The Indentured Class: The Social Costs of Student Debt (KPCC Forum Series)

Event Overview and Series Context

• The event marks the second installment of the "Rescuing the California Dream, Policies for an Affordable Future" series, co-presented by KPCC and the Milken Institute.
• KPCC Vice President of Content Melanie Sill noted the series aims to move beyond reporting problems to actively engaging citizens in policy solutions.
• The upcoming November 10th event at the Milken Institute in Santa Monica will focus on workforce changes and their effects on Southern California businesses and markets.

Student Debt Statistics and Trends

• In 2013, bachelor's degree graduates from public and nonprofit colleges carried an average of just under $30,000 in student loan debt.
• Graduates from for-profit colleges tend to carry 40% more debt than their counterparts, though comprehensive college-to-college data remains limited.
• Student debt has grown at a significantly faster rate than inflation over the past decade, with larger increases in average debt than in the share of students with debt.
• 99% of borrowers have less than $100,000 in loans, despite public focus on extreme cases involving hundreds of thousands.
• 63% of student loan defaulters in California (based on those entering repayment in 2012 and defaulting by 2014) attended for-profit colleges.
• Only 27% of students from Westwood College (a for-profit) graduate, compared to 86% at Occidental College.
• Of Westwood graduates, only 37% are able to pay down debt, whereas 95% of Occidental graduates start or complete repayment quickly.

Cost of Education and Institutional Structures

• Higher education costs have risen over 800% since 1990, a rate that vastly outpaces healthcare and other inflation metrics.
• State disinvestment has pushed the burden of rising costs onto students and families over time.
• Federal loan options include the Perkins Loan (5% interest), Federal Direct Loans (4.76% interest), and unsubsidized/subsidized varieties.
• Institutional loans, such as Occidental's Weingart Loan, offer zero interest, though private alternative loans have largely dried up since 2008.
• Parent PLUS loans were cited in cases reaching $80,000, though borrowing by parents is reportedly decreasing slightly despite steady enrollment of low-income families.
• Private student loans lack income-driven repayment options and bankruptcy protections available to federal loans.
• Recent federal changes removed the government subsidy for graduate student loans, meaning these loans are now fully interest-bearing.

Economic and Social Impacts

• Student debt acts as a barrier to home ownership, marriage, and family formation for recent graduates.
• High debt levels contribute to a "brain drain" in California, as educated workers move to other states with lower costs of living and similar wages to escape financial strain.
• The "cost vector" of living in Los Angeles or the Bay Area means a $30,000–$45,000 income there feels financially equivalent to $22,000–$30,000 in other regions.
• Perry Wong highlighted that the creative class in Southern California is particularly vulnerable, as many work as contractors rather than receiving stable salaries to service debt.
• The emotional and cognitive toll of debt is described as a "straitjacket," causing students to feel their future receding rather than opening up.

Policy Recommendations and Future Directions

• Debbie Cochran (Institute for College Access and Success) advocates for expanding income-driven repayment plans, which cap payments at 10-15% of discretionary income.
• A proposed bill would require California colleges to counsel students about federal loan eligibility before they take out private loans.
• Perry Wong suggested a model where high-tuition-paying international or out-of-state students subsidize low-income in-state households, though this was noted as potentially unsustainable.
• Panelists discussed "risk-sharing" models where colleges would face financial penalties if their students consistently default or fail to pay down debt.
• A significant policy concern is the taxability of loan forgiveness under income-driven repayment plans, which creates a future tax burden even if the principal is forgiven.
• There is a push for financial literacy education starting in middle school to help students understand the long-term implications of borrowing.
• Maureen McRae Goldberg noted that while elite schools meeting full demonstrated need (like Harvard and Yale) mitigate debt issues, the problem persists where schools cannot meet full need, forcing students into private loans.
• Panelists identified a disparity where community colleges sometimes restrict access to federal loans, disproportionately affecting African American and Latino students who then turn to private lenders.

Audience Testimonies and Personal Anecdotes

• Shane Bush, a CalArts graduate, carries $400,000 in debt; his mother, Inez Bush, expressed regret that she did not stop him from pursuing his Master's to avoid compounding the financial burden.
• Dustin Davis, a Chapman University film graduate, holds $82,000 in debt for his Master's, noting he lacked information on graduate earnings before enrolling.
• Audience member Bob Deutsch (cognitive anthropologist) reported that debt severely impacts students' cognitive capacity to plan and make life decisions.
• A Harvard Law School graduate noted that understanding the reality of public interest salaries earlier might have prevented them from taking on debt for that path.
• A graduate student questioned why faculty members living on food stamps teach students who pay $80,000+ in debt, highlighting internal institutional financial inequities.
• The panel confirmed that neither federal nor private student loans are currently dischargeable in bankruptcy.