Debt is a permanent feature of most of our lives. Yet the socialization of risk debt represents isolates individuals, locking us in the private misery of our dealings with banks and creditors. Medical debt, student debt, consumer debt, foreclosures -- these social forms mark so many personal failings and moral obligations, we are told. Debt, in other words, not only insures our continued servitude to the corporate pursuit of dwindling private profits. It also serves to alienate us from one another, and foreclose the possibility of collective resistance. Debtors’ Assemblies, then, are a first step in fighting back to reclaim our stolen futures. Please join us Wednesday, October 24th from 5-6 in front of California Hall for the first in a series of weekly Debtors’ Assemblies to learn more about the many forms of debt and discuss ways to resist debt’s claim upon our lives. Robert Meister will speak briefly at the beginning of the first assembly.

Fantastic interview on austerity at the UC. Covers all the bases: Bob Meister's "They Pledged Your Tuition," construction bonds and rating agencies, pepper-spray cop, the Davis Dozen, student debt...

On November 10th at 1am, the following proposal was adopted by the Occupy Cal general assembly:

After a mass rally and march of over 3,000 people, and repeated police assaults on the encampment, the Occupy Cal general assembly decided on the night of November 9th -- with over 500 votes, 95% of the assembly -- to organize and call for a strike and day of action on Tuesday, November 15 in all sectors of higher education. We will strike in opposition to the cuts to public education, university privatization, and the indebting of our generation.

We also call for simultaneous solidarity actions in workplaces and k-12 schools. We will organize through daily, 5pm strike planning meetings at our encampments, followed by general assemblies.

The following is meant as an analysis of the context, aims, and possible effects of the general higher education strike and day of action.

What occurred yesterday on campuses around the state, including at UC Berkeley, made real the antagonistic relations that shape the lives of students and academic workers. When university administrators and police repeatedly brutalized assembled workers, students, and debtors at large, such relations -- of exploitation and precarity -- were cast into sharp relief.

We did not back down, nor did we shy from an encounter with the forces that manage our lives and profit from our indebtedness. We held our ground when the police attacked our assemblies and encampments; then, after securing a space for assembly, we decided collectively to counter the Regents and the financial industry -- those responsible for privatizing our educational commons and resegregating our schools -- with one of our most effective tactics: our refusal to work and to attend classes.

We know that our relatively local acts of resistance and refusal will only have transformative force if they are embedded in a larger political disruption, a strike and day of action across all sectors of higher education, tied to sympathy strikes and actions in workplaces and schools. This is why we have called for a general higher education strike -- a strike throughout an entire economic sector and sphere of public life.

We understand that a fully realized general higher education strike is not likely to materialize next Tuesday. And yet, we take inspiration from last week's general strike in Oakland, and believe that a relatively generalized work stoppage and walkout is possible. By pushing for widespread mobilizations next Tuesday, we will build support for the convergences of the 16th and will further expand and strengthen our bonds of solidarity and mutual care.

****

For an account of how the Regents and financial industry profits off our indebtedness, see the recent pamphlet from Reclamations: "Generation of Debt."

In solidarity with the #OccupyColleges walkouts taking place today across the country.

The Reclamations Journal folks have just released an educational and agitational pamphlet on student debt. Below are some passages from the text, but it's really worth reading the whole thing -- I don't think I've read another single compilation or text that so effectively outlines the devastating current realities of student debt, how these realities are centrally related to broader economic conditions and crises, and what can be done to resist student debt and its effects...

***

Generally speaking, debt is a collective phenomenon suffered individually. Our monthly loan statements are like nineteenth century serialized novels—mass reading material, anticipated by all but read alone. When experienced in this way, by dispersed individuals, debt appears to be merely a fact of life; a kind of required reading material. It can be nearly impossible then to imagine how our personalized loan statements or individual defaults could be fought in a way that forges bonds between us. How loans could produce more than isolating shame, anxiety, and loss. Or how, in a word, we could collectivize struggles against indebtedness and unemployment, and in doing so open the horizon of our futures.

-- Amanda Armstrong, Insolvent Futures / Bonds of Struggle

Today, student debt is an exceptionally punishing kind to have. Not only is it inescapable through bankruptcy, but student loans have no expiration date and collectors can garnish wages, social security payments, and even unemployment benefits. When a borrower defaults and the guaranty agency collects from the federal government, the agency gets a cut of whatever it’s able to recover from then on (even though they have already been compensated for the losses), giving agencies a financial incentive to dog former students to the grave.

