Student Loan Debt: The Panic Starts May 5th

In a move poised to send millions of Americans into financial distress, the U.S. Department of Education announced this week that its Office of Federal Student Aid (FSA) will resume collections on defaulted federal student loans starting Monday, May 5, 2025. This marks the official end of a pandemic-era pause in collections that has been in place since March 2020.

The timing of the announcement is already sparking anxiety—but it's just the beginning. While collections begin next month, experts warn that by September, we could see a full-scale panic as a surge of borrowers hit the 270-day threshold for loan delinquency, legally tipping them into default status. The clock is ticking for millions who have missed or deferred payments during the chaotic restart of loan servicing.

According to the Department, 42.7 million Americans now owe more than $1.6 trillion in student loan debt. Shockingly, only 38 percent are current on their payments, and nearly 10 million borrowers are already in default or serious delinquency. These numbers are expected to climb sharply as repayment systems falter and financial strain deepens.

Education Secretary Linda McMahon, in announcing the decision, framed the return to collections as a victory for taxpayers. “American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” she said, taking aim at the previous administration’s debt relief efforts, which she labeled “illegal loan forgiveness schemes.”

But for millions of borrowers—especially those from working-class backgrounds and communities of color—this policy marks the end of hope. Many had placed their faith in long-promised reforms and debt relief that never fully materialized.

Hope, however, is not entirely dead. The forthcoming book The Student Debt Crisis: America’s Moral Urgency by Dr. Jamal Watson—journalist, professor, and associate dean at Trinity Washington University—lays bare the human cost of the crisis. Scheduled for release in September 2025, the book is expected to coincide with the fallout from a wave of new defaults. Watson calls the debt system “a modern form of indentured servitude,” and his work amplifies the voices of those crushed under its weight.

Beginning next week, the Department will restart the Treasury Offset Program, which allows the federal government to seize tax refunds and federal benefits to collect on unpaid loans. Administrative wage garnishment is also scheduled to resume later this summer. Borrowers in default will receive email instructions in the coming weeks, urging them to contact the Default Resolution Group to avoid harsher penalties.

In an attempt to soften the blow, the Department has announced an enhanced Income-Driven Repayment (IDR) process, promising to streamline enrollment and eliminate annual income verification. Additionally, roughly 1.9 million stalled borrower applications, held up since August 2024, are slated for processing beginning in May.

Still, these administrative changes are unlikely to ease the broader economic pain. The reactivation of collections amid economic uncertainty and servicing confusion is expected to deepen the divide between those who can navigate the system—and those who cannot.

The Higher Education Inquirer has long tracked the rise of the “educated underclass”—graduates and dropouts alike, burdened with debt but lacking economic mobility. For them, May 5 is only the beginning. The real crisis looms in September, when an avalanche of defaults could further destabilize lives, families, and entire communities.

We will be here to report it.

If you’re facing default, garnishment, or administrative hurdles, the Higher Education Inquirer wants to hear your story. Email us confidentially to be part of our ongoing investigation.

We have met the enemy...

Class conflict has always been woven into the fabric of American higher education. The struggle over access, affordability, and control of knowledge production has long pitted economic elites against working-class and middle-class students, faculty, and staff. Since the 1960s, these tensions have only deepened, exacerbated by policy shifts that have served to entrench inequality rather than dismantle it.

The 1960s marked a critical turning point in the political battle over higher education. Ronald Reagan’s war on the University of California system while he was governor set the tone for a broader conservative backlash against public higher education, which had been expanding to accommodate the postwar baby boom and increasing calls for racial and economic justice. Reagan’s attacks on free tuition and student activism foreshadowed decades of policies designed to limit public investment in higher education while encouraging privatization and corporate influence.

Since the 1970s, economic inequality in the US has grown dramatically, and higher education has been both a battleground and a casualty in this ongoing class war. Today, the sector is experiencing a long-running meltdown, with no signs of reversal. The following key issues illustrate the breadth of the crisis:

Educated Underclass and Underemployment

The promise of higher education as a pathway to economic security has eroded. A growing segment of college graduates, particularly those from working-class backgrounds, find themselves in precarious employment, often saddled with student debt and working jobs that do not require a degree. The rise of the educated underclass reflects a broader trend of economic stratification in the US, where social mobility is increasingly constrained.

Student Loan Debt Crisis

Student loan debt has surpassed $1.7 trillion, shackling millions of Americans to a lifetime of financial insecurity. The cost of higher education has skyrocketed, while wages have stagnated, leaving many borrowers unable to pay off their loans. Rather than addressing this crisis with systemic reform, policymakers have largely chosen half-measures and band-aid solutions that fail to address the structural drivers of student debt.

The Role of Foreign Students in US Higher Education

The influx of international students, particularly from wealthy families abroad, has been used as a revenue stream for cash-strapped universities. While diversity in higher education is valuable, the prioritization of full-tuition-paying international students over domestic students, especially those from working-class backgrounds, reflects a troubling shift in university priorities from public good to profit-seeking.

Academic Labor and Adjunctification

Higher education’s labor crisis is one of its most glaring failures. Over the past several decades, universities have replaced tenured faculty with contingent faculty—adjuncts and lecturers who work for low wages with no job security. This adjunctification has degraded the quality of education while exacerbating economic precarity for instructors, who now make up the majority of faculty positions in the US.

