Student Debt Time Machine

Here’s where we are now: All American children are told to exercise self-discipline and spend the only things they have (their time and effort) working and completing for a spot in a college freshman class.  If they’re lucky enough to achieve this goal, they’ll borrow on average tens of thousands of dollars from the government for an increasingly diluted education.  Schools take this $100+ billion a year in government money, backed by their students’ ability to do work in the future, and spend it like their job is to produce more spending.  Colleges have dug themselves so deep into their shining marble pit that not even the vultures in the bond market want much to do with them.  Meanwhile, debtors can’t walk away from student loans unless they can walk away from themselves.

Even if it were larger, the subprime housing market is a less sophisticated and stable way to gin up demand than the student debt industrial complex.  People can’t default on their human capital, even it’s overleveraged.  That means that as long as the government keeps treating student loans as a special kind of practically inalienable debt, when this value is created, it’s created for real.  Student debt is a kind of time travel for value: Borrowers take out loans based on the idea that the returns on a college education will always exceed the costs, and they’re made to pay regardless.

Here’s how the time machine works: Say you — hypothetically — need to generate demand for a bunch of construction projects (a state-of-the-art athletic facility, perhaps, or a new performing arts center designed by a famous architect) because the housing market collapsed.  You look high and low, and everyone is tapped out.  It’s a bad economy.  But you’re smart, and you know money is more complicated than that.  Just because the demand doesn’t exist now doesn’t mean it won’t exist later, and if it exists later, then making it appear now is just a matter of the right forecasts and the right lender with the right interest rates.  You don’t want another bubble, though, so you need to anchor these predictions to something that can’t evaporate if market conditions change.  And if there’s one thing you know about a future in which firms are able to collect debts, where we have to spend money to buy food and stay alive, it’s that people will be working.  Human capital is the present value of the one thing you know, in aggregate, has to happen in the future: Workers are going to work.




The broad Washington policy consensus boils down to the idea that we need more college access, which means more debt.  But the problem with student debt isn’t that there’s not enough of it, it’s that American higher education costs too much.  No mystification can disguise what anyone who can read a price tag already knows.  But we ignore the cost because we’re so dedicated to the axiomatic virtue of “College for all” that we consider a college education priceless. […]

Higher education is, in addition to other things, an economic regime that extracts increasingly absurd amounts of money from millions of young people’s as-yet-unperformed labor.  For anyone who takes out a student loan — and that’s two-thirds of students — succeeding at contemporary American childhood now means contracting out hours, days, years of their future work to the government, with no way to escape the consequences of what is barely a decision in the first place. (48-49)



The intensive parent attempts total control for the same reason we don’t have wooden playgrounds anymore: so nothing bad happens.  Bad things that could happen include but are not limited to: the child getting hurt outside, the child being kidnapped, the child being placed in a lower academic lane, the child contracting a chronic illness, the child developing a drug addiction, the child using drugs, the child getting a bad grade, the child getting pregnant or getting someone else pregnant, the child having sex and contracting and STI, the child getting in a fight, the child being disciplined by the school, the child being disciplined by the police, the child being killed by the police, the child dropping out of school, the child not getting into a good college, and the child not getting into college at all.  These are hazards any parent might worry about, but they’re also things any investor might worry about.  The easy slippage between these roles makes intensive parents ideal managers for budding capital, whether they think of it that way or not. (33-34)

Malcolm Harris | Kids These Days: Human Capital and the Making of Millenials

Human Capital

Waged workers receive money to mark their expended effort-time — even though it only represents a fraction of their total output.  The student equivalent is the grade: We say a student has “worked for” or “earned” her marks; the return of graded papers or report cards resembles the passing out of paychecks; etc.  In theory, a grade in a class in a semester represents a student’s work and skill exercised over time, but grades are comparative.  Still, postsecondary grades have been rising nationwide, in a phenomenon that frustrated commentators have dubbed “grade inflation.”  But inflation is the wrong economic metaphor: Nongrade measures of educational output — like students taking Advanced Placement classes or tests, or kids applying to college — have trended upward, along with labor productivity in other sectors.  It’s a twisted system that aspires to train every student for “A” work, then calls it a crisis when the distribution shifts in that direction.

The idea that underlies contemporary schooling is that grades, eventually, turn into money, or if not money, into choice, or what social scientists sometimes call “better life outcomes.”  The pedagogical mask is incomplete, insofar as everyone involved in education — not least of all students — recognizes that the work they do (or don’t do) has an impact on their future wellbeing.  In waged work we have the concept of valoriation, which is the process by which laborers produce value above and beyond their wages and increase the mass of invested capital.  But if no one is profiting off kids’ scholastic work — teachers definitely don’t count — where does their product go?  […] When students are working, what they’re working on is their own ability to work.  Human capital’s rough paper analogy is the resume: a summary of past training for future labor.  At its most technical, human capital is the present value of a person’s future earnings, or a person’s imagined price at sale, if you could buy and sell laborers — minus upkeep.

The “capital” part of “human capital” means that, when we use this term, we’re thinking of people as tools in a larger production process. (21-22)

Malcolm Harris | Kids These Days: Human Capital and the Making of Millenials