When the housing bubble collapsed, the results (relatively good for most investors, bad for the government, worse for homeowners) were predictable but not foreordained. With the student-loan bubble, the resolution is much the same, and it’s decided in advance.

-- Malcolm Harris, Bad Education

Federal student loans originate in the National Defense Education Act of 1958. These loans were, on the advice of noted neoliberal architect Milton Friedman, direct federal loans to students that by-passed institutional control: through this, Friedman intended to direct more federal dollars to private institutions as a means to discipline and eventually privatize public education (Federal Education Budget Project). While a necessary first step, the design flaw in this program was that any direct federal loan showed up as a loss on government balance sheets even though the loan would no doubt be repaid in the future – with interest. To get around this, the government instead began guaranteeing loans to students by private financial houses: in essence privatizing an enormous chunk of federal largesse.3 With the dramatic decrease in federal funding to institutions themselves in favor of loans and grants – as mandated by HEA - the stage was set for institutional competition and the explosive growth of college tuition as the market would now determine education’s worth.

-- Mark Paschal, A Framework for Student Debt

Building a student loan debt abolition movement also requires that we reframe the question of the debt itself. A first step must be a political house cleaning to dispel the smell of sanctity and rationality surrounding debt repayment regardless of the conditions in which it has been contracted and the ability of the debtor to do so. Most important, however, from the viewpoint of building a movement is to redefine student loans and debts as involving wage and work issues that go to the heart of the power relation between workers and capital. Student debt does not arise from the sphere
of consumption (it is not like a credit card loan or even a mortgage). To treat student loans as consumer loans (i.e., deferred payment in exchange for immediate consumption of a desired commodity) is to misrepresent their content, making invisible their class dimension and the potential allies in the struggle against them.

Student debt is a work issue in at least three ways:

i. Schoolwork is work; it is the source of an enormous amount of new knowledge, wealth and social creativity presumably benefiting “society” but in reality providing a source of capital accumulation. Thus, paying for education is, for students, paying twice, with their work and with the money they provide.

ii. A certificate, diploma, or degree of some sort is now being posed as indispensable condition for obtaining employment. Thus the decision to take on a debt cannot be treated as an individual choice similar to the choosing to buy a particular brand of soap. Paying for one’s education then is a toll imposed on workers in exchange for the
possibility, not even the certainty, of employment. In this sense, it is a collective wage-cut.

iii. Student debt is a work-discipline issue because it represents a way of mortgaging many workers’ future, of deciding which jobs and wages they will seek and their ability to resist exploitation and/or to fight for better conditions (Williams).

-- George Caffentzis, The Student Loan Debt Abolition Movement in the US

Generation of Debt Final

A version of this article was recently published in the UCSC Disorientation Guide. We repost it here because we found it to be a very useful resource: a history of the UC from the perspective of austerity that collects and synthesizes a lot of otherwise dispersed data. Give it a read, and check out the rest of the disorientation guide as well.

As you go from class to overcrowded class this fall, you’ll want to forget that tuition last year was around $1,800 less than you’re paying now. Continuing a 30-year trend, the UC Board of Regents gathered in cigar and gin-soaked boardrooms over the summer to raise our tuition by 17.6% and lay down plans for further increases in January, or maybe just raise tuition 81% over the next 4 years. (Hey, overcrowding at least improves your chances of getting lucky; tuition hikes on the other hand, just increase the probability of working a shitty job in college and plenty of debt after). The UC Office of the President (UCOP) never tires of reminding us that tuition increases are the recession’s fault or scolding us that Californians are just unwilling to spend on education in hard times; this is a strange excuse though, since state funding has been decreasing while tuition has been skyrocketing since the early 1990s. Even while UCOP continues to whine about how poor it is and how unfortunate it is that they need to raise tuition, it’s offering the state of California a billion dollar loan from UC financial reserves. As it happens, in 9 of the past 10 years tuition was raised – well before the 2008 recession began; UCOP’s insistence on the necessity of this recent series of tuition increases has so many logical fallacies that if it were an assignment, it’d get an F (assuming, of course, that the overburdened TA grading it even had time to pay attention to it). Tuition hikes and budget cuts – at all levels of California higher education – are part of the decades-long process whereby the richest assholes in California (and the greater US) intend to make private what few institutions remain in public hands.

