Misunderstanding Student Debt

This is a copy of an email sent to Politics War Room in response to the hosts discussion of student loan debt and proposals to cancel some or part of it. Politics War Room, “Revisionist History: The Triplicate Program and Opioid Epidemic”, July 10, 2022.

Hello Al and James,

I have to reply to your comments about student loan debt because there is a basic misunderstanding of how this $1.4 trillion (and rising) debt came about in the first place.  Student loan debt is the result of public policy choices that thought it best to put more of the cost of higher education on the shoulders of students and finance those costs with their debt.  This is literally what Ronald Reagan, then governor of California, said in 1967 when he explained why he was reducing public tuition support in California.

Other states like Florida and New York followed Reagan and California and by the 1980s state legislatures across the country were cutting public tax support for higher education while at the same time the federal loan program was increasing to fill the funding void.  That funding transfer didn’t quite satisfy the cost-cutting politicians or cover remaining higher ed funding needs.  State colleges and universities faced “retrenchment” requirements throughout the 1980s based on the uninformed notion that higher ed should be run like a business and cut costs to balance the budgets if they could not raise funds.  The result were program cuts and tuition increases; often tuition increased at incrementally faster rates as a part of the budget-balancing act and loans were there to pick up the slack.

The problem with student loan debt is the fact that it is the outcome of deliberate public policy choices that cut public support in favor of putting the obligation of that support on students and funding it with their debt.  That is the student loan industry and the mess it created in a nutshell.

Those funding strategies failed.  Public universities and colleges now offer less, cost more, and once again the demographic divide between who attends and graduates from college is increasing based on factors like race and income.

Prior to the 1980s, when public support for higher education was more robust, all students attending college, whether from families with wealth or otherwise, benefited from lower tuition costs.  The public benefited, too — indeed, I would consider an educated population a public good — the public benefited from more educated people entering the workforce and society while not being burdened with years of debt.  If you have driven on a highway, attended grade school, or seen a doctor, you benefited.  (But I believe there are intangible benefits of an educated society that are obvious today.)  

And an argument that Al was starting to make about who would pay for canceling loans misses the point of the problem in the first place (what I am arguing here) and overall how and why taxes are collected and used to fund programs.  It isn’t the case that a dollar will be taken from someone who paid their loans to pay for someone who didn’t.  We ALL pay taxes and we don’t allocate our tax payments to our personal wants and needs.  Taxes pay for democracy.  If we had a for-fee system we wouldn’t have much of a democracy.  If a hurricane wipes out coastal cities our collective tax dollars help local governments, businesses, and individuals recover.  That’s the way we want a democratic government to work, right?

Whether someone is making $25,000 a year or $250,000 a year, if after years of payments they are still paying for student loans, those loans are a problem.  Unlike tax cuts, canceling this debt and freeing up the monthly payments that service that debt, will deliver strong economic stimulus and directly help people.  

But it is more than just canceling the debt that needs attention. The United States and our state governments must restore public funding for higher education.  Higher education — trade schools, community colleges, too — deliver an important and underappreciated public good:  An educated public!

My two cents…

Thanks again!

–Shane