Student Loan Debt Is the Enemy of Meritocracy in the US, with Thomas Piketty | Big Think

Student Loan Debt Is the Enemy of Meritocracy in the US, with Thomas Piketty
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Higher and more equitable growth in the United States requires more public support for higher education, argues economist and best-selling author Thomas Piketty. Changes are necessary for the stark reality of higher education to match the purported American values of meritocracy, hard work, and equal opportunity/mobility. If we really want to promote these things, says Piketty, we need to do something about student debt.
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THOMAS PIKETTY:

Thomas Piketty is Professor of Economics at the Paris School of Economics and author of the landmark 2013 book Capital in the Twenty-First Century. He is the author of numerous articles published in journals such as the Quarterly Journal of Economics, the Journal of Political Economy, the American Economic Review and the Review of Economic Studies, and of a dozen books. He has done major historical and theoretical work on the interplay between economic development and the distribution of income and wealth. In particular, he is the initiator of the recent literature on the long run evolution of top income shares in national income (now available in the World Top Incomes Database). These works have led to radically question the optimistic relationship between development and inequality posited by Kuznets, and to emphasize the role of political and fiscal institutions in the historical evolution of income and wealth distribution.
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TRANSCRIPT:

Thomas Piketty: So, the amount of household debt and even more recently of student debt in the U.S. is something that is really troublesome and it reflects the very large rise in tuition in the U.S. a very large inequality in access to education. And I think if we really want to promote more equal opportunity and redistribute chances in access to education, we should do something about student debt. And it's not possible to have such a large group of the population entering the labor force with such a big debt behind them. This exemplifies a particular problem with inequality in the United States, which is very high inequality and access to higher education. So in other countries in the developed world you don't have such massive student debt because you have more public support to higher education. And I think the plan that was proposed earlier this year in 2015 by President Obama to increase public funding to public universities and community college is exactly justified.

This is really the key for higher growth in the future and also for a more equitable growth. There's one statistic, which I give in my book, which is a bit frightening, which is that if you look at the average income of the parents of Harvard University graduate students right now, what you get is the equivalent of the average income of the top 2 percent of the U.S. distribution of family income. So this doesn't mean that there's nobody from below the top 2 percent that gets into Harvard, but this means something very precise, which is that people from below the top two that make it to Harvard are sufficiently few. And the people who come from the top two come from sufficiently high within the top two, that the overall average is as if all students had been picked from within the top 2 percent of the distribution of U.S. family income.

So this is an example which shows that you have the official discourse about meritocracy, equal opportunity and mobility, and then you have the reality. And the gap between the two can be quite troublesome. So this is like you have a problem like this and there's a lot of hypocrisy about meritocracy in every country, not only in the U.S., but there is evidence suggesting that this has become particularly extreme in the United States. And of course, student debt at the other extreme of the distribution is the other side of the coin. So this is a situation that is very troublesome and should rank very highly in the policy agenda in the future in the U.S.





Higher and more equitable growth in the United States requires more public support for higher education, argues economist and best-selling author Thomas Piketty. Changes are necessary for the stark reality of higher education to match the purported American values of meritocracy, hard work, and equal opportunity/mobility. If we really want to promote these things, says Piketty, we need to do something about student debt.

[MetricImperialist]

Student loans are the problem not the debt. It's the guaranteed loans that are causing the tuition fees to rise because the universities and colleges know that they can charge as much as they want. They can do this because the students are willing to pay whatever the price is and can come up with the needed cash on the spot.

Getting the public to pay for the loans will not reduce the cost of a tuition and will only enable the universities to charge even more.

If we can reduce the cost, the loans will be smaller and easier to pay off.

[MrHaloswrath]

Internet bubble... Housing bubble... Student loan bubble.. I wonder if there is a pattern....

[miteeoak]

I had zero support from my parents.  I lived alone.  How did I do it? I worked my tail off.  I was going to school full time while working 2 jobs when i was able,  I left college with a manageable 14, 000 in loan debt.  I went to a commuter school.  No credit cards and no new car certainly helped.  It's a matter of lowering expectations for a while to reach a goal.  I in no way suffered.  