The other day, we wrote a brief post on the renovation of Lower Sproul Plaza at UC Berkeley, reading it (following Bob Meister's now classic exposé) as yet another capital project funded by UC construction bonds that are, for their part, backed by student tuition. Mostly we were interested in the way UC administrators imagined their accountability to the students who increasingly "foot the bill" for pretty much everything the university does, and we didn't get into the technical details of the project because, well, we aren't so great with that kind of stuff.

Fortunately, it turns out we didn't need to. After a brief back-and-forth in the comments of that post, Zach Williams has written an incredibly useful and detailed investigation into the funding mechanisms for this particular project. Think Charlie Schwartz with a killer instinct. Williams's analysis is not only useful for understanding this particular case, but more generally it serves as a framework or methodology for understanding UC capital projects, for seeing through the obscure complexity of these financial deals. This complexity offers the UC administration another rhetorical weapon to be deployed in its war on students and workers. We're going to post the conclusion here, but we highly recommend reading the full post:

The Lower Sproul renovation is funded, almost entirely, by payments from the students, despite University protestations to the contrary. . . .

13 million is from campus funds -- some of which is sourced from student fees, though not student tuition.

200 million is externally financed. This 200 million in financing is backed by two sources:

1. 112 million in special student fees, proposed and approved by the students themselves.
2. A General Revenue Bond

So, half of that external financing (which is, if you recall, nothing other than a general revenue bond, though it may be a federally subsidized one) will be financed by . . . another general revenue bond. The rest will be footed by a sort of ‘complicit in one’s own domination’ decision by the ASU to help turn a basic safety retrofit into a project to increase space for students, student organizations, and student run revenue streams.

And that general revenue bond will be financed by student fees. Quite clearly, none of the 35% of funding from grants is going to this capital project. Rather, it will be financed entirely from auxiliary and student fees. And the bulk of auxiliary fees are . . . oh, right, student fees.

So, let’s list no bullshit sources of revenue for this project.

1. Student fees (campus funds)
2. Student fees (special student fee)
3. Student fees (registration fees)
4. Student fees (auxiliary fees from housing, dining, parking, and so on)

We talk a lot here about construction and debt, about the UC administration's addiction to using student tuition -- and the promise of future tuition increases -- as collateral to finance the sale of construction bonds. That's classic Meister. But it's important to remember that the UC's corporate management uses tuition in other ways as well. Remember, for example, how a couple days ago the state government asked the UC to loan it $1.7 billion, while the UC regents are once again raising student tuition at the exact same time? (The regents just officially approved the 9.6 percent additional tuition increase, on top of the 8 percent that had already been approved. So tuition will officially increase by 17.6 percent this fall.) Bob Samuels explains:

As we get ready for another large tuition increase, and we read about the elimination of several UC degree programs, the bond rating agency, Fitch, has re-affirmed the university’s strong fiscal standing. While the bond raters have been wrong in the past, we can still read the latest analysis of UC’s fiscal health as indicating the real priorities of the administration.

Since the UC has decided to help reduce its pension liability by selling about $1 billion of commercial paper (debt), it has asked to have its financial status rated. As I have argued in the past, due to the UCs high level of debt, it is dependent on getting a high rating from the bond raters so that it can receive a low interest rate, and one result of this dependency on debt is that the bond raters can tell the university how they think the system should structure its finances. Moreover, even though the bond raters pretend to be neutral and free of any ideology, they covertly push the same agenda that we find in the World Bank and the International Monetary fund. This agenda pushes for the privatization of public entities, a taking on of huge debts, and the deregulation of markets. The plan for the UC set out by Fitch is thus in many ways the global plan being pushed by conservatives and bond raters.

In reading the summary of Fitch’s report, we learn that the university has received a high rating because of, “UC's substantial level of balance sheet resources and liquidity; diverse revenue base, which enables the system to weather temporary weakness in any one funding source; and manageable debt burden, despite the expansive, capital intensive nature of its operations.” In other words, UC has many different revenue streams, and although it has a high level of debt, over $14 billion, it has the resources to take care of its financial obligations.

According to Fitch, one of the main signs of UC’s fiscal health is its ability to constantly raise tuition: “Recent reductions in state appropriations, and the potential for additional cuts through the intermediate term, are partially mitigated by the university's still considerable, though now more limited, ability to raise tuition and fees, and its overall limited reliance on state operating support.” In other words, the UC should not worry too much about losing state funds because it has shown a willingness to raise tuition. In fact, this same logic of privatization is driving the state’s reduction of funding for the UC; since the Democrats believe they cannot raise taxes, they cut the UC, which they know will turn around and raise tuition.

