The Student Loan Mess Updated: Debt as a Form of Social Control and Political Action

[Editor's note: The FY 2023 FSA Annual Report is here.] 

In 2014, the father-son team of Joel Best and Eric Best published The Student Loan Mess: How Good Intentions Created a Trillion Dollar Problem. Their argument was that rising student loan debt posed a major social and economic problem in the United States, exceeding $1 trillion at the time of publication (predicted to reach $2 trillion by 2020). This "mess" resulted from a series of well-intentioned but flawed policies that focused on different aspects of the issue in isolation, ultimately creating unintended consequences.

Key Points of the 2014 book:

History of Federal Involvement: The book explored the evolution of federal student loan programs, highlighting how each policy change created new problems while attempting to address the previous ones.

Cost of College: Rising tuition fees along with readily available loans fueled the debt crisis, as students borrowed more to cope with increasing costs.

Repayment Challenges: The authors delved into the difficulties graduates face repaying their loans, including high interest rates, complex repayment plans, and limited income mobility.

Societal Impacts: The book examined the broader societal consequences of student loan debt, such as delayed homeownership, reduced entrepreneurship, and increased economic inequality.

Beyond the Mess: While acknowledging the complexity of the issue, the authors discussed potential solutions, including loan forgiveness programs, income-based repayment plans, and increased government regulation of for-profit colleges.

Overall, "The Student Loan Mess" provided a critical historical analysis of the factors contributing to the crisis and suggested pathways towards a more sustainable system of higher education financing.

Expansion of Federal Loan Programs (1960s-1990s):

The creation of federal loan programs initially aimed to increase access to higher education.

This led to rising tuition costs as universities saw guaranteed funding, with less pressure to remain affordable.

Loan eligibility expanded, encouraging more borrowing even without clear career prospects for graduates.

Cost Explosion and Predatory Lending (1990s-2000s):

College costs skyrocketed due to various factors, including decreased state funding and increased administrative spending.

Loan limits were raised, further fueling the debt increase.

Private lenders entered the market, offering aggressive marketing and deceptive practices, targeting vulnerable students.

Recession and Repayment Struggles (2008-present):

The Great Recession exacerbated loan burdens as graduates faced limited job opportunities and stagnant wages.

Complex repayment plans and high interest rates created a challenging landscape for borrowers.

The rise of for-profit colleges further complicated the issue, often saddling students with debt for degrees with low earning potential.

Growing Awareness, Advocacy, and Reform (2010s-present):

Public awareness of the student loan crisis grew, leading to increased advocacy and demands for reform.

Issues like predatory lending, debt forgiveness, and income-based repayment gained traction.

In 2010, the Health Care and Education Reconciliation Act made a significant change to the federal student loan system. Previously, the government guaranteed private loans, meaning it reimbursed lenders if borrowers defaulted. In turn, lenders received subsidies for participating. The Act ended these subsidies for private lenders, resulting in over $60 billion saved that could be reinvested in student aid programs.

Debates on the role of government and private lenders in financing higher education continued.


Next Chapters?

Since 2014, almost ten years after the Student Loan Mess was published, several major developments have unfolded concerning student loan debt:

Growth and Persistence:

Debt continues to climb: While the growth rate has slowed somewhat, outstanding student loan debt has surpassed $1.7 trillion and remains a significant burden for millions of borrowers.



 

Racial and socioeconomic disparities persist: African American and Latinx borrowers disproportionately hold a higher amount of debt compared to white borrowers, exacerbating economic inequalities.

Policy Changes: 

https://x.com/The Biden-Harris administration has provided $136.6 billion in debt relief. 

Expansion of income-driven repayment plans: Options like Income-Based Repayment (IBR) and Pay As You Earn (PAYE) have been expanded, allowing borrowers to adjust their monthly payments based on income.

Public Service Loan Forgiveness (PSLF) challenges: Legal uncertainties and administrative backlogs have plagued PSLF, leaving many public servants struggling to qualify for loan forgiveness.

Temporary pandemic relief: During the COVID-19 pandemic, federal student loan payments were paused and interest rates set to 0%. Payments resumed in 2023.