Identity Politics and DEI as a Substitute for Racial Justice

Diversity, Equity, and Inclusion (DEI) initiatives have become a central focus of university policies, yet they often serve as a superficial substitute for genuine racial and economic justice. Originating in part from efforts like those of Ward Connerly in California, DEI programs provide cover for institutions that continue to perpetuate racial and economic inequities, while failing to address core issues such as wealth redistribution, labor rights, and equitable access to higher education.

Privatization of Higher Education

Public funding for universities has declined, and in its place, privatization has surged. Universities have increasingly outsourced services, partnered with corporations, and relied on private donors and endowments to stay afloat. This shift has transformed higher education into a commodity rather than a public good, further marginalizing low-income students and faculty who cannot compete in a system driven by financial interests.

Online Education and the For-Profit Takeover

The rise of online education, fueled by for-profit colleges and Online Program Managers (OPMs), has introduced new layers of exploitation and inequality. While online education promises accessibility, in practice, it has been used to cut costs, lower instructional quality, and extract profits from students—many of whom are left with degrees of questionable value and significant debt.

Alienation and Anomie in Higher Education

As economic pressures mount and academic work becomes more precarious, feelings of alienation and anomie have intensified. Students and faculty alike find themselves disconnected from the traditional mission of higher education as a space for critical thought and democratic engagement. The result is a crisis of meaning that extends beyond the university into broader society.

The Power of Elite Universities

At the other end of the spectrum, elite universities continue to amass enormous endowments, wielding disproportionate influence over higher education policy and urban development. These institutions contribute to gentrification, driving up housing costs in surrounding areas while serving as gatekeepers to elite status. Their governing structures—dominated by trustees from finance, industry, and politics—reflect the interests of the wealthy rather than the needs of students and faculty.

The Way Forward

To avoid the full entrenchment of an oligarchic system, those who hold power in higher education must step aside and allow for systemic transformation. This means prioritizing policies that restore public investment in education, dismantle student debt, protect academic labor, and democratize decision-making processes. The fight for a more just and equitable higher education system is inseparable from the broader struggle for democracy itself.

As history has shown, real change will not come from those at the top—it will come from the courageous efforts of students, faculty, and workers who refuse to accept a system built on exploitation and inequality. The time to act is now.

The Digital Dark Ages

In this so-called Age of Information, we find ourselves plunged into a paradoxical darkness—a time when myth increasingly triumphs over truth, and justice is routinely deformed or deferred. At The Higher Education Inquirer, we call it the Digital Dark Ages.

Despite the unprecedented access to data and connectivity, we’re witnessing a decay in critical thought, a rise in disinformation, and the erosion of institutions once thought to be champions of intellectual rigor. Higher education, far from being immune, is now entangled in this digital storm—none more so than in the rise of robocolleges and the assault on public universities themselves.

The Fog of Myth

The myths of the Digital Dark Ages come packaged as innovation and access. Online education is heralded as the great equalizer—a tool to democratize knowledge and reach underserved students. But as the dust settles, a darker truth emerges: many of these online programs are not centers of enlightenment, but factories of debt and disillusionment. Myth has become a business model.

The fantasy of upward mobility through a flexible online degree masks a grim reality. The students—often working-class professionals juggling jobs and families—become robostudents, herded through algorithmic coursework with minimal human interaction. The faculty, increasingly adjunct or contract-based, become roboworkers, ghosting in and out of online discussion boards, often managing hundreds of students with little support. And behind it all stands the robocollege—a machine optimized not for education, but for profit.

The Rise of Robocolleges

The rapid growth of online-only education has introduced a new breed of institutions: for-profit, non-profit, secular, and religious, all sharing a similar DNA. Among the most prominent are Southern New Hampshire University, Grand Canyon University, Liberty University Online, University of Maryland Global Campus, Purdue University Global, Walden University, Capella University, Colorado Tech, and the rebranded former for-profits now operating under public university names, like University of Phoenix and University of Arizona Global Campus.

These robocolleges promise convenience and career readiness. In practice, they churn out thousands of credentials in fields like education, healthcare, business, and public administration—often leaving behind hundreds of billions of dollars in student loan debt.

The Robocollege Model is defined by:

• Automation Over Education

• Aggressive Marketing and Recruitment

• High Tuition with Low Return

• Shallow Curricula and Limited Academic Support

• Poor Job Placement and Overburdened Students

These institutions optimize for profit and political protection, not pedagogy. Many align themselves with right-wing agendas, blending Christian nationalism with capitalist pragmatism, while marketing themselves as the moral antidote to “woke” education.

Trump’s War on Higher Ed and DEI

Former President Donald Trump didn’t just attack political rivals—he waged an ideological war against higher education itself. Under his administration and continuing through his influence, the right has cast universities as hotbeds of liberal indoctrination, cultural decay, and bureaucratic excess. Public universities and their faculties have been relentlessly vilified as enemies of “real America.”

Central to Trump’s campaign was the targeting of Diversity, Equity, and Inclusion (DEI) initiatives. Executive orders banned federally funded diversity training, and right-wing media amplified the narrative that DEI was a form of “reverse racism” and leftist brainwashing. That playbook has since been adopted by Republican governors and legislatures across the country, leading to:

• Defunding DEI Offices: Entire departments dedicated to equity have been dismantled in states like Florida and Texas.

• Censorship of Curriculum: Academic freedom is under siege as laws restrict the teaching of race, gender, and American history.

• Chilling Effects on Faculty: Scholars of color, queer faculty, and those doing critical theory face retaliation, termination, or self-censorship.