Not only does the state feel comfortable reducing the university’s funding, but they are planning to borrow another $1 billion from the UC system, and the reason why the administration will accept this deal is that the university will turn a profit by lending money to the state. This deal make sense on paper because due to UC’s high bond rating and the state’s low rating, the state has to pay a higher interest rate to borrow money, and if the UC lends money, the state can improve its bond rating, and the UC can profit from the difference between its low interest rate and the state’s high interest rate.

What is left out of this equation is that students are paying 6.8% to take out their loans, and these loans not only allow the UC to raise tuition, but the money generated from tuition can be leant to the state at something like 5%, which is better than the 2-3% the UC gets from putting tuition dollars into its Short Term Investment Pool. If we connect the dots, we see that students are lending money to the state, so that the university can bring in more money, but the end result is that the students will have to pay for this interest deal.

The UC administration and the regents, as dettman put it yesterday, "are simply another mechanism by which the state plunders the middle class to feed the rich."

From the Sacramento Bee:

The state wants the ability to borrow $1.7 billion from the University of California and California State University after slashing nearly a quarter of state funding for the beleaguered systems.

Legislation moving through the Capitol with scant notice, Senate Bill 79, would establish a new investment fund for UC, CSU, California Community Colleges and the Judicial Council. If necessary, the state could use that money to retire short-term loans from Wall Street or pay bills, while giving the universities above-market interest rates until a future payoff date.

UC plans to transfer $1 billion of cash reserves into the fund, while CSU will shift $700 million, according to officials at the two systems. The deal does nothing to relieve CSU or UC of the $650 million in cuts each system will absorb under the budget enacted nearly two weeks ago.

Gov. Jerry Brown's Department of Finance and Democratic lawmakers said AB 79 is necessary to persuade Wall Street to lend California money at competitive rates. Each year, the state receives the bulk of its tax revenue in the second half of the fiscal year and must borrow until then to pay bills.

Robert Turnage, CSU assistant vice chancellor for budget, said his system maintains about $2 billion in total short-term reserves. The money normally earns 0.5 percent interest with private managers.

Turnage believes CSU could earn 1.5 percent interest under the state deal. That would be a full percentage point above what the state now provides to other public agencies in the state's $66 billion Pooled Money Investment Account.

Asked why CSU isn't using the $700 million to offset fee hikes, Turnage said, "The budget cut that was just delivered by the Legislature is a permanent cut in our base funding from the state … If we were to draw down our short-term investment pool to avoid other steps like a fee increase, then we would have another hole next year."

In the words of a comrade, they pledged your tuition . . . to fund the prisons.

A few months ago, we wrote about a number of construction projects that are on the horizon at the UC and specifically about the way these projects are funded. As usual, the UC sells its highly rated construction bonds to raise the capital to carry them out. And ever since Professor Bob Meister published his now-infamous essay "They Pledged Your Tuition," we've known that student tuition, along with the promise of future tuition increases, are critical to the university's ability to maintain its high bond rating. As he wrote in the fall of 2009, "since 2004, UC’s highest priorities have been set by bond raters, and not by the State of California."

To be fair, sometimes there are other sources of revenue, but these cases are the exceptions. One of the examples we cited in the earlier post was the development project in Lower Sproul Plaza at UC Berkeley. The reason it came up at the time was that, even before the project had gotten underway, it had already gone $10 million over budget. Funding for that project comes, as the Daily Cal reported, from "contributions from the campus, the UC Office of the President and student fees approved . . . in the 2010 ASUC General Election." As we wrote at the time:

In other words, not only are students paying directly for the project -- after all, we voted for it! Democracy in action! -- we're paying for it indirectly as well, through tuition increases that have already taken place (that money goes into the general fund) and the promise of future tuition increases that the UC now owes the bond raters.

Today, the Daily Cal reports that this same construction project, which will take many years to complete, is already showing a negative cash flow. The article draws on a presentation given by an outside consulting firm, Brailsford & Dunlavey, which is based in Washington, DC. (It's not entirely clear how much the firm is charging for its services, but it's possible that we might be seeing a repeat of the scandalous Bain & Company contract worth $7.5 million.)

