accept one another’s subsidies for up to 2 months a year and one year out of 5. Edu-tourism! Edu-travel!

Anyone could set up a curriculum equal to a major with 20 classes or 800 hrs of instruction. A mini-curriculum, equal to a minor, would be 10 classes or 400 hrs, and a micro-curriculum, or focus area, would be 5 classes or 200 hrs. The curriculum designer would specify the prerequisites, some books, videos, podcasts, authors, the skills and knowledge to be tested and proven.

So a curriculum in regenerative agriculture might have prequisites studying Allan Savory, a practicum with Joel Salatin in animal husbandry, courses in soil biology, and when those had been mastered, a year in San Miguel de Allende in Mexico where they’re doing amazing things restoring the land.

A micro-curriculum could be on the anthropology, literature, cuisine, ecology, politics and dance of Peru. There are so many exciting areas of study and places for cross-pollination, once we stop wasting education on the young and take it out of the service of corporate investors.

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But let’s bring this full circle—how would this system solve the existing student debt? From what I’ve read, more people over 50 have student debt than under 25, and the average debt for older people is $41,000 while the younger owe an average of $14,000. For those over 50, these high amounts are due to compounding interest. According to Islamic law, anything more than double the amount borrowed is usury. If people have paid twice what they borrowed, I would declare those debts dead and over.

For the remainder, I would limit repayment to 10 years at no more than 150% of the monthly educational subsidy. For these students, they’d be able to use their own for repayment and earn half of someone else’s by doing something useful for them. This would make the repayment doable, and the community would get the benefit of these smart, motivated young people.

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For more details on the plan, here’s The Economics of Anarchy:

Economics is a system of organizing labor by issuing and collecting money backed by ownership of the assets; anarchy is rule by rules rather than by rulers. As the czar or czarina of your fiefdom, what will your policies be? This discusses Universal Basic Income, student debt forgiveness, naive do-gooders, capitalism vs. socialism, and cheap vs. free. As a supplemental economy, it takes the mortgages back from capitalists and takes the social pension back from government. It enables those who work for corporations to benefit from the local economy while adding to the reserves that generate more prosperity. With a segue into a spirituality of enough, it ends with Matt Ehret on protectionism vs. free trade and the need for a standing army.

and this is From FOMO to JOMO: the Joy of Missing Out, which also talks about John Taylor Gatto and reading for power. Let’s get back to a world where we read for pleasure and power!

Do you miss the slowed-down pace of sequestering and self-care? I feel you. In this episode I explore wasted time, and whether there is such a thing. I look at reading and the art of the good excuse. Along with social obligations, I look at political activism and whether we're dealing with a runaway train. An elastic concept of time and an imaginative sense of purpose is proposed as a way of keeping the sanity we gained in the pandemic, contrary to their intentions.