Debt cancellation debates: Proposals for broad-based student loan forgiveness have gained traction, with several Democratic lawmakers pushing for different cancellation amounts. However, these proposals have faced legal and political hurdles. In 2023, the 9th Circuit Court ruled in favor of mass cancellation of loans from predatory for-profit colleges (Sweet v Cardona). A few months later, the US Supreme Court struck down President Biden's plan for debt relief to more than 30 million Americans.

Increased attention to for-profit colleges and online program managers: Scrutiny of predatory practices and low graduate outcomes at for-profit institutions has intensified. Gainful employment rules have been reestablished, but whether they will be enforced is in question.  


Looking forward:

The future of student loan debt remains uncertain. Key questions include:

Will broad-based loan forgiveness materialize?

Can income-driven repayment plans be made more effective?

How will future administrations address affordability and access to higher education?

What role will the private sector play in financing higher education?

How will declining enrollment numbers and skepticism about the value of higher education affect student loan debt and debt relief?  

Will higher ed institutions be held accountable for the debt of their former students and alumni?

Can higher education reduce consumer costs and provide value to consumers and communities at the same time?  

How will student loan debt affect disability, retirement, and life expectancy among long-term debtors?     

Policy Drivers:

Economic factors: A strong economy could increase government revenue, potentially enabling broader debt forgiveness or increased funding for higher education access initiatives. Conversely, an economic downturn could make policy interventions more challenging.

Elections and political pressure: Public opinion and the results of future elections will influence the political will for reform. Continued activism and pressure from advocacy groups could sway policy decisions.

Legal challenges and court rulings: Lawsuits over debt cancellation programs and loan servicer practices could impact the legal landscape and shape future policy options.

Private sector involvement: Developments in the private student loan market and potential regulations of lending practices could affect access to credit and repayment options.

Consumer Decisions:

Debt burden and economic outlook: The level of outstanding debt and future job prospects will significantly influence borrower behavior. Increased debt loads could incentivize riskier repayment strategies or delaying major life decisions like homeownership.

Awareness and financial literacy: Improved understanding of loan terms, repayment options, and alternative financing methods could empower borrowers to make informed decisions.

Government programs and incentives: Changes to income-driven repayment plans, loan forgiveness programs, and other government initiatives will directly impact consumer choices about managing their debt.

Emerging Trends:

Alternative financing models: Innovations like income-share agreements and skills-based financing could disrupt traditional loan structures and offer new options for students.

Technology and automation: Increased use of technology to streamline loan management and repayment could improve efficiency and transparency.

Focus on affordability and value: As concerns about the value proposition of higher education grow, there might be a shift towards emphasizing affordable options and skills-based learning.


How does student loan debt affect the lives of Americans?

Student loan debt has a profound impact on the lives of millions of Americans in various ways, affecting not just their finances but also their major life decisions and overall well-being. Here's a breakdown of some key areas:

Financial Impact:

Burden of debt: The average graduate has over $40,000 in student loan debt, significantly impacting their monthly budget and disposable income. This can limit savings for retirement, emergencies, and major purchases like a house.

Lower credit scores: Missed payments or delinquencies can negatively affect credit scores, hindering access to future loans and increasing interest rates on other forms of credit.

Delayed milestones: High debt burdens may cause individuals to delay major life milestones like buying a home, getting married, starting a family, or pursuing further education due to financial constraints.

Career Choices:

Job dissatisfaction: To make loan payments, some graduates might feel pressured to stay in high-paying but unfulfilling jobs, sacrificing career satisfaction for financial stability.

Entrepreneurial risk: The fear of financial failure due to debt may discourage individuals from pursuing entrepreneurial ventures, hindering innovation and economic growth.

Limited career mobility: Debt may lock individuals into specific career paths based on earning potential, restricting their ability to pursue desired career changes.

Mental and Emotional Wellbeing:

Stress and anxiety: The constant pressure of debt repayment can lead to significant stress and anxiety, impacting mental and emotional well-being.

Lower self-esteem: Feelings of financial instability and hopelessness can negatively impact self-esteem and overall life satisfaction.