The consulting firm's presentation is noteworthy, though not in the sense that Messrs. Brailsford & Dunlavey were hoping for. For example,

A deficit as high as $800,000 may occur between 2019 and 2022, after an expected bump in revenue due to increased student fees in 2018, according to the presentation.

Either the consultants are privy to information about future tuition increases that the rest of us aren't or they're just making shit up (in which case why is UC Berkeley hiring them?). It's important to remember that privatization is not a response to immediate crisis but a long-term strategy. Tuition hikes, it appears, are plotted out years in advance. While they are adjusted to take immediate political concerns into account (like state budgets, for example), these adjustments are little more than slight deviations here and there from the original projections. [Update 7/12 10am: Our mistake. The comment below is correct on this point, that the fees in question are not actually tuition but rather the student fees approved in the vote. However, this doesn't change the fact that the construction project is still financed through multiple sources, including the sale of construction bonds backed by student tuition as collateral. In any case, you can find the schedule for increased student fees for the project here. Further update 7/14 12:39pm: For a full discussion of what the vote actually approved, and why the earlier comment isn't exactly right, check out the comment from Zach Williams below.]

But most important are the comments from Assistant Vice Chancellor for Physical and Environmental Planning Capital Projects Emily Marthinsen:

“If the students are footing the bill for things that are not only the students’ responsibility, then those things have to be very defensible,” Marthinsen said.

If the students are footing the bill... From her isolated office in the A&E Building, Marthinsen can't understand the full implications of her words. Because what Meister shows us is that as students we foot all the bills: "Because UC pledges 100% of tuition to maintain its bond rating, it has also implicitly assured bond financiers that it will raise your tuition so that it can borrow more. Since 2004, UC has based its financial planning on the growing confidence of bond markets that your tuition will increase." Defensibility, furthermore, performs an interesting function here. What administrators find defensible is obviously not defensible for the rest of us -- students, workers, faculty, those of us who use the university. But beyond that, the logic of defensibility is the logic of the liberal technocrat, the enlightened bureaucrat who cannot be held accountable for decisions and as such offers little more than explanations and well-formulated "defenses" -- at best -- that lock the rest of us into decades of debt.

From our perspective, however, the administration's drive toward privatization is simply not defensible. There is little use in appealing to their hearts or letter-writing campaigns or attending glossy presentations by highly-paid consultants. These are the administration's bureaucratic fortresses, sites designed specifically to be highly defensible. And paradoxically, our participation only makes them stronger.

The following statement was distributed last night during the Anticut 1 action last night:

Now that the banks have been bailed out and the rich treated to yet another tax cut, our libraries and schools, already devastated, are once again on the chopping-block, while our elderly and poor are turned out on the street. Heavily armed cops with increased powers roam our city’s streets, threatening anyone who steps out of line. Times have never been better, in other words, for the rich.

It’s not as if things weren’t already pretty bad. Each one of us is a casualty of the economy, in one way or another -- jobs that pay next to nothing or no jobs at all, rent that keeps increasing, gas prices that double overnight, student loans we’ll never be able to pay back. But what is most distressing of all is how little we are able to do about this, how little control we seem to have over these things. Perhaps, though, our lack of control is not so complete. On nights like this, with all of us in the street together, we remember that when people number in the hundreds and the thousands they can do nearly anything. Laws, it seems, apply to individuals, not crowds.

In Oakland, of course, the legacy of Black Panthers remains inescapable. The Panthers, we remember, were not merely indignant. They did something about it. They organized themselves. They did not simply petition the ruling powers for more resources but took what they needed, as necessary. And what the state couldn’t provide, they would. This is the meaning of their Free Breakfast programs for school children, their Free Clothing programs, their libraries and crossing guards. So, we understand that the decision-makers will never give us what we want because it’s not something they can give. And although the street is merely a small portion of what we must reclaim, it’s a crucial start. Without this public space for us to meet each other and organize, outside of our homes and jobs, nothing could even begin to happen.

So, tonight, we are in the streets in resistance. We will be here until we no longer need to be.

Our second march, Anticut 2, meets on June 17th in the afternoon. For more specific info, check out BAYOFRAGE.COM

Here's a halfsheet PDF version for printing.

[Update Sunday 7:34 pm]: For more information about the action, check out this reportback which includes some photos.