• Hostile Campus Environments: Students in marginalized groups are increasingly isolated, unsupported, and surveilled.

This culture war is not simply rhetorical—it’s institutional. It weakens public confidence in higher education, strips protections for vulnerable communities, and drives talent out of teaching and research. It also feeds directly into the robocollege model, which offers a sanitized, uncritical, and commodified version of education to replace the messy, vital work of civic learning and self-reflection.

The Debt Trap and Student Loan Servitude

Today, more than 45 million Americans are trapped in a cycle of student loan debt servitude, collectively owing over $1.7 trillion. Robocolleges have played a central role in inflating this debt by promising career transformation and delivering questionable outcomes.

Debt has become a silent form of social control—disabling an entire generation’s ability to invest, build, or dissent.

• Delayed Life Milestones

• Psychological Toll

• Stalled Economic Mobility

This is not just a personal burden—it is the product of decades of deregulation, privatization, and a bipartisan consensus that treats education as a private good rather than a public right.

The Dismantling of the U.S. Department of Education

Over time, and especially under Trump-aligned officials like Betsy DeVos, the U.S. Department of Education has been hollowed out, repurposed to protect predatory institutions rather than students. Key actions include:

• Rolling Back Protections for borrowers defrauded by for-profit colleges.

• Weakening Oversight of accreditation and accountability metrics.

• Empowering Loan Servicers to act with impunity.

• Undermining Public Education in favor of vouchers, charters, and online alternatives.

The result? Robocolleges and their corporate allies are given free rein to exploit. Students are caught in the machinery. And the very institution charged with protecting educational integrity has been turned into a clearinghouse for deregulated profiteering.

Reclaiming the Idea of Higher Education

This is where we are: in a Digital Dark Age where myths drive markets, and education has become a shell of its democratic promise. But all is not lost.

Resistance lives—in underfunded community colleges, independent media, academic unions, student debt collectives, and grassroots movements that refuse to accept the commodification of learning.

What’s needed now is not another tech “solution” or rebranding campaign. We need a recommitment to education as a public good. That means:

• Rebuilding and funding public universities

• Protecting academic freedom and DEI efforts

• Canceling student debt and regulating private actors

• Restoring the Department of Education as a tool for justice

• Rethinking accreditation, equity, and access through a democratic lens

Because if we do not act now—if we do not call the Digital Dark Ages by name—we may soon forget what truth, justice, and education ever meant.

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For-Profit College Corporation Perdoceo Gave Your Tax Dollars to Trump Inaugural Committee (David Halperin)

A new report filed with the Federal Election Commission shows that the troubled for-profit college operation Perdoceo Education Corp. donated $50,000 to the 2025 Trump-Vance Inaugural Committee. Almost all of Perdoceo’s revenue comes from U.S. taxpayers.

The report filed this week by the Trump committee lists, among hundreds of other gifts from corporations and individuals, a $50,000 donation from “CEC Educational Services,” which is the name of a Perdoceo subsidiary, and gives the donor address as the Schaumberg, Illinois, location of Perdoceo’s corporate offices.

The Trump inaugural committee raised $239 million, more than doubling the record-breaking amount raised by the Trump committee for the 2017 inauguration.

As the New York Times noted, presidential inaugurations, even with all the glitzy balls and other events, “have never cost anything near roughly a quarter-billion dollars, and the amount raised by the committee will resurface questions about where any leftover funds might go.” Trump associates have suggested it could be spent on other Trump projects, including a presidential library.

The Times speculated that the high volume of gifts was “driven by corporate America’s eagerness to win the president’s favor.”

Perdoceo, whose stock is publicly traded, is one corporation that would be motivated to win the transactional Trump’s favor. It is almost entirely dependent on federal government largesse. The two mostly online colleges it operates — American Intercontinental University and Colorado Technical University — have at times received as much as 97 percent of their revenue from taxpayer dollars in the form of federal student grants and loans; in the most recent reported year 83 percent came from the U.S. Department of Education alone, plus more from the departments of defense and veterans affairs.

That means, effectively, that almost all of the gift that Perdoceo made to curry favor with Trump was paid for by American taxpayers.

The donation is also consistent with Perdoceo CEO Todd Nelson’s past support for Republican politicians. More importantly, it reflects Perdoceo’s continuing need to have the federal government keep the money flowing and look the other way while the company’s schools, which have repeatedly faced law enforcement actions, offer low-quality, high-priced programs that leave many students deep in debt and without the career advancement they sought.

As Republic Report has chronicled for over a decade, Perdoceo has been one of the worst actors in all of for-profit higher education, taking in billions of dollars from taxpayers for student grants and loans while repeatedly engaging in predatory abuses.

Like Donald Trump’s own fraudulent Trump University, Perdoceo has faced multiple law enforcement investigations for predatory conduct.

In 2019, the company entered into a $494 million settlement with 48 state attorneys general, plus the District of Columbia, over allegations that it engaged in widespread deceptive practices against students.

Later that same year, Perdoceo agreed to pay $30 million to settle charges brought by the Federal Trade Commission that its schools have recruited students through deceptive third-party lead generation operations. In each case, the company did not admit guilt.

More recently, Perdoceo employees told media outlets USA Today and Capitol Forum, as well as Republic Report, that company recruiters continued to feel pressure to make misleading sales pitches and to enroll low-income people into programs that aren’t strong enough to help them succeed. Some of those former employees also spoke with federal investigators.

