by Alex Knepper
It is almost impossible to convey how wretchedly awful the arguments against student loan forgiveness are until the entire nexus of deception is unraveled and every illusion is laid bare. Student loan forgiveness is thought by some on the right to be a particularly thorny issue for the left, perhaps the epitome of the left-wing tendency to just promise ‘free stuff’ to the voters, to incentivize taking advantage of the system, to wage class war against the rich and soak wealthy taxpayers with the costs of middle-class education instead of asking people to take responsibility for their own lives.
This is mind-shatteringly backwards. Everything opponents of a jubilee say against student loan forgiveness is in fact applicable to the wealthy and well-connected people and institutions who openly conspired to exact tribute from the American people for their private benefit — a pattern that has become depressingly ordinary over the last 40 years, our ongoing Second Gilded Age.
The story of the student loan fiasco — half-tragedy, half-farce — and the road to a potential jubilee is heavily one about moral hazard, just as conservatives say. But the moral hazard involved is not the product of students. University administrators, bankers, bureaucrats, lobbyists, and politicians have written favored actors among them a blank check to exact tribute from the emergent middle class, manufacture a rigged game in which the consumer and taxpayer assume 100% of the risk of a loan, consciously cultivate perverse incentives for universities to regularly raise costs on a middle-class essential, hand out tens of thousands of dollars with no strings attached to 18-year-olds with no credit history, and yet simultaneously manage to offer products that are becoming less and less valuable over time — and then have had the ineffable audacity to claim that the students and their families are the ones who acted irresponsibly.
It is truly the height of shamelessness to look at a gigantic bank or government contractor lending $50,000 to an 18-year-old with no credit history with no strings attached and declare that the 18-year-old is the one being appallingly reckless.
What future predatory schemes have we unleashed on the middle class without knowing it, owing to the green light this one received from every institution with the power to call a halt to it?
Why do government contractors and banks engage in this behavior? Because the law all but guarantees them the money. That’s actually not how it’s supposed to be. Although student loan lobbyists and apologists like to suggest that the moral calculus here can be reduced to something like ‘You took out a loan – pay it back. One must pay one’s debts’, since interest is charged on the student there is in fact an obvious incentive to the creditor to lend the money; it is not an altruistic good deed; hence creditor and debtor ordinarily are both asked to assume some risk. Typically, the creditor retains more power, yes. But the creditor is still hoping to gain, and ordinary rules and ethics would insist that he assume some risk in order to do so.
Student loans are not dischargeable in bankruptcy, thereby removing the consumer’s only weapon against usury and a powerful incentive for lenders to avoid making reckless loans. President George W. Bush, with the votes of senators like Joe Biden and Hillary Clinton, signed this into law in 2005 as part of the so-called Bankruptcy Abuse Prevention and Consumer Protection Act. The argument for this is essentially that if students can take out the loans with no strings attached and with relatively lenient repayment options and relatively low interest rates, then they should be obligated to pay them.
There are a number of problems here. This logic implies that the respective responsibilities of each side are reconciled by balancing poorly-designed incentives benefiting debtors with poorly-designed incentives benefiting creditors. Interest rates on federal student loans may be fairly low compared to interest rates on private student loans, but it is peculiar that most of us take for granted that of course the government is going to want to profit off of our nation’s students in the first place; this is apparently just a natural, normal, morally unproblematic thing to do. Moreover, those private student loans still represent over $100 billion in debt and millions of students, and those private companies benefit each time the market price of a degree increases, so the banks have a strong incentive to fuel the cycle.
It strains belief to think that the banks in the student loan game did not understand that the bankruptcy regulations gave the green light to university administrators to keep jacking up the price of a degree, knowing that government would cover the cost no matter what it is, with no strings attached. All of that loan money was a gigantic, lush subsidy to universities. College bureaucracies expanded, many universities received lavish makeovers and helped themselves to enormous sports and entertainment installations — while adjunct professors — teachers and researchers, the heart and soul of the university — continue to be paid like a trapped servant class; the value of a degree continued to water down, and still the price kept going up, up, up. And as that price went up, so did the interest collected by banks on their slice of the student loan con.