[miwbefh]

The real issue with student loan debt is that the government has in essence created a bubble (much like the housing bubble) in the higher education system. Because the federal government has incentivized both students and lenders the price of education has skyrocketed. Universities know they can charge more because the government will foot the bill leading to astronomical tuitions which leads to more loan dependence. Sallie Mae for example is a government sponsored entity (GSE) much like Fannie Mae and Freddie mac. Fannie and Freddie subsequently collapsed when the sub-prime mortgage crisis hit. And according to me all student borrowers are technically "sub-prime". This bubble is nothing new.

[ughhim]

There is a light in the tunnel: At my graduation, Senator Schumer (D-NY) proposed legislation that is very forgiving to those with student loans.

[laughattack]

well if we'd stop funding public education through local taxes...

[IceCube]

lol america is a business. that line brad pitt says at the end of that one movie was no joke!

[chrisose]

This is just another leg of the "Everyone needs higher education" marketing bullshit. All you need to do to understand just what a money pit higher education has become is to look at the growth of for-profit colleges, universities and tech-schools. Of course so-called public colleges and universities are not much better these days with the biggest name schools asking the price of a large house just to get a 4 year degree.
A few points
1: Most jobs that keep society civil do not require anything beyond a basic education.
2: The public education system in the US is being dismantled piece by piece forcing students to pay to learn basic skills in their first years in "higher education". These are skills that children use to have upon graduation from high school but programs like No Child Let Behind changed that.
3: Most school districts across the country spend more each year on construction then they spend on actual education.
4: The MBA management theory has eliminated most on the job training in part to force people into paid schooling. Consider that most business schools are funded by the likes of the Koch Brothers who also tend to be advocates for the elimination of public schools.
5: Many people who do get a degree will never make a dime in their field of study. This is true of the legitimate subjects as well as the fluff majors.

[APR]

Absolutely love this. I literally got tears watching. Xo's

His grammar is solid and his vocabulary is quite large. He's ESL teacher seriously neglected pronunciation activities.

[wakeupscreaming]

Just for everyone's information -- Cuban citizens can go to school, right up to a masters degree -- all paid for by the state -- they are not burdened with debt.

Ask yourself wtf is wrong with capitalist countries.

[CosmoShidan]

Here's a thought: bring higher education into public schools. Like philosophy and calculus for one.

[beegum]

Student load debt is caused by the way the US government funds education.  If the government controlled it completely it could keep prices down with a side effect of keeping quality down, as in most of the world.  Since it subsidized education we've managed to get massive inflation rates on college expenses and large amounts of private and likely also public debt to do so...  I don't think this stuff would be controversial to economists.  The previous argument was that the yield would be increased research and development.  I'm not sure this down side was worth the cost, especially if it causes our economists to teach like this.  I mean, yeah, you're probably getting paid partially on the government dole as an economist, but what is going on here is very easy to understand.  Like, my parents generation could pay for college as they went through it.  It cost me quite bit with some loans, but if you got the right degree it won't matter much at all, and now it's getting to be a high risk bet at the cost of public college today even. 

What would be nice is an analysis of the actual system, rather than just asking for more money to expand programs.  What has the program 'as is' done?  Increased costs, increased debt, ?perhaps increased research?...  can we consider this a success?  IN THE LIGHT OF REALITY how can it be improved?

Why don't you guys see education costs like you see health care costs?  I swear the US has the most either ignorant or dishonest economists in the world being promoted to public recognition.

One great way to make the system competitive would be to deregulate the public subsidy, rather than pretending you're serving the public's interest by regulating known sources of superior education.  Governments all over the world, butt into the education sphere, where, like the Catholic Church had done, then they raise taxes, and either defund the private schools or they regulate them so that they are not as superior as before...  essentially, when the government is not run well, it is a parasite on normal industry.

[aznpwnerp]

How does student loan debt relate to meritocracy? They're two different issues.

[henrywoeltjen]

You establish huge institutions of debt that promise a future, a future you cannot deliver on. Then, and only then, you enforce these invalid contracts over people for money not due, for the contract was void to begin with as you never intended to deliver the services promised.

Therefore I say unto you, those of you who collect money from the poor under false pretenses, those of you who decide to destroy the life of your neighbors, you shall be judged. 

Do not think the Lord is blind to these things. Our Lord sees all of you, and if you continue in this sin he will reign down judgement upon your heads. Lo, some of you know this to be true. 

So then, turn back your faces from sin or he will come upon you. As his one and only son does reign over all corners of the earth, he will quickly come upon you. Turn back from sin children.