USA Today reported in 2022 that the U.S. Department of Education, in December 2021, requested information from Perdoceo; the Department also asked Perdoceo to retain records regarding student recruiting, marketing, financial aid practices, and more. Perdoceo confirmed the probe, while seeming to minimize its significance, in a February 2022 SEC filing. Perdoceo also acknowledged in May 2022 that it received a request for documents and information from the U.S. Justice Department.

The Department of Education provided AIU and CTU with more than $551 million in student grants and loans in the 2022-23 school year, the most recent year that was reported. A bachelor’s degree from CTU is priced at about $66,000.

But data released by the Department in 2023 show that Perdoceo’s two schools, AIU and CTU, deliver poor results for students, with low graduation rates and graduate incomes and high levels of student debt.

Before joining Perdoceo, company CEO Todd Nelson ran two of the other biggest for-profit colleges operations: the University of Phoenix and now-demised Education Management Corp. Both of those chains, like Perdoceo, ran into major law enforcement issues because of deceptive recruiting practices and other abuses that occurred on Nelson’s watch.

The Biden Department of Education never proceeded with an enforcement action to penalize Perdoceo or take away its federal aid. But it did issue a series of regulations that would make it more difficult for that company and others to engage in predatory practices going forward. The Trump administration, whose previous incarnation coddled predatory schools, and whose current incarnation has gutted the Department of Education and its accountability efforts, is likely to do nothing while Nelson’s schools keeping enrolling students, with taxpayer dollars, in substandard education programs.

$50,000 may not be a lot of money to Perdoceo or its CEO, but it’s a lot of money to each of the thousands of students across the country who are in debt to Perdoceo for multiples of that amount. Perdoceo’s donation to Trump’s inauguration, using your money, can only reinforce the company’s entitlement and impunity.

It’s wrong when a company can take money from students and taxpayers and use it curry favor with a president whose team is shutting down higher education enforcement efforts and aggressively seeking student loan repayments, even from borrowers who were deceived and abused by that company’s schools.

The donation from a supposed “education” company also sends a bad message to America’s students, because it celebrates the return to power of a twice-impeached, four-times-indicted, convicted felon and adjudged sexual assaulter who incited a murderous Capitol riot aimed at overthrowing a democratic election. Not a good civics lesson.

Perdoceo did not respond to a request for comment.

[Editor's note: This article originally appeared on Republic Report.]

Why College Matters: Out of Touch with Social Class Realities

Serve Marketing's Why College Matters media campaign stacks the deck in favor of higher education and expects consumers to believe the story they tell. The problem with this campaign, and its anonymous funders, is that for many folks, college (and life after college) is problematic at best and oppressive at worst. 

 

The Higher Education Disconnect: What Survey Results Miss About Americans' Real Concerns

The Why College Matters campaign presents data suggesting Americans' perceptions of higher education can be positively influenced through messaging. However, when compared with broader research on Americans' attitudes toward higher education, significant disconnects emerge. This analysis examines the gaps between the campaign's focus and the well-documented concerns Americans have about today's college experience.

The Financial Reality Gap: Debt and Affordability Concerns

The Why College Matters campaign notably avoids addressing one of the most pressing issues facing Americans considering higher education: the financial burden. This omission creates a fundamental disconnect with public sentiment.

Student Debt as a Life-Altering Burden

Recent research shows that 70% of middle-income Americans believe student loans are impacting their ability to achieve financial prosperity5. The psychological burden is equally significant, with 54% of student borrowers experiencing mental health challenges directly attributed to their debt load, including anxiety (56%) and depression (approximately 33%)8.

The campaign's focus on abstract benefits like "growing America's economic prosperity" fails to acknowledge that for many individuals, the immediate economic reality is far less promising. Student borrowers report delaying major life milestones including starting families, purchasing homes, and pursuing careers they're passionate about due to debt constraints8.

The Middle-Class Squeeze

While the campaign targets adults without college degrees as a key demographic, it misses that middle-class families face particularly acute challenges. These families often find themselves in a precarious position - too wealthy to qualify for significant need-based aid but not wealthy enough to comfortably afford college expenses13. This "middle-class squeeze" represents a significant disconnect between survey messaging and lived experience.

The Employment Reality Disconnect

Perhaps the most striking omission in the campaign's framing is the reality of post-graduation employment outcomes, which directly contradicts the economic benefit messaging.

Widespread Underemployment

Research from the Burning Glass Institute reveals a sobering statistic: 52% of recent four-year college graduates are underemployed a year after graduation, holding jobs that don't require a bachelor's degree14. Even more concerning, 45% still don't hold college-level jobs a decade after graduation14. This creates a fundamental disconnect when the campaign emphasizes workforce development without acknowledging this reality.

The "First Job Trap"

The survey frames higher education as broadly beneficial for workforce development but fails to address what researchers call the "first job trap." Data shows that 73% of graduates who start their careers in below-college-level jobs remain underemployed a decade after graduation14. This presents a significantly different picture than the campaign's simplified message about maintaining a skilled workforce.

Credential Inflation: The Devaluing Degree

The campaign messaging presumes that increased educational attainment inherently produces positive outcomes, without addressing the phenomenon of credential inflation that undermines this assumption.

Degrees as Diminishing Returns

Credential inflation refers to the declining value of educational credentials over time, creating a scenario where jobs that once required a high school diploma now demand bachelor's degrees, and positions that required bachelor's degrees now require master's or doctorates11. This creates a paradoxical situation where more education is simultaneously more necessary yet less valuable - a nuance entirely absent from the campaign narrative.