In 2005, rather than colluding to swindle the middle class by taking away bankruptcy protections for borrowers, the people’s greatest weapon against usury, we can imagine a situation in which the university administrators, the bankers, the politicians, the bureaucrats, and the lobbyists came together and recognized that they had a serious problem on their hands. They could have come together to acknowledge the growing cost-spiral and forged solutions to keep it from getting out of control. They could have recognized that America needs a strong, educated middle-class, and that as people who collectively know more about these issues than anyone were in a unique position to be part of the solution.
This shouldn’t be so farfetched; it is in no one’s long-term interest for anything to have turned out the way it has. But literally nobody expects that anybody belonging to any of those groups would ever do such a thing. It’s taken completely for granted that they are all going to approach the situation trying to figure out how they can privately benefit in the short-term — at other people’s expense, if need be. And that’s what all of them did: instead of putting their heads together to figure out how to stop the cost-spiral, they colluded against the public, just as Adam Smith warned us.
What if we expected — demanded — responsibility from our institutions? How different would the conversation be if we didn’t just take for granted that of course the universities and the bureaucrats and the bankers are out to screw us over and so therefore we’ve got to be vigilant, every-man-for-himself style? What if we stopped assuming that things have to be this way?
There is roughly $1 trillion in outstanding debt the government is due to collect over the next 20 years, averaging about $50 billion a year — before factoring in the saved money on contractors who do the collecting and the sometimes-futile pursuit of delinquent loans, plus those paying little or nothing on the income-based repayment plan. We in fact set aside the same amount of money over the same period of time for a fighter jet program. We increased the Pentagon’s budget by $50 billion last year. We cut taxes for millionaires again two years ago and are running trillion-dollar deficits to do it. Why is there never a question of whether there is enough money to go around when it comes to defense contractors and millionaires? Why is it only time to tighten our belts when we’re going to do something for regular Americans, for once? Why isn’t it time for the defense contractors and millionaires to tighten their belts and sacrifice a little more? Why is it always the same groups of people being asked to do the sacrificing for the greater good of the economy? The federal government extracted nothing from the criminals who nearly brought down the world economy, yet this same clique of insiders and those imitating them are today escalating a scheme in which they exact tribute from rising middle-class Americans.
That’s what we should call them: not loans, but tributes.
And everyone gets a slice: the bureaucrats, the bankers, the college administrators, the contractors and lobbyists. Meanwhile, our universities treat the heart and soul of the institution — professors — like indentured servants, giving legions of PhDs little choice but to accept degrading economic conditions as ‘adjuncts’ while the imperial march of ordinary administrative workers who benefit from the student loan regime make significantly more money — while the students are treated like veritable cash cows, trapped and helpless before the ‘Yale or Jail’ dilemma, facing either heavy debt or downward mobility.
The American right has responded to this situation shamefully, waging generational warfare against Millennials, willfully misrepresenting the scandalous state of the student loan situation as the product of lazy people majoring in social justice. The archetypal ‘soft’ degree, the Gender Studies degree, accounts for barely over 1,000 degrees awarded each year out of over 2 million. Multiply that by twenty and ‘social justice’ degrees account for one percent of the total. Most Americans major in ‘practical’ subjects. Those wells just are increasingly dry, too.
The trade school hoax is no alternative: send everyone to trade school, and in 10 years there will be the same degradation of the value of those skills, the same over=saturation of markets, the same ballooning costs of acquiring the education, and then at the end of it all the American right will ridicule everyone who went to trade school as foolish for majoring in yesterday’s skills when the Asian man promising everyone $1,000 warned them that the robots were coming, and find some way to blame ‘government’ in the abstract like always.
The only way to keep college useful for the foreseeable future is to make four years of higher education of any kind free to all Americans.
This would get everyone into the market, allow us to impose rules and regulations on colleges that won’t be subject to radically changing market conditions, and would free Americans to pursue their educational dreams without the horror of falling into debt before finishing a degree, meeting market conditions that render college a raw deal, or having to overcome heavy obstacles to make college education a real possibility.