Stigma and discrimination: Some individuals may face social stigma associated with student loan debt, further exacerbating the emotional burden.

Societal Impact:

Economic inequality: Student loan debt disproportionately affects certain groups, like minorities and low-income students, perpetuating and widening economic inequality.

Lower homeownership rates: High debt burdens can hinder homeownership, negatively impacting the housing market and contributing to wealth disparities.

Reduced consumer spending: Debt-burdened individuals have less disposable income, limiting their purchasing power and affecting the overall economy.


Social Class and Student Loan Debt

There's a well-documented and intricate relationship between social class and student loan debt, characterized by significant inequalities and disparities. Here's a breakdown of some key points:

Higher burden on lower classes:

Borrowing rates: Individuals from lower socioeconomic backgrounds are more likely to borrow student loans due to limited family resources and higher college costs compared to their income.

Debt amounts: Borrowers from lower socioeconomic backgrounds often take on larger debt loads due to higher tuition fees and living expenses, often exceeding their earning potential after graduation.

Repayment challenges: They face greater difficulty repaying loans due to lower-paying jobs, making them more susceptible to delinquency and default. This hinders wealth accumulation and upward mobility.

Contributing factors:

Limited financial support: Lack of parental financial support or savings forces students from lower socioeconomic backgrounds to rely heavily on loans for college expenses.

Limited college options: Limited access to affordable, high-quality educational institutions often steers individuals towards for-profit colleges with deceptive practices and low graduation rates, leading to high debt with limited job prospects.

Ongoing Debate

There is ongoing debate on solutions to address the student loan crisis, with proposals ranging from broad-based loan forgiveness to reforms in higher education financing and income-driven repayment plans. The future of student loan debt and its impact on Americans remains uncertain and depends on various factors, including policy decisions, economic trends, and individual financial choices.

The Student Loan Debt Movement

There has been an organized effort for student loan debt relief since the 2010s. This movement, using direct action, lawsuits, and lobbying has had some gains, putting pressure for accountability for schools that use predatory practices--and getting debt relief for hundreds of thousands of debtors.  The most notable organization has been the Debt Collective.  

Image of Ann Bowers, courtesy of the Debt Collective

There have been legal allies too, such as the Harvard Project on Predatory Student Lending (PPSL) and the Student Borrower Protection Center (SBPC).    

Named plaintiffs Theresa Sweet (L) and Alicia Davis (R) outside the federal district court in San Francisco on November 6, 2022, three days before the final approval hearing in Sweet v Cardona (Image credit: Ashley Pizzuti) 

Resistance to Debt Relief

The reasons why some people might not support student loan forgiveness. Some conservatives believe that it is unfair to forgive the debts of those who willingly took out loans, while others believe that it would be a waste of taxpayer money. Additionally, some believe that student loan forgiveness would not address the root causes of the problem, such as the high cost of tuition.

It is important to note that not all conservatives oppose student loan forgiveness. Some support income-based repayment plans or public service loan forgiveness. Additionally, some believe the government should focus on making college more affordable, rather than simply forgiving existing debt.

According to a 2019 poll by the Pew Research Center, 54% of Republicans and Republican-leaning independents opposed forgiving all student loan debt, while 37% supported it.

Student Loan Debt Power Analysis: Who Benefits from Inaction?

There are elites and elite organizations who are (at least on the backstage) against student loan debt relief: student loan servicers (e.g. Maximus, Nelnet, Navient, and Sallie Mae), big banks, large corporations, and the US military. For them, debt serves as a way to get others to do their bidding. Debt is essential as a leverage tool to recruit and retain workers. Debt relief could also create more competition for better, more meaningful jobs, which some elites may not want for their children. States may be unwilling or unable to further subsidize higher education if elites are unwilling to pay. This situation is likely to worsen as Medicaid budgets are used for a growing number of elderly and increasingly disabled Baby Boomers.  

Related links:

Borrower Defense Claims Surpass 750,000. Consumers Empowered. Subprime Colleges and Programs Threatened.