Opportunity Costs Unacknowledged

The campaign frames college primarily through its benefits, without acknowledging significant opportunity costs identified in research. These include delayed savings, fewer years in the workforce, postponement of family formation, and accumulation of debt11. This one-sided framing creates a disconnect with the lived experience of many Americans weighing these very real tradeoffs.

The Growing Generational Divide

The campaign's focus on adults aged 35-64 misses a critical demographic: younger generations who express the most skepticism about higher education's value.

Gen Z's Value Perception Crisis

Only 39% of Gen Z respondents in one study said advancing their education is important to them, and 46% don't believe college is worth the cost15. This represents a fundamental shift in attitude that the campaign's methodology doesn't capture, creating another disconnect between messaging and emerging social reality.

The Civic Disconnection Context

Research on youth disconnection shows broader trends of civic disengagement, with young Americans becoming less connected to community institutions generally19. The campaign's framing of higher education as building community connection happens against this backdrop of declining civic participation - context that provides important nuance missing from the survey design.

Mental Health Concerns: The Hidden Cost

Perhaps the most significant omission in the campaign's messaging is the documented mental health impact of the higher education experience, particularly related to financial strain.

Student Debt as Mental Health Crisis

Research demonstrates clear links between student loan debt and mental health challenges. Beyond anxiety and depression, the financial burden of education impacts overall wellbeing in ways unacknowledged by the campaign messaging816.

Postponed Lives and Dreams

The psychological impact of delayed life milestones due to educational debt creates stress that extends far beyond graduation. Student borrowers report putting their lives on hold - a reality that contradicts the campaign's emphasis on "keeping alive the American dream"8.

Ideological and Cultural Concerns

The campaign notably avoids addressing concerns about campus culture and ideological homogeneity that research shows are significant factors in changing attitudes toward higher education.

Faculty Ideological Imbalance

Research from Harvard University reveals striking ideological homogeneity among faculty, with 37% identifying as "very liberal" and just 1% as "conservative"12. This imbalance contributes to perceptions of higher education as disconnected from the values of many Americans - particularly explaining why the campaign struggled to persuade conservative Americans that "higher education plays a critical role in maintaining a healthy democracy."

Conclusion: Bridging the Perception Gap

The Why College Matters campaign demonstrates that positive messaging can improve abstract perceptions of higher education's value. However, for these improved perceptions to translate into meaningful change in Americans' relationship with higher education, campaigns must address the substantive concerns documented in research.

The disconnects identified here - regarding debt, employment outcomes, credential inflation, generational attitudes, mental health impacts, and ideological concerns - represent real issues that significantly impact Americans' decisions about higher education. Any campaign seeking to genuinely improve perceptions of higher education's value must engage with these realities rather than focusing solely on abstract benefits.

Simply improving "feelings" about higher education without addressing concrete problems risks further widening the gap between institutional messaging and public experience - potentially eroding rather than building trust in higher education as an institution.

Citations:

1. https://www.americansurveycenter.org/research/disconnected-places-and-spaces/
2. https://scholarworks.wm.edu/cgi/viewcontent.cgi?article=1876&context=aspubs
3. https://stevenschwartz.substack.com/p/degree-inflation-undermining-the
4. https://eab.com/about/newsroom/press/2024-first-year-experience-survey/
5. https://www.newsweek.com/student-loans-hindering-american-prosperity-survey-1839337
6. https://www.burningglassinstitute.org/research/underemployment
7. https://www.insidehighered.com/opinion/blogs/higher-ed-gamma/2024/06/03/colleges-and-universities-new-mandate-rebuild-public-trust
8. https://thehill.com/changing-america/enrichment/education/3658639-majority-of-student-loan-borrowers-link-mental-health-issues-to-their-debt/
9. https://measureofamerica.org/youth-disconnection-2024/
10. https://scholarworks.gsu.edu/cgi/viewcontent.cgi?article=1037&context=aysps_dissertations
11. https://en.wikipedia.org/wiki/Educational_inflation
12. https://fee.org/articles/harvard-faculty-survey-reveals-striking-ideological-bias-but-more-balanced-higher-education-options-are-emerging/
13. https://www.aaup.org/article/college-financing-and-plight-middle-class
14. https://www.insidehighered.com/news/students/academics/2024/02/22/more-half-recent-four-year-college-grads-underemployed
15. https://www.businessinsider.com/gen-z-value-of-college-higher-education-student-debt-tuition-2023-12
16. https://lbcurrent.com/opinions/2024/09/04/debts-dilemma-student-loans-and-its-effects-on-mental-health/
17. https://www.cssny.org/news/entry/national-poll-economic-hardships-american-middle-class-true-cost-of-living-press-release
18. https://www.acenet.edu/Documents/Anatomy-of-College-Tuition.pdf
19. https://www.cis.org.au/publication/degree-inflation-undermining-the-value-of-higher-education/
20. https://www.insidehighered.com/news/quick-takes/2024/05/14/third-first-year-students-experience-bias-targeting
21. https://www.rwjf.org/en/about-rwjf/newsroom/2023/10/survey-reveals-areas-of-fragmentation-and-common-ground-in-a-complicated-america.html
22. https://www.hamiltonproject.org/publication/post/regardless-of-the-cost-college-still-matters/
23. https://www.richardchambers.com/education-inflation-bad-for-education-bad-for-business/
24. https://www.aaup.org/article/data-snapshot-whom-does-campus-reform-target-and-what-are-effects
25. https://www.minneapolisfed.org/article/2007/has-middle-america-stagnated
26. https://www.reddit.com/r/StudentLoans/comments/lmijoy/why_cant_they_just_lower_tuition/
27. https://www.reddit.com/r/highereducation/comments/177qjtk/degree_inflation_is_a_huge_problem/
28. https://www.insidehighered.com/news/institutions/2025/03/06/survey-presidents-point-drivers-declining-public-trust
29. https://www.pewresearch.org/short-reads/2024/09/18/facts-about-student-loans/
30. https://stradaeducation.org/wp-content/uploads/2024/02/Talent-Disrupted.pdf
31. https://thehill.com/opinion/education/4375280-its-clear-colleges-today-lack-moral-clarity/
32. https://www.apa.org/gradpsych/2013/01/debt
33. https://center-forward.org/wp-content/uploads/2023/05/39370-Center-Forward-Student-Loans-Survey-Analysis-F04.11.23.pdf
34. https://www.highereddive.com/news/half-of-graduates-end-up-underemployed-what-does-that-mean-for-colleges/710836/
35. https://jamesgmartin.center/2019/07/exposing-the-moral-flaws-in-our-higher-education-system/
36. https://www.freedomdebtrelief.com/learn/loans/how-student-loans-affect-mental-health/
37. https://educationdata.org/student-loan-debt-by-income-level
38. https://www.insidehighered.com/news/students/careers/2024/07/01/how-concerning-underemployment-graduates
39. https://www.thefire.org/facultyreport
40. https://www.ellucian.com/news/national-survey-reveals-59-college-students-considered-dropping-out-due-financial-stress

