Observers of the OWS claim it is mainly about self-inflicted wounds, caused by the government/non-profit sector, where lack of market pricing and continual subsidies of college education mean there is

1. No market discipline (universities don’t attract students by a better product but by more subsidies of their product)

2. No consumer choice being exerted (students pick what they want to study, without any thought to cost)

3. Cartelization and price-fixing by universities

4.  No incentive for people to choose gainful employment over universities subsidies/debt forgiveness

Student loans are a bizarre focus for a protest about financial corruption or private sector (for-profit) bail-outs, because they are completely a government/non-profit created problem. The only real solution is to get federal subsidies out of the university system, allow for bankruptcy filing in extreme cases (although I suspect this will create another boondoggle), and educate people away from choosing expensive colleges, or even college itself) when many other options are now available to them, with the internet.

National Review’s Reihan Salam:

Many college grads have good reason to be upset. Educational inflation has been running far ahead of general inflation, without improvements in quality. Most higher education is still a good value (at least at the undergraduate level)  but it’s not as good a value as it used to be. And that’s really what complaints about student debt are—complaints about how much education costs the consumer.

The persistence of this runaway inflation is mysterious to me. Consumers are not imposing discipline on the market in the way I would expect—they fail to shop around for the best education value, and sometimes they buy education products that are worth less than their cost. People keep paying small fortunes to attend Tier 3 law schools even though the job market for their graduates is terrible. I don’t know how to get them to stop, but it seems to me that downward pressure on education prices will ultimately have to be applied from the consumer side. I do my part by trying to dissuade my friends from going to graduate school.

Megan McArdle makes a strong case that allowing student loan debt to be discharged in bankruptcy would both provide needed relief to people who can’t service their debts and discourage inefficient consumption of education in the future.

[Lila: It would be better if students were discouraged from taking out loans for education in the first place, especially for non-professional degrees. How about skipping college and starting a small business?]

Some of the rumblings from the OWS folks are toward the idea that there should be broader relief of student loan debt. This makes little sense. Unlike with the housing market, there was no general lurch in asset prices that went unmatched by a reworking of liabilities. The better avenue for relief is one targeted to people who can’t service their debts—i.e., bankruptcy.

While there are major problems to do with education prices and related debt, these problems have almost nothing to do with Wall Street and little to do with the for-profit sector. Most student loan debt is provided (directly or indirectly) by the government, and education is mostly provided by government and non-profit entities. [Lila: Exactly. That’s why there is a problem. The universities can keep charging prices the student think they can pay, because the federal sugar daddy is picking up the tab]

College graduates’ problems should be kept in perspective. The unemployment rate for people with bachelor’s degrees or higher is 4.3 percent. The really big consumer debt problem in America is with mortgage debt. As such, the degree of focus within OWS on a problem that is specific to the relatively well-educated is a misfire.

Not everybody who is complaining was wronged. The We Are the 99 Percent Tumblr includes complaints like this: “My father (multiple PhD’s) lives in his car so that he can do what he loves for a living rather than be a slave to the system.” A Columbia graduate student complained to the Associated Press that she has to eat rice and beans. These are not people who got screwed. These are people who have gainful employment available to them and made follow-your-dreams life choices that reduce their incomes. That’s their prerogative; it’s not anybody else’s problem.