 

People's Rally for Student Debt Cancellation to be held outside Supreme Court, February 28, 2023  

 

Department of Education: Over half of federal student loan borrowers were not paying before Pandemic (Alan Collinge)

Student Loans and a Brutal Lifetime of Debt (Dahn Shaulis and Glen McGhee)

Maximus, Student Loan Debt, and the Poverty Industrial Complex

SLABS: The Soylent Green of US Higher Education

I Went on Strike to Cancel My Student Debt and Won. Every Debtor Deserves the Same. (Ann Bowers)

An Email of Concern to the People of Arkansas about the University of Phoenix (Tarah Gramza)

Higher Education FOIA Requests to US Department of Education

A People's History of Higher Education in the US?

[Editor's Note: What we saw today at the US Supreme Court--with the end of affirmative action in college enrollment--is horrible but not shocking.  The History of Higher Education in the US over the last four centuries is worse than horrible--from a People's perspective. In many cases it has been horrifying. Some of it has been documented.  Much of it has not. No one has documented the full-length of the terrain, the voyage that got us here, or to what may lie ahead. Looking in the mirror, and at the injustice, what do you see?]  

A People's History of US Higher Education is sorely needed, not as a purely academic work to gather dust on shelves, or as internet click bait, but as a way to assess how our nation moves forward as a democracy--or as something less. To make history, it's helpful to know (real) history: the history of working-class (and middle-class) struggles. 

The college and university industry faces enormous challenges in the coming years, and an elitist perspective that is taught in higher education perpetuates this societal mess: one of monumental (and widely acceptable) selfishness and greed, increasing inequality (see graph below) and reduced social mobility, decreasing life expectancy, lack of transparency and accountability followed by trillions in government bailouts to the rich, and profound environmental destruction. 

A Sketch of the Current Terrain

At the front end of the higher ed pipeline, the US is not producing enough domestic students with the resources or skills to succeed in college and beyond. Much of this is related to "savage inequalities" in the K-12 system (and throughout society) that have never been remedied. And in 2026 we expect an enrollment cliff to occur, a ripple effect of the 2008 Great Recession.

Community colleges and second-tier state universities--once considered the backbone of increasing democracy and social mobility, have faced declining revenues, lower enrollment, and public defunding for more than a decade.   

Adjuncts have become the "new faculty majority"--a trend moving that way for several decades--with little resistance.  Labor has had a few recent victories at elite schools, but it remains to be seen how strong this movement will become and whether it will spread to lower rung institutions.

Drug and alcohol abuse, sexual coercion and assault, bullying, and other forms of violence and brutality are long-standing parts of the US higher ed landscape that have not been fully dealt with.

Millions of folks are learning exclusively online. Subprime robocolleges (like the University of Phoenix, Purdue University Global, and University of Arizona Global Campus) and Online Program Managers (OPMs) have replaced traditional universities with little information about their value or effectiveness.  Those schools flood the internet with targeted ads.  

White supremacy and anti-intellectualism have regained popularity, with the higher education policies of Ron DeSantis in Florida, Greg Abbott in Texas, and Sarah Huckabee-Sanders in Arkansas. The Supreme Court has also spoken recently--ending affirmative action for people of color. Legacies and other meritless preferences for the more rich and powerful remain.   

Mergers, acquisitions, and campus closings are commonplace as schools compete for a smaller number of students and an even smaller number that can pay the full amount for tuition, room and board, fees, and living expenses. 

Elite universities are financial and industrial centers, scooping up (and stealing) land, investing billions overseas and paying few taxes, and hiring foreign workers instead of Americans.  

At the end of the pipeline, US higher education may be educating the world's elites, but higher ed and the larger society are not producing enough skilled workers/good jobs for Americans. There is a growing educated underclass, people who are working but are not working in areas that they had hoped for. There are many bullsh*t jobs out there. And many gig jobs with no benefits. And there are jobs that require long hours and difficult conditions, forcing people to choose between the personal and professional. Some folks are doubling down for career advancement, borrowing (sometimes unwisely) for graduate school. 