The Haves and Have Nots of Higher Education and Student Loan Debt

In a move that has raised eyebrows across Washington and beyond, President Donald Trump recently announced a plan to transfer the U.S. Department of Education’s vast student loan portfolio—totaling a staggering $1.8 trillion—to the Small Business Administration (SBA). This bold step is ostensibly designed to streamline the management of federal student loans, but it is also seen by many as the first move in a larger effort to dismantle the Department of Education entirely, reduce federal oversight, and privatize key aspects of the student loan system. Alongside this plan, there are growing discussions about eliminating essential borrower protections, including programs like Public Service Loan Forgiveness (PSLF), Pay As You Earn (PAYE), Income-Contingent Repayment (ICR), and the Borrower Defense to Repayment program, all of which have offered critical relief to millions of students. Additionally, the rollback of Gainful Employment regulations—which were designed to protect students from predatory for-profit institutions—further signals a shift toward private sector control, which has historically benefited lenders over borrowers.

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The Alleged 'Rescue' of the Loan Portfolio

The White House has framed the transfer of the student loan portfolio to the SBA as a necessary step to relieve the Department of Education (ED) of a heavy burden, positioning the SBA as the new “caretaker” of the nation’s student debt. According to President Trump, the SBA—under the leadership of Kelly Loeffler—will now handle the $1.8 trillion student loan portfolio, while the Department of Education focuses on other key educational initiatives.

For some, the move seems like a fresh approach to a problem that has long plagued U.S. higher education: the overwhelming student debt crisis. However, a deeper look into the mechanics of the transfer suggests that this could be the first step toward a far more troubling goal: the dismantling of the federal student loan system and the privatization of debt, a shift that could harm millions of consumers in the process.

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The SBA’s Inexperience with Student Loans

The SBA, traditionally tasked with managing small business loans, lacks the expertise to effectively manage the complex structure of federal student loans, which include income-driven repayment plans, loan forgiveness programs, and various protections for struggling borrowers. With the agency also facing significant staffing cuts, it’s highly unlikely that the SBA will be able to competently handle such a vast and complicated portfolio—especially when 40% of these loans are already in default or behind on payments.

This raises an obvious question: is the SBA being set up to fail? Some insiders suggest that the failure of the SBA to properly manage the student loan portfolio could be deliberate—creating a crisis that would justify selling off the portfolio to private companies, thus privatizing the entire system.

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The Planned Failure: A Strategy for Privatization?

According to several former senior officials within the Department of Education, the transfer of the student loan portfolio to the SBA could be a calculated move to destabilize the federal loan system. The apparent failure of the SBA to manage the loans would then serve as a justification for transferring the loans to the private sector. This mirrors tactics used in other sectors where privatization was pursued under the guise of government inefficiency. The fear is that this move could ultimately lead to for-profit companies taking over the loan system, with borrowers facing higher interest rates, stricter repayment terms, and the loss of essential protections.

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Who Stands to Gain from Privatizing Student Loans?

The shift toward privatizing student loans stands to benefit several key players in the financial and educational sectors, particularly for-profit companies and private lenders who have long pushed for deregulation and profit-driven management of student debt. The primary beneficiaries would include:

1. Private Lenders and Financial Institutions: Banks, investment firms, and loan servicing companies are the most obvious winners in a privatized student loan system. With the federal government stepping back, these entities would gain control over the $1.8 trillion portfolio, allowing them to set higher interest rates, stricter repayment terms, and impose fees on borrowers. This would turn student loans into even more lucrative financial products for the private sector.