First, this article from last Friday that our compañeros at thosewhouseit caught as well. In it, UC President Mark Yudof declares that tuition could double if no tax increases are incorporated into Governor Jerry Brown's budget:

UC President Mark Yudof had a simple message to deliver Friday morning when he testified before the state senate's budget committee: If the legislature opts for an all-cuts budget to fill its remaining $15.4 billion deficit, "all bets are off" at the University of California.

If the $500 million cut already made to the university earlier this spring were to double to $1 billion under an all-cuts budget, Yudof said the 10 campus system would be put on a path that could lead to a mid-year tuition increase next January, employee layoffs, program closures throughout the university and -- ultimately -- a doubling of tuition to $20,000 a year.

[...]

Friday's committee meeting marked the first time Yudof has publicly acknowledged what the consequences of a $1 billion cut could look like, though Gov. Jerry Brown had predicted in April that tuition could rise to $20,000 or $25,000 under an all-cuts plan. Yudof agreed, saying to the committee that he had looked at the numbers until he was "blue in the face" and that "the governor is not far off in his prediction."

At this point, it's hardly news that the state has cut funding for higher education -- they've been doing it for decades. But this isn't about speaking out against cuts. It's about positioning. Yudof testified to the state senate's budget committee that "the system can absorb the initial $500 million cut" -- the one that has already been programmed into the UC budget for this year -- "but if the state increases the size of the cuts the university will have little choice but to raise tuition 'geometrically' and cut services." In addition to erasing the violence of austerity ("Don't worry about it, we'll be fine... as long as you only cut $500 million." Um, really?), this strategy charts a path of rhetorical retreat. Obviously this isn't a rousing defense of public education. But it leads to another danger: every time the budget is cut, it's a "disaster"... until the cuts go through. At that point it becomes the new normal. In effect, it represents an attempt to limit political struggle to a relatively minor question about what's currently on the table -- everything else simply disappears.

Now take a look at this article published in today's paper. It reports on the results of an audit of UC finances that shows the system's increasing liabilities relative to its assets. Of course, the UC administration isn't having any of it. UC spokesperson Steve Montiel, always ready for a vapid soundbite, tells the paper that "financially, the university is pretty strong." Thanks, Steve. But then we get this:

The report also states that capital spending -- funding that goes towards long-term assets that help in the production of future goods and services -- throughout the UC continues at a "brisk pace" in order to provide the facilities necessary to support the university's teaching, research and public service mission and for patient care.

Facilities include academic buildings, libraries, student services, housing and auxiliary enterprises, health science centers, utility plants and infrastructure and remote centers for educational outreach, research and public service.

[...]

Additionally, in 2010, $2.8 billion of debt was issued to finance and refinance facilities and projects at various UC campuses, though the report did not specify those projects.

Wherever there's a budget crisis, there's capital projects. The Daily Cal does an interesting job of translation here, with that little clause to tell us what "capital spending" is: it's spending, they say, that leads to accumulation. Another way of saying it would be it's spending that transfers the burden of debt from the university to the student. As Bob Samuels recently wrote, "In this modified credit swap, students are forced to take out subprime student loans, often charging 6 per cent interest, so that the university can borrow money at a reduced rate." And then there's that short sentence at the bottom on construction bonds, the debt issued by the UC to engage in further construction projects. Another $2.8 billion. And as usual there's little transparency -- no mention of where that money is going. Will it be used to pay for important renovations? Or new stadiums and laboratories? All we can do is guess, but at this point we have little reason to trust the UC administration's word on any of this. [Update Wednesday 5/11: The Chronicle just published a relevant article on the UC's maintenance backlog: "the university predicts it will need nearly $2 billion over the next five years to address capital renewal and deferred maintenance." There's not much analysis in the article about why this is the case, but it does note: "Money for capital projects at UC or CSU is often earmarked for specific projects, such as the $321 million bond for renovation of Cal's Memorial Stadium. None of that money can be used, for example, to repair the stairwell at the life sciences building." But presumably the administration could sell bonds dedicated to repairs -- the real question is why they don't. But in reality it's not much of a question at all.]