Student loan debt makes college graduates captive to the corporations who are willing to hire them--and subject to dismissal whenever they are no longer helping them make a profit. Even at non-profits this is the case. Crushing debt results in people who decide (logically) not to marry, not to have children--at the expense of being labeled as criminals and deviants. The Republican Supreme Court will soon weigh in on the subject and likely determine that debt relief would not be fair to others--presumably the wealthy and powerful that the Justices represent.  

Let's be clear.  Higher education in the United States has always reflected and reinforced a larger (sick) society and its ills. Its beginnings and much of its history are deeply rooted in white supremacy, patriarchy, and classism-- through land theft, genocide, worker oppression, and exclusion. 

There have been many excellent critical accounts of higher education over the last century, from Upton Sinclair's The Goosestep (1923) to Craig Steven Wilder's Ebony and Ivy (2013) to Gary Roth's The Educated Underclass (2019).  Recent books have also examined elite universities, state universities, and for-profit colleges and their predatory practices. But few if any assess the dark landscape from start to finish. 

A Sketch of Where the US Has Been

In the 1600s and 1700s, elite eastern schools like Harvard, Yale, Princeton, Brown, and Georgetown were constructed on stolen land. The leaders of the exclusive white male schools held people captive in order to keep the schools running. All the students were white men or people who had to assimilate into the world of white supremacy. The schools also taught religious ideologies to rationalize their crimes against humanity.  What was it like for an indigenous person, an enslaved person, or a servant at one of these schools? How brutal was college life in those times?  

Government intervention was essential to increasing opportunity. After the Civil War, Historically Black Colleges and Universities enabled some African Americans to get a higher education. State universities and teacher's colleges also emerged with the promise of educating and empowering more citizens. And even then, land for state universities came from land theft of indigenous nations. Financial and industrial robber barons (men who stole wholesale from workers and their families), subsidized and controlled elite higher private higher education. These men included Leland Stanford, John D. Rockefeller, and Andrew Carnegie.  

Government funding through the post-World War II GI Bill increased enrollment (but disproportionate opportunity for white men) during the late 1940s and 1950s. The 1960s reflected a time of rebellion, greater access, and a movement toward equality. The Black Panthers, for example, challenged white supremacy at Merritt College and San Francisco State. But those days seem to be from a bygone era--a moment of opportunity lost. We do have some accounts of students and teachers, but is there one place we can find what life was like in junior colleges and lesser known state universities? 

Were the 1960s an anomaly? In 2023, it certainly appears so. For those activists who remember those times well enough, and remember the progress, it may be disheartening. Many citizens today are too young or not as well informed. Over the decades, even more have been disinformed--lied to--by elitist revisions of history.  

Battling the Business of Higher Education

Since the 1980s, US higher education has increasingly reflected and reinforced a nation of privatization, government austerity and lack of oversight, and social class exclusion. Elite credentials are used to discriminate in career fields (like law) where there is an oversupply; other careers (like nursing) are also hamstrung by hyper-credentialism--creating artificial shortages. 

Progressive organizations have been largely ineffective in battling strengthening corporate forces on campus.  The Fed and other organizations continue to sell the idea of more higher education for all, as millions face a lifetime of debt peonage.  There have been some heroes on the People's side, but they have been largely ignored by the mainstream media--which largely writes from an elitist perspective. 

We are now more than four decades into this neoliberal era. Higher education has changed, yet it still reflects much of what is wrong with America. Working class folks, and even many middle-class consumers are increasingly wary of higher education--whether it's worth buying into.  In some cases, edtech has reduced our Quality of Life. Is there anyone with enough energy, resources, and courage to document it all?  And can it be done from the perspective of the People--for the good of the People?  

Related links: 

HEI Resources

US Higher Education and the Intellectualization of White Supremacy

One Fascism or Two?: The Reemergence of "Fascism(s)" in US Higher Education

"Let's all pretend we couldn't see it coming" (The US Working-Class Depression)

The Tragedy of Human Capital Theory in Higher Education (Glen McGhee)

The College Dream is Over (Gary Roth) 

Erica Gallagher Speaks Out About 2U's Shady Practices at Department of Education Virtual Listening Meeting 

I Went on Strike to Cancel My Student Debt and Won. Every Debtor Deserves the Same. (Ann Bowers)