2. For-Profit Educational Institutions: For-profit colleges, which often rely on student loans to fund their operations, could also stand to gain. These institutions—many of which have faced significant scrutiny for high tuition costs and poor student outcomes—would benefit from a less regulated environment. Without the Gainful Employment regulations, which were designed to hold these institutions accountable for their job placement and earnings data, they would face fewer restrictions on their recruitment practices and financial dealings, potentially allowing them to continue enrolling students in expensive, low-quality programs.

3. Servicers and Debt Collection Agencies: Loan servicers and debt collection agencies that would likely take over the management of student loans in a privatized system stand to profit greatly. By controlling the servicing of student loans, these companies can increase their fees and aggressively pursue defaulting borrowers, further exacerbating the financial hardship for many students. These entities would benefit from a less regulated environment where the focus would shift toward profitability, often at the expense of borrowers.

4. Political Donors and Lobbyists: Financial institutions and for-profit education providers have historically been major political donors and lobbyists, particularly to policymakers who have pushed for deregulation of student loan systems. Privatization could provide these stakeholders with the opportunity to consolidate their power over the student loan industry, influencing policy decisions in their favor and ensuring continued access to profits from the student loan market.

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A History of Struggles: Lack of Oversight and Privatization Since the 1980s

The idea of privatizing student loans and dismantling federal oversight is not entirely new. In fact, the U.S. student loan system has been struggling for decades due to a lack of oversight and a trend toward privatization dating back to the 1980s. The federal government’s role as a guarantor of student loans—starting with the creation of the Guaranteed Student Loan (GSL) program in the 1960s—was eventually scaled back, leading to a rise in private student loans. As private lenders entered the student loan market, particularly during the 1990s and 2000s, the system became increasingly unregulated, leading to rising debt levels and predatory lending practices.

By the 1980s, the federal government’s reliance on private institutions to handle student loans led to a lack of transparency, accountability, and consumer protections. In particular, private lenders began to offer loans with fewer safeguards, contributing to the explosion of student loan debt and the proliferation of for-profit colleges that preyed on vulnerable students. The government, despite its involvement, increasingly stepped back from actively managing the loan system, leaving students with limited options for relief when they fell into financial distress.

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The Consequences of Deregulation: Elite Colleges and the Growing Educated Underclass

One of the most significant byproducts of the shift toward privatization and deregulation in U.S. higher education has been the growth of a growing educated underclass. While elite colleges have continued to thrive, expanding their endowments and increasing their tuition fees, a large segment of the population is left with a degree and overwhelming debt that fails to deliver on its promise. Over the past several decades, prestigious universities have only gotten wealthier, with many now sitting on endowments of billions of dollars. These institutions benefit from the student loan system, which allows students to take on more debt to afford high tuition costs, all while their wealthy alumni networks and expansive endowments only grow larger.

At the same time, a growing number of students from lower-income backgrounds—many of whom attend for-profit or underfunded public colleges—are graduating with significant debt and few prospects for stable, high-paying careers. This has created a growing “educated underclass,” where graduates with degrees struggle to find employment that pays enough to manage their loan repayment, further exacerbating wealth inequality.

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The Dangers of Future Issues: AI, Automation, and the Loss of Good Jobs

Looking to the future, the privatization of student loans and the increasing burden of student debt could be exacerbated by emerging technological shifts, particularly in the fields of artificial intelligence (AI) and automation. As industries evolve and more jobs become automated, many middle-class careers traditionally accessible to graduates may disappear or evolve into low-wage, low-security positions. This could lead to an even larger divide between the "haves" and "have-nots" in society, where only those with connections or elite educational backgrounds can secure stable, high-paying employment.

For students entering the workforce with massive student loan debt, this would present a troubling scenario where their ability to repay their loans becomes even more difficult as fewer well-paying jobs are available. This, in turn, would increase the financial strain on future generations of students who are already navigating a rapidly changing job market. For many, student loans could become an insurmountable barrier, keeping them trapped in cycles of debt that are impossible to escape.

Moreover, the increasing reliance on private companies to manage student loans, with their focus on profitability, could exacerbate these issues by offering fewer opportunities for income-driven repayment plans or relief options that account for the economic realities of an AI-powered, automation-driven economy. As the job market continues to shrink and evolve, the need for federal programs to support borrowers through tough economic times will only grow.

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The Impact of Eliminating Borrower Protections

The elimination of borrower protections—such as PSLF, PAYE, ICR, and Borrower Defense to Repayment—would significantly worsen the student loan crisis. Public Service Loan Forgiveness, for example, allows individuals working in essential public service careers to receive loan forgiveness after ten years of qualifying payments. Without this program, many public servants would face a lifetime of insurmountable debt. Similarly, income-driven repayment programs allow borrowers to repay loans based on their income, making it easier for those in low-paying fields to manage their debt.

The Borrower Defense to Repayment program provides vital relief to students who were defrauded by their institutions. Without strong enforcement of this program, students may have no recourse to seek relief from predatory schools. The rollback of Gainful Employment regulations could further expose students to the risks of attending for-profit institutions that fail to deliver on their promises.

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The Long-Term Fallout: A Dangerous Precedent

The long-term consequences of privatizing student loans could include exacerbating wealth inequality, widening the racial wealth gap, and creating an economic landscape where education debt is a permanent burden on a generation of students. If privatization moves forward, the financial burden of education will likely become a far more persistent and overwhelming problem, especially for those who can least afford it.

