The Passover story is old but not unique. Slavery in its many horrific forms has reared its ugly head all over the world for centuries. However, one type stands out as unique amongst them all, as it is the only one that is entered voluntarily.
For thousands of years, debts followed everyone to their graves. Failure to pay their debts in full could lead to debt bondage, forced labor until the debt was repaid. The Bankruptcy Act of 1898 allowed people to choose to file for bankruptcy, giving the debtor a fresh start, a chance to begin anew, and, hopefully, pursue a better life by learning from one’s past financial mistakes. Debt bondage was outlawed in the United States, until congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). Congress essentially singled out and removed student loan debt from bankruptcy laws. Congress, pandering to special interests, has potentially put millions of students in debt bondage. (I have heard all the justifications, and none of them are legitimate. There is no real distinction between student loan debt and credit card debt. If you like BAPCPA then it should apply to everyone equally.)
If students had only racked up $60k in credit card debt, they could restructure the payments, blame predatory lending, and even discharge the debt in bankruptcy. But with $60k in non-dischargable student debt, and a market in which even entry level jobs demand prior experience, many interns find themselves in modern-day debt bondage, forced to work for free in the hopes that that will, someday, enable them to earn enough to dig their way out of debt.
Student loans are not loans at all. It’s a misnomer. Loans involve risk. The only risk being taken by student loan providers is that a debtor will die before repaying his loans, because student loans, unlike all other loans, are essentially impossible to discharge in bankruptcy. As an NPR report stated, “private lenders have been given a blank check to charge any interest rate with no-risks of default.” Consumerist has a great infographic examining how student loans work.
It’s worth reiterating, “a debtor must work to pay off his debt until he dies.”
This is where unpaid internships take this whole mess to the next level. When actual work is being performed by heavily indebted interns, and they don’t get paid for it.
When the value of the work is not applied towards the liquidation of ones debt, such as takes place in unpaid internships, the situation becomes a variation of debt bondage. It looks different because there are 3rd party loan providers, but imagine if students actually had to pay the school $60k when they graduate, and the schools were pushing them to take unpaid internships with university “friends”.
The Ten Plagues
Here are ten plagues that “unpaid internships” may inflict on all of us.
1. Help create the greatest divide in the U.S. between those with connections/money and those without. The U.S. becomes known as “The country formerly known as the land of opportunity”
2. Degrade ethical standards by giving a free pass to institutionalized deceptive practices.
3. Older generations with jobs will buy second houses, while the unemployable (those without real job experience) move back home (unpaid internship work never counts as real job experience).
4. The United States continues to become an unproductive and expensive labor force via the promotion of the misallocation of labor resources.
5. Those in academia who promoted unpaid internships soon realize that laws setting labor standards weren’t just there to protect someone else, and begin to see their own standards of living eroding (they then start to scream, but its too late).
6. Large parts of Gen Y cannot afford to enter the next stage of life and cannot financially support a family, leading to a further shrinkage of the U.S. population, and an increase in the taxes needed to fund unfunded entitlement liabilities.
7. The failure to teach Gen Y good business acumen, leads to a military led by former unpaid interns who end up giving away battleships in the hope of “networking”.
8. Debtors’ prisons are built in the hopes that the construction projects will create jobs and boost the economy.
9. Academics give up trying to convince Mastercard to accept their students’ college-credit as a form of payment.
10. The exodus begins
With young people continuing to enter the job market by the millions every year and fewer retiring workers, entry level jobs are dwindling in numbers. Many of the debt ridden millennials may find their only options are in jobs outside the United States. An option that has the added benefit of freeing themselves from their debt burden (a debt that just surpassed credit cards and auto loans combined). One doesn’t have to be Nostradamus to predict this exodus. Ben Franklin ran away from his contractual apprenticeship servitude in Boston for a new life in Philadelphia. Which country do you think the next Ben Franklin will run to?