Economic Update Extra: Eli Campbell

Summary

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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.

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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.

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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)

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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

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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.

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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.

Transcript

[A]

Welcome, friends, to Economic Update Extra. This is where we continue interviews and conversations from Economic Update. Make them available as a special service and as an appreciation for the Patreon community that is so supportive of us and about which we are very appreciative. I'm talking with Eli Campbell and I'm talking about student debt as a problem and the boycott of student debt as a movement of students and their supporters to deal with that. So, Eli, let's continue the conversation. And let me ask you, how will the boycott, if it happens, if it gets organized in the way you're trying to do, how will it affect the broader economy? I mean, it's understandable that it will help students and their families immeasurably to get and finish their educations and become educated contributors. But how is it going to impact the larger society? In the regular interview, you did tell us that it could confront the society with a crisis. You're aware of that. How do you imagine that might play out?

[B]

Well, one thing that I wanted to talk more about, but I didn't quite get to it in the original interview, is the student loan asset backed security, or slabs as they are called, wonderful little financial instrument. The idea here is very similar to what took place during the housing bubble in the early 2000s, where Navient Corporation, for instance, which is a student loan servicer, will buy student debt that mostly, I think Navient deals in publicly issued student debt issued by the government and insured by the government, actually. And they will create securities which are financial products that they can sell to investors made of student loan obligations. And so it's.

[A]

Let me interrupt you just to explain to the audience. What that means is that Navient sells to anybody a piece of paper that entitles that person who buys the piece of paper to a portion of what all the students are paying back. So each such a security has say 1,000 students or 10,000 students each of whom is paying back what he or she owes. And a portion of that is then given to the investor. It allows Naviant to be the servicer to pick up lots of fees in the process of doing this. But the actual risk that the students don't pay back, which you always have with a debt, is held by the people who bought that security who are hoping that they can get a lot more interest than other investments, but are taking the risk which they know that students will not pay back.

[B]

Yes, well, and there's a lot of. There's so much interesting minutia involved in this. I mean, for instance, all of the student loan asset backed securities have an underwriter. And my understanding of this is that means that like a bank like Goldman Sachs or Wells Fargo or JP Morgan will, in the event that Navient can't sell all of the slabs, the banks will foot the bill and buy the remaining portions of it. So the potential here for devastation is really significant. I mean, if there were, and if there were, when the default crisis happens with student loans, because I mean, the Brookings Institute released a report, I think last year saying that 40% of student borrowers will probably default before 2023. And you've got these slabs have maturity dates of like 2056. I mean, the idea that these things are going to be worth anything is ludicrous. And if there was a crisis where the value of these assets was in question and the rating agencies had to make decisions about the ratings of the assets, it would have severe impact to all of the banks that have these student securities, all of the investors. It would have a systemic effect on the economy. I mean, students are a very crucial card in this house of cards.

[A]

Yeah. I should remind people who may not be aware, as I know you do too, that student debt, now roughly one and a half trillion dollars, is larger the total of student debt than all car debt, all the debt accumulated by people who buy cars. And it's significantly larger than all credit card debt. So we're not talking about a small part of the story. There are basically four kinds of debt. Mortgage, automobile, student and credit card. And student is number two right after mortgages. And therefore this is a significant impact. And if there were an economic downturn and large numbers of student families could no longer support their students and can't accumulate more debt either, then the question is, are you going to be able to collect debt from students whose educations you've made it impossible for them to continue. 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.

[B]

Well, and one of the, one of the reasons that we should be hesitant to, in the face of the current administration and the Republican Party to accept the Democratic Party is that we should look at the history of student loans and realize that a lot of these changes that made it harder for students over the long term, but, but easier in the short term. For instance, the income based repayment plans were created under Barack Obama's administration. Democratic Congress passed these rules right around the time that they passed the Affordable Care Act. There's this new Thing that a lot of students are in income based repayment plans. Now, what that does, instead of paying say $300 a month, you can pay a portion of your income, which for most of us is a pretty small amount of money, which is nice in the short term, but over the long term, it stretches out the life of that loan so you'll never pay back the full loan. You're just going to be paying the interest. And ultimately, 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.