What’s particularly concerning is that in past crises, it’s the elites—wealthy colleges, financial institutions, and large corporations—that have consistently received the bulk of government bailouts. The same institutions that contribute the least to solving the country’s educational inequities continue to benefit from taxpayer-funded relief. If privatization moves forward, we cannot allow the same pattern to repeat itself. The majority of relief should go to those most burdened by student debt, not those who already have the means to navigate the system with ease.

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The Future of Higher Education Debt: A Call to Protect Federal Loan Programs

At the Higher Education Inquirer, we stand in full support of federal student loan forgiveness and repayment programs, including PSLF, PAYE, and ICR, as they offer essential pathways for borrowers, especially public service workers and low-income individuals. These programs provide vital relief to borrowers, allowing them to focus on their careers without the burden of overwhelming debt. We urge policymakers to protect, enhance, and expand these vital initiatives to ensure that education remains accessible and equitable for all.

As we continue to face challenges in higher education financing, it is crucial to learn from past mistakes and advocate for systems that prioritize the well-being of students, not profit. The proposed privatization of the student loan system threatens to undo decades of progress and burden future generations with lifelong debt. It is essential that we protect these programs and work toward a solution that prioritizes education and fairness over corporate interests.

College Meltdown 2025, Quarter 1: Here we are, at another fork in the road.

In an August 2022 interview with Gary Stocker of College Viability, I offered a chilling projection for U.S. higher education and the College Meltdown:

“The worst-case scenario is that colleges are involved on both sides of a Second US Civil War between Christian Fundamentalists and neoliberals. Working families will take the largest hit.”

It’s a stark and provocative warning, but one grounded in decades of neoliberal policy, predatory capitalism, and ideological warfare. From our perspective at the Higher Education Inquirer, the College Meltdown is not a future risk—it’s a slow-moving catastrophe already unfolding.

Two Fronts in a Cultural and Economic War

On one side of this looming conflict are Christian fundamentalists who seek to remake public education in their own image: purging curricula of critical perspectives, defunding public universities, and promoting ideological orthodoxy over inquiry.

On the other side are neoliberal technocrats, who have transformed higher education into a marketplace of credentials, debt, and precarious labor. Under their regime, colleges prioritize growth, branding, and profit over education, equity, and labor rights.

Both groups, while ideologically different, are willing to use colleges as instruments of power. In doing so, they turn institutions of higher learning into ideological battlegrounds, undermining their civic purpose.

The Educated Underclass: Evidence of Collapse

One of the most visible outcomes of this dysfunction is the rise of the educated underclass. These are people who did what they were told: they went to college, took on debt, and earned degrees. Yet instead of opportunity, they found instability.

“A large proportion of those who have attended colleges have become part of a growing educated underclass,” Shaulis noted in his interview with Stocker.

This includes:

• Adjunct instructors working multiple jobs without benefits

• Degree holders underemployed in gig work

• Students lured into expensive, low-return programs at subprime colleges

These individuals are too educated for social support but too broke for economic stability. They are the byproduct of a system that treats education as a private investment rather than a public good.

Colleges in Crisis: A Systemic Failure

At the Higher Education Inquirer, our concept of the College Meltdown describes a long-term decline marked by falling enrollment, rising costs, debt peonage, and declining academic labor conditions:

• Enrollment has been falling since 2011, with sharp declines in community colleges and regional publics.

• Student debt has exploded, with minimal returns for many graduates.

• Academic labor is being deskilled, with "robocolleges" relying on underpaid, non-tenure-track staff or automated instruction.

• State funding is shrinking, as aging populations drive up Medicaid costs and crowd out investment in public higher education.

Enter the Trump Administration (2025)

The return of Donald Trump to the presidency in 2025 has further accelerated the higher ed crisis. His administration is now actively contributing to the system’s unraveling:

Deregulation and Predatory Practices

Trump’s Department of Education is dismantling federal oversight of for-profit colleges, weakening gainful employment protections and allowing discredited institutions back into the federal aid system. This benefits subprime colleges that trap students in cycles of debt.

Political Weaponization of Higher Ed

Trump-aligned state governments and federal agencies are targeting DEI initiatives, restricting academic freedom, and enforcing ideological conformity. Public colleges are increasingly being used to wage cultural wars.

Funding Cuts and Favoritism

Funding is being diverted from public institutions toward private religious colleges and corporate-friendly training programs. Meanwhile, community colleges and regional universities are being left to die on the vine.

Undermining Debt Relief

Efforts to reform or forgive student loans have been stalled or reversed. Borrowers are left stranded in opaque systems, while private loans surge in popularity—often with worse terms and even less accountability.

A Best-Case vs. Worst-Case Future

When asked what the next few years could look like, I offered a fork in the road:

Best case: Colleges become transparent, accountable, and aligned with the public good, confronting crises like climate change, inequality, and authoritarianism.

Worst case: Colleges become entrenched ideological battlegrounds, deepening inequality and social fragmentation. The educated underclass grows, and higher education becomes an engine of despair rather than mobility.

Conclusion

The College Meltdown is not a singular event—it is a long-term systemic crisis. Under the combined forces of privatization, political polarization, and demographic stress, U.S. higher education is being hollowed out.

As colleges pick sides in a broader culture war, the public mission of higher education is being sacrificed. The working class and the educated underclass are the casualties of a system that promised prosperity but delivered precarity.

In this volatile moment, the future of American higher education may well mirror the broader American crisis: one defined by deepening divides, fraying institutions, and a desperate need for accountability, justice, and reinvention.