Once again, Steve Montiel: "'We've got great ratings services. The university has really high ratings from many ratings services,' Montiel said. 'I don't know there is any need to reduce liability.'" What ratings is he talking about? Bond ratings. As Bob Meister wrote back in October 2009,

Why haven’t you been told that UC has been using your tuition as collateral to borrow billions of dollars? The obvious reason is that tuition increases are justified (to you) as a way to pay instructional expenses that taxpayers refuse to pay. If that’s why they’re being imposed, it’s natural to assume that tuition increase will be used to minimize cuts to education. But when UC pledges your tuition to its bond trustee (Bank of NY Mellon Trust), it’s really (legally) saying that your tuition doesn’t have to be used for education, or anything in particular. That’s why it can be used to back UC construction bonds, and why the growth in tuition revenue, as such, is enough to satisfy UC’s bond rating agencies (S&P and Moody’s), whether or not UC can pay its bills. The effect of UC’s pledge is to place a new legal restriction on the use of funds that it must first say it could have used for anything, including education. Thereafter, construction comes ahead of instruction.

Some of UC’s new, and self-imposed, constructions costs will come off the top of its annual budget, despite this year’s “extreme financial emergency.” When UC chose t0 take on $1.35B in new construction debt for 70 projects in August 2009 -- one month after imposing employee furloughs that “saved” $170M -- it committed to spending $70-80M in extra interest payments for years into the future -- they’ve just released the interest rates for each new bond series. Earlier in the year, UC had already issued $.8B in tuition-backed bonds in spring 2009, only some of which were for refinancing older projects at lower interest rate. It’s thus likely that the interest due on new projects funded during 2009 alone will have eaten up more than half of UC’s “savings” from the furloughs. Would the furloughs have been “unavoidable” if UC were not secretly planning to incur additional interest expenses for new bond-funded construction?

Note that the graphic above shows that $2.5 billion of the UC's short-term liabilities are classed as "securities lending collateral." We're not entirely sure what this means, but it might refer to the $2.8 billion in construction bonds mentioned by Montiel. Why the $300 million difference?

Now that we once again have the UC administration's obsession with construction over instruction in mind, take a look at another article out of today's Daily Cal. This one is about the ongoing process of developing a plan for renovating and redesigning Lower Sproul Plaza at UC Berkeley, a project that's budgeted at $223 million. And guess what:

As the exact design of the new Lower Sproul Plaza continues to form, an estimate of the cost for the current design is over budget by about $10 million.

The money for the project comes from a number of sources: "contributions from the campus, the UC Office of the President and student fees approved . . . in the 2010 ASUC General Election." In other words, not only are students paying directly for the project -- after all, we voted for it! Democracy in action! -- we're paying for it indirectly as well, through tuition increases that have already taken place (that money goes into the general fund) and the promise of future tuition increases that the UC now owes the bond raters.

This isn't about budget cuts -- it's about priorities.

Malcolm Harris looks at the student debt bubble in N+1:

The Project On Student Debt estimates that the average college senior in 2009 graduated with $24,000 in outstanding loans. Last August, student loans surpassed credit cards as the nation’s largest single largest source of debt, edging ever closer to $1 trillion. Yet for all the moralizing about American consumer debt by both parties, no one dares call higher education a bad investment. The nearly axiomatic good of a university degree in American society has allowed a higher education bubble to expand to the point of bursting.

Since 1978, the price of tuition at US colleges has increased over 900 percent, 650 points above inflation. To put that in number in perspective, housing prices, the bubble that nearly burst the US economy, then the global one, increased only fifty points above the Consumer Price Index during those years. But while college applicants’ faith in the value of higher education has only increased, employers’ has declined. According to Richard Rothstein at The Economic Policy Institute, wages for college-educated workers outside of the inflated finance industry have stagnated or diminished. Unemployment has hit recent graduates especially hard, nearly doubling in the post-2007 recession. The result is that the most indebted generation in history is without the dependable jobs it needs to escape debt.

What kind of incentives motivate lenders to continue awarding six-figure sums to teenagers facing both the worst youth unemployment rate in decades and an increasingly competitive global workforce?

During the expansion of the housing bubble, lenders felt protected because they could repackage risky loans as mortgage-backed securities, which sold briskly to a pious market that believed housing prices could only increase. By combining slices of regionally diverse loans and theoretically spreading the risk of default, lenders were able to convince independent rating agencies that the resulting financial products were safe bets. They weren’t. But since this wouldn’t be America if you couldn’t monetize your children’s futures, the education sector still has its equivalent: the Student Loan Asset-Backed Security (or, as they’re known in the industry, SLABS).

