Episode Overview

Podcast: Economic Update with Richard D. Wolff
Episode: Economic Update Extra: Eli Campbell
Date: July 7, 2018
Main Theme:
This episode delves into the crisis of student debt in the United States, with a focus on the movement to boycott student debt. Host Richard D. Wolff and guest Eli Campbell explore the financial mechanisms underpinning student loans, their impact on students' lives and the economy, and the potential consequences—both immediate and systemic—of widespread student debt default or organized debt boycotts.

Key Discussion Points & Insights

1. Student Debt as a Systemic Economic Threat

• Student Loan Asset-Backed Securities (SLABS)

  • Eli Campbell explains how student debts are bundled into financial instruments—SLABS—similar to the mortgage-backed securities involved in the 2008 financial crisis.
    • “The idea here is very similar to what took place during the housing bubble in the early 2000s, where Navient Corporation… will create securities which are financial products that they can sell to investors made of student loan obligations.” (Eli Campbell, 01:13)
  • Banks like Goldman Sachs, Wells Fargo, and JP Morgan act as underwriters; if the loans can't be sold, banks buy them up.
  • These securities have long maturity dates (e.g., up to 2056), raising serious questions about their actual value.

• Potential Default Crisis

  • Brookings Institute projects that 40% of student borrowers will default before 2023.
    • “If there were, when the default crisis happens with student loans… these SLABS have maturity dates of like 2056. I mean, the idea that these things are going to be worth anything is ludicrous.” (Eli Campbell, 03:02)
  • Default on such scale would have a ripple effect on banks and investors, risking a wider systemic financial crisis:
    • “It would have a systemic effect on the economy. I mean, students are a very crucial card in this house of cards.” (Eli Campbell, 03:02)

• The Scale of Student Debt

  • U.S. student debt sits at $1.5 trillion—more than car or credit card debt, second only to mortgages.
    • “Student debt… is larger, the total of student debt, than all car debt… and significantly larger than all credit card debt.” (Richard D. Wolff, 04:48)

2. Political Dimensions—Who Built the System?

• Bipartisan Complicity
  • Both major U.S. political parties have supported policies that have deepened the crisis.
  • Obama-era income-based repayment plans were designed to ease payment in the short-term but extend debt's lifetime and increase overall interest paid.
  • The education system is criticized as repurposed to generate Wall Street profits:
    • “Both of the political parties have had a hand in turning our education system into a source of revenue, which is completely unethical and unsustainable.” (Eli Campbell, 05:52)

3. Lived Reality for Students

• Impact on Aspirations and Well-Being

  • Heavy debt forces students to compromise on their dreams and career paths:
    • “You can ask any student who has debt… they’ll give you an answer. And it’s probably not what they want to do… we have to sacrifice our dreams and our goals to make ends meet. And if it really is all just about making a profit for Wall street, it’s just sad.” (Eli Campbell, 07:48)
  • Links drawn to mental health crises among students (depression, suicide):
    • “Why is there such an epidemic of depression and suicide… these are not normal. None of this is normal.” (Eli Campbell, 07:48)
  • The debt crisis is framed as part of broader societal dysfunction, intersecting with issues like immigration and authoritarianism.

• Loss for Society

  • The system’s inefficiency: students' inability to pursue passions and maximize societal contributions is a “huge loss for the society as a whole.” (Richard D. Wolff, 09:48)
  • Germany highlighted as a positive example: tuition-free higher education for both citizens and foreigners is seen as an investment in society.
    • “In Germany this last year, all costs of higher education are zero. Not just for Germans, but they make it available to anybody… because they want to build their economy and their future.” (Richard D. Wolff, 09:48)

4. Consequences for Higher Education

• Shrinking Accessibility

  • Rising tuition, reduced support from states (case study: SUNY system post-2008 austerity).
  • The growing burden is pushing students out of higher education, threatening the very existence of institutions:
    • “Sooner or later students aren’t going to be able to afford it even with the loans. And that threatens our institutions of higher education.” (Eli Campbell, 13:25)

• Widening Inequality

  • System threatens to reduce higher education to a privilege for the wealthy:
    • “We are literally destroying the higher education system except for a small number of wealthy people who don’t care about these things.” (Richard D. Wolff, 12:39)

5. The Boycott as Catalyst

• Potential for Organized Action
  • If enough students and families refuse repayment, or if circumstances force mass default, this could provoke a necessary crisis:
    • “We’re talking about a boycott that may come not because it’s organized by folks like you, but because it is forced on people by the economy itself.” (Richard D. Wolff, 04:48)
  • This crisis could act as a "wake up call" to address the realities of the system.

Notable Quotes & Memorable Moments with Timestamps

• On the replication of 2008’s financial mechanisms:

  • “The idea here is very similar to what took place during the housing bubble in the early 2000s, where Navient Corporation… will create securities which are financial products that they can sell to investors made of student loan obligations.” (Eli Campbell, 01:13)

• On the ultimate risk:

  • “Students are a very crucial card in this house of cards.” (Eli Campbell, 03:02)

• On bipartisan responsibility:

  • “Both of the political parties have had a hand in turning our education system into a source of revenue, which is completely unethical and unsustainable.” (Eli Campbell, 05:52)

• On student choices and lost dreams:

  • “We have to sacrifice our dreams and our goals to make ends meet. And if it really is all just about making a profit for Wall street, it’s just sad.” (Eli Campbell, 07:48)

• On international comparison:

  • “In Germany this last year, all costs of higher education are zero. Not just for Germans, but they make it available to anybody… because they want to build their economy and their future.” (Richard D. Wolff, 09:48)

• On the future of education:

  • “Sooner or later students aren’t going to be able to afford it even with the loans. And that threatens our institutions of higher education.” (Eli Campbell, 13:25)

• Closing thought on the urgency for change:

  • “The crisis you in a sense want to provoke with such a boycott may be the wake up call needed to face a problem that is otherwise going to slowly erode the basis of the society.” (Richard D. Wolff, 14:25)

Important Segment Timestamps

• Student Loan Asset-Backed Securities Explained: 01:13–04:48
• Scale of U.S. Debt & Societal Risk: 04:48–05:52
• Political Origins & Repayment Policies: 05:52–07:15
• Lived Impact on Students: 07:15–09:48
• Consequences for Society & German Comparison: 09:48–11:22
• Higher Education’s Shrinking Reach: 12:39–13:25
• The danger and potential of a student debt boycott: 14:25

Tone and Language

The tone is critical, urgent, and sometimes somber, with both speakers highlighting the gravity of the crisis and its human costs. Eli Campbell presents passionate, personal insights, while Richard D. Wolff maintains a probing, explanatory approach, drawing systemic connections and historical parallels.

Summary Takeaway

This episode makes a compelling case that America's student debt crisis is not merely a private hardship, but a time bomb for the entire economic system. Through technical explanation, personal testimony, and international comparison, Campbell and Wolff connect the despair of indebted students to larger patterns of financial risk and social destabilization—arguing that unless confronted through dramatic action, such as a debt boycott, the crisis could end higher education’s accessibility and threaten economic stability itself.