Jason Bailey: It’s time to cancel student debt and get back to education as a public good
President Biden’s recent statements that he will forgive some student loan debt are hopeful news for the 616,000 Kentuckians who owe them, our communities, and the economy. It will also be a chance to fix a broken and unsustainable system and reengage in education as a public good that benefits us all.
Student loan debt, which exceeds $1.6 trillion nationally and $20.5 billion in Kentucky, has been an evolving problem for decades. Josh Mitchell’s recent book The Debt Trap: How Student Loans Became a National Catastrophe tells how we got here through the financial motives of powerful interests and misguided assumptions about the purpose and benefits of education.
The story begins with the admirable goal of expanding college access in the 1960s. However, in the debate at the time as to whether higher education was primarily a public good or a personal responsibility, the latter prevailed. Congress made the pivotal decision to fund the college primarily through loans rather than grants.
Banks and other private lenders got involved and lobbied to create a system that brought them huge profits with full federal financial support and little government oversight. Because students could rely on easy access to credit, universities significantly increased tuition fees. Predatory, for-profit colleges also entered the scene, using large marketing budgets to steer students into programs of questionable value and low graduation rates. And lenders have successfully lobbied to steadily expand loan programs, making it nearly impossible to clear student debt through bankruptcy.
States like Kentucky then withdrew from funding universities and community colleges with public dollars, using the money instead for tax cuts on corporations and the wealthy, and letting credit debt fill the gap. In Kentucky, the legislature has cut state funding for higher education by 1/3 only since 2008. And with public money making up a shrinking portion of their budgets, universities increasingly disengaged themselves from their public responsibilities and began behaving more like corporations — with salaries up to reflect it.
These trends have also been spurred by the common canard that education is the answer to all of our economic problems, ranging from poverty to stagnant wages to vanishing union jobs. If the problem of bad jobs was a “skills gap,” it could be solved if workers were simply given more and better skills. The debt would be worth it.
These claims have now been shaken by decades of practical experience. In Kentucky, the proportion of adults with at least a four-year degree has increased from 11% in 1980 to 24% today, but average wages have not improved over that time. The resulting frustration is why some of the workers who are now participating in unionizing their jobs at companies like Starbucks and Amazon have college degrees. The problem has always been a lack of manpower, not a lack of education.
The current state of the student loan debt problem is staggering. For example, since 1964, tuition at the University of Louisville has risen 376% after adjusting for inflation. Today, nearly one in five adult Kentuckians owes student loan debt, according to a report by the Kentucky Center for Economic Policy. Not all of these borrowers are young people — about 20,000 Kentuckians with an average debt of $38,000 are at or near retirement age. Black students in Kentucky are more likely to have college debt due to reduced family wealth caused by discrimination, and many of those Kentuckians with debt do not graduate — in part because they cannot afford to continue.
If President Biden canceled $18,000 in loans, it would completely wipe out the debt of half of Kentucky’s borrowers. If he canceled $40,000 in debt, 75% or 462,000 borrowers in Kentucky would cancel their loans. Such support would impact those affected and benefit the broader economy as this debt no longer prevents families from starting a business, buying a home, saving for retirement and more.
Knowing how popular it will be, opponents are outraged by the idea of student debt relief and grasping at straws. One argument says it’s not fair to all the people who’ve already paid off their student debt. That’s as silly as saying we should never have started Head Start in the 1960’s because it wasn’t fair to the kids who couldn’t go to preschool before. progress is good!
Student debt relief isn’t the only thing we need to do to help people financially (a good place to start is for Congress to stop blocking the Build Back Better Act, which addresses family expenses in myriad ways). But it’s on the table because of a unique law that gives the president the power to forgive student debt through the Department of Education without congressional intervention.
Periodic debt cancellation is a tradition as old as the anniversaries proclaimed in the Bible. Then it was seen as a sacred declaration and a way for an entire people to start anew. Given the sordid history of student loans, the economic toll of that debt, and the importance of education to our democracy, it’s time for sweeping action on this matter.
Jason Bailey is executive director of the Kentucky Center for Economic Policy.