The government could even get in the game itself and partner with community colleges, tap into the army of underappreciated PhDs and put them to work teaching in our communities, and offer a lower-cost public alternative to the current racket. We would encourage people to acquire all sorts of skills, because the market is unpredictable, and we don’t want an overspecialized population that only knows how to think in a handful of ways. Almost any kind of college degree would prove useful in some way, and the general skills one gains in college — how to be a better writer, researcher, thinker, etc. — are useful in life and as citizens. This may create economic value — I think it really would — but more importantly, it would make this country a better place to live. We should be a country that invests in our people, in their quality of life, and in the whole human being, not just the human being as economic actor. The university must be more than a jobs training center for the upper classes.
One practical policy solution to control costs would be to tie funding for particular universities to tuition-reduction goals; schools that can’t meet a standard percentage in tuition reduction will lose funding and access to federal and state dollars.
We should erase student debt for everyone, including privately-held debt, because the point of eliminating student debt isn’t to punish the banks and the contractors and the lobbyists and the universities — the point is to affirm that education is not just an individual good but a social good, that the student has gotten a raw deal, and that if we can find money for the Pentagon that it didn’t even ask for, we can find just as much money for students and their families. And those who feel they got a raw deal by skipping college to avoid the debt should be free to reverse their decision and receive four free years of higher education for themselves, paid for by new taxes on those who have been waging class war against America’s middle class and laborers for 40 years. We can think of it as their thank you for the 40-year financial party underwritten by the minds, hearts, and hands of America’s middle and working classes. And the Education Department should issue a formal apology for trying to make a buck off of America’s students and commit to never again perpetuating a scheme like this.
But there is more: by eliminating the need for millions of American families to divert money from the real economy into the spreadsheets of bureaucrats and contractors and bankers, more money will be spent on real goods and services at real businesses by these same Americans in their capacity as consumers. The money will still go somewhere: it will circulate in the economy in which most people actually participate, rather than being exacted as tribute to large, anonymous entities that create little value in that economy.
Finally, all student loans that have already been repaid should be reimbursed gradually. Some people may wish to voluntarily write this off as a loss, but it would not be fair to not seek restorative justice with these people. It might not be practical for the government to pay all of it back at once, of course; it might be given back to people over a decade, for instance — but it must be done if we are to really right what went wrong. We have the money; there is a massive propaganda campaign to deceive Americans into thinking we don’t have the money — but we certainly always seem to have the money when it’s for something the donor class wants. When the people crowing about individual responsibility call for reversing the tax cuts financed by trillion-dollar deficits, we will know they believe their rhetoric about fiscal responsibility.
Here is a motto all should know: No individual responsibility without institutional responsibility! It is only in the context of functioning and responsible institutions that responsibility toward them is sensible and intelligible.
Universities should also systematically clean house, radically scale back non-academic programs until tuition is under control and all staff are paid fairly, from the adjunct professors to the kitchen workers, roll back administrative bloat, and issue conspicuous and intelligible reports explaining the economic and non-economic values of various degrees, including data from actual outcomes among graduates. Universities must disavow the desire to ‘run the university like a business’ and it must disavow the desire to prioritize ‘the experience’ over the education. It should be basic civics to affirm that the university functions as a social good and a center of priceless education — and not just as a jobs-training and salary-maximizing center.
I don’t think that every student who took out a loan was making a responsible decision. I just think that if we’re going to moralize about taking responsibility for one’s actions, we should have some accountability for the people who manufactured this vicious cost spiral, loaded 100% of the risks of college financing onto students and their families, initiated a massive expansion of administrative bloat while squeezing every last drop of surplus value out of existentially trapped adjuncts and everyday wage-workers like kitchen workers and custodial staff, and prioritized profit for university administrators, student loan contractors and lobbyists, and bankers against the people who are supposed to be the heart and soul of the university. The public is ready to revolt against this scheme of “socialism for the rich and rugged individualism for the poor,” in Dr. King’s immortal words.
In revolting against this scheme, Americans will be doing little more than conservatively reacting against the radical hijacking of Constitutional government for and by the people by corporate predators.