[A]

Let me ask you, just as a student yourself, what is the impact? How would you describe what it means to a student as he or she goes through their studies and plans their career to be loading up with, we now know, on average, tens of thousands of dollars of a debt that they're going to then have to carry through an indefinite period of their life? What's the impact of it? Help the audience that isn't students get a sense of what this does.

[B]

Well, I think just given that context, I hope that people can understand what a lot of that means to students, but in a very serious way. You can ask any student who has debt what, what their plan is, what their goal is, and they'll give you an answer. And it's probably not what they want to do, it's probably not what they dreamed of doing, it's probably not what they went to college to do, but they have to make ends meet somehow. And it's really, 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. I mean, more than anything else, it is. There's, I mean, why is there such an epidemic of depression and suicide and just all of the symptoms of our society that we're seeing right now? I mean, these are not normal. None of this is normal. And it' sydon't know if you want to call it fascism, I don't know what you want to call it. But when you have these kind of circumstances and then at the same time you have someone like Trump who's blaming immigrants and ICE is breaking up thousands of families right now. I mean, this is serious. And if students, it's maybe a solution to our problems, but also a relief from our suffering ourselves, we might be able to change things. If we use this leverage we have, we might be able to start something new other than whatever it is we're seeing right now.

[A]

I still Want to stay for a minute with the other issue? I think it's very powerful, what you just told us, that if people have dreams and passions about certain kinds of studies and certain kind of career that goes with those studies, then it's reasonable to assume that if they have the chance to do that, they will excel. They will get more of a contribution to society because they love what they do. They. They studied it with the commitment that goes with learning, so that if the loan takes people away from that, they can't go another year to get that degree or to take those courses or to specialize, then we are losing for the society as a whole, contributions that are much larger in their impact than what it would cost to do without these stupid loans in, in the first place. And then I'm also caught up with having just learned recently that in Germany this last year, all costs of higher education are zero. Not just for Germans, but they make it available to anybody else who isn't a German who comes to a German university. They'll have to pay their room and board, but the tuition and the. All taken care of because they want to build their economy and their future. And they see education as a way to do that. Well, what's happening that we're losing out in this way? How do you, as a young person, how do you account for that?

[B]

Well, it's the capitalist system working the way it was intended to work. But now it's experiencing a bit of difficulty, as I'm sure you can explain better than anyone. It's what happens when you run a society for profit. It can't work forever. And I think we're seeing the end of the line in a lot of ways for people like Betsy DeVos. These people are scared because they realize that the world is changing and they're trying desperately to hold on. I mean, Rex Tillerson, all these people that have, they've built careers on, having no concept of the suffering that they're imposing on future generations. Trump, I mean, I've heard you compare him to the Louis of France. I mean, these. He really thinks that he is going to. You know, he probably thinks Barron's going to be president someday. He's going to appoint lots of Trumps to offices and they're going to. Trumps are going to keep serving.

[A]

And.

[B]

It would be funny if it weren't so dangerous.

[A]

Are there students? I guess this is a difficult question. I'm beginning to wonder, as I listen to you, whether we're going to have students increasingly with their parents and so on, looking at an education and saying, I'm not going to go to college, I'm not going to do it. The difficulties, the prices, the debts on top of it, the endless vista of being trust trapped. I can't. It's not just that I can't study what I love, but I can't get married, I can't have children, I can't have. And so we are literally destroying the higher education system except for a small number of wealthy people who don't care about these things.

[B]

Well, and that's the logical conclusion of a general policy of austerity that we've seen. I mean, since the financial crisis, I know in New York, the SUNY system has experienced major budget cuts from the state and that's why tuition has gone up so much. Because it used to be, I think, something like 30, 70, where the state was funding the majority of the programs and the funding that was needed. And since the crisis, that's shifted. Now it's the other way around and students are taking more of the burden. And as you point out, that's the only thing it's going to lead to is that 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. They're not going to be able to keep their doors open if they don't have a continuous stream of people willing to take on these debts. And I'm very worried about it.

[A]

And it seems to me it's a wonderful story to tell because it means that 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. Thank you again, Eli Campbell. I hope you enjoyed another economic update Extra. That's why we produced them. And thank you again. The Patreon community is an important support for all of what we do. And, and it is our pleasure to present these economic update extras for you.