SLABS were invented by then-semi-public Sallie Mae in the early ’90s, and their trading grew as part of the larger asset-backed security wave that peaked in 2007. In 1990, there were $75.6 million of these securities in circulation; at their apex, the total stood at $2.67 trillion. The number of SLABS traded on the market grew from $200,000 in 1991 to near $250 billion by the fourth quarter of 2010. But while trading in securities backed by credit cards, auto loans, and home equity is down 50 percent or more across the board, SLABS have not suffered the same sort of drop. SLABS are still considered safe investments—the kind financial advisors market to pension funds and the elderly.

With the secondary market in such good shape, primary lenders have been eager to help students with out-of-control costs. In addition to the knowledge that they can move these loans off their balance sheets quickly, they have had another reason not to worry: federal guarantees. Under the just-ended Federal Family Education Loan Program (FFELP), the US Treasury backed private loans to college students. This meant that even if the secondary market collapsed and there were an anomalous wave of defaults, the federal government had already built a lender bailout into the law. And if that weren’t enough, in May 2008 President Bush signed the Ensuring Continued Access to Student Loans Act, which authorized the Department of Education to purchase FFELP loans outright if secondary demand dipped. In 2010, as a cost-offset attached to health reform legislation, President Obama ended the FFELP, but not before it had grown to a $60 billion-a-year operation.

Even with the Treasury no longer acting as co-signer on private loans, the flow of SLABS won’t end any time soon. What analysts at Barclay’s Capital wrote of the securities in 2006 still rings true: “For this sector, we expect sustainable growth in new issuance volume as the growth in education costs continues to outpace increases in family incomes, grants, and federal loans.” The loans and costs are caught in the kind of dangerous loop that occurs when lending becomes both profitable and seemingly risk-free: high and increasing college costs mean students need to take out more loans, more loans mean more securities lenders can package and sell, more selling means lenders can offer more loans with the capital they raise, which means colleges can continue to raise costs. The result is over $800 billion in outstanding student debt, over 30 percent of it securitized, and the federal government directly or indirectly on the hook for almost all of it.

Read the whole thing here or below the fold, if you want to see UC Regent Richard Blum's special cameo appearance... [Update Tuesday 8:56 am]: Now there's a version with links here.

The New York Times reports today:

Student loan debt outpaced credit card debt for the first time last year and is likely to top a trillion dollars this year as more students go to college and a growing share borrow money to do so.

While many economists say student debt should be seen in a more favorable light, the rising loan bills nevertheless mean that many graduates will be paying them for a longer time.

“In the coming years, a lot of people will still be paying off their student loans when it’s time for their kids to go to college,” said Mark Kantrowitz, the publisher of FinAid.org and Fastweb.com, who has compiled the estimates of student debt, including federal and private loans.

Two-thirds of bachelor’s degree recipients graduated with debt in 2008, compared with less than half in 1993. Last year, graduates who took out loans left college with an average of $24,000 in debt. Default rates are rising, especially among those who attended for-profit colleges.

The mountain of debt is likely to grow more quickly with the coming round of budget-slashing. Pell grants for low-income students are expected to be cut and tuition at public universities will probably increase as states with pinched budgets cut back on the money they give to colleges.

From Annie McClanahan's article "Coming Due: Accounting for Debt, Counting on Crisis" in Against the Day:

[W]hy do fee increases feel "intangible"? The reason is expressed in the shrugging student's description of buying on credit: it is real, but "not real yet." Debt is a promise of future realization, not a present fact. As historian J. G. A. Pocock famously observed, the very notion of the "historical future" -- a future available to human action yet driven by social forces larger than the individual agent -- is the effect of the emergence of large-scale credit mechanisms. For the student buying education on credit, the future of debt repayment is at once deferred and inexorable: 2014, when today's first-year students will be asked to start paying back their loans, may seem unimaginable distant to some but nothing will prevent its arrival. Many students are already becoming aware of the cruel certainty of debt repayment. In the summer of 2009, two of my students had to miss classes to help parents who were being evicted from their homes; they did so in the besieged Central Valley of a state whose own drastic debt forced it to give public employees IOUs rather than paychecks. The student's shrug is thus a gesture expressing both repayment's postponement and debt's inevitability, and this experience of an ineluctable but distant day of future settlement sustains a feeling of resignation far colder than what is often dismissed as generational apathy. Creating a sense of critical urgency among students around the issue of fee increases requires that we bring the indebted future into the present, that we make the cost of an education bought on layaway visible -- and transformable -- here and now.