In the United States, education is supposed to be an equalizer, and higher education in particular is key to improving your life chances. At least that’s how the story goes.
But in fact, millions of people are unable to access higher education without going into debt. More than 44 million people owe student debt, and the total amount of outstanding debt in the United States has more than tripled since 2006, totaling more than $1.5 trillion — almost 8 percent of the country’s GDP.
Rather than serving as an engine of economic advancement for the poor and working class, twenty-first-century higher education has created more inequality through the explosion in student debt. While the very rich spend hundreds of thousands of dollars to bribe or trick their way into college, the poor, working class, and middle class are forced to pay a premium to one section of the employing class (student lenders and loan servicing companies) to obtain a credential so the families that bought their way into elite schools can exploit their labor. The burden of student debt falls heaviest on black and Hispanic students, and the disparity in the amount owed between black students and white students grows significantly after graduation.
But it doesn’t have to be this way. The secretary of education has the power to wipe out most student debt with the stroke of a pen.
President Bernie Sanders could do this. If he wants to win the lifelong loyalty of tens of millions of predominantly young Americans to his politics, he should promise to cancel student debt as part of a bigger plan to advance tuition-free college for all, then follow through when he’s elected.
Student lenders and financial companies prey on poor people (and, with higher education costs skyrocketing, even on the relatively comfortable) in order to make obscene amounts of money. The largest loan servicing companies, AES, Navient, and Nelnet, had revenues of $10.74 billion, $5.67 billion, and $1.76 billion in 2018, respectively. These same companies had almost nine thousand consumer complaints filed against them for shady business practices in 2017.
And the federal government, rather than ensure tuition to higher education is either nonexistent or affordable, instead takes the largest slice of the student-debt pie for itself — while these for-profit middlemen are the bane of every student debtor’s existence, the vast majority of student debt is ultimately owned by the federal government.
Profiting from education is not a morally legitimate enterprise. Access to the wonder of accumulated human knowledge is every person’s birthright, not a business plan. College tuition should be free.
But tuition costs are spiraling, with tuition at public institutions rising almost 34 percent in the decade ending in 2016, the most recent year for which figures are available. This has left many people with little choice but to take on large amounts of student debt, as evidenced by ballooning debt figures. So as we move to make college tuition-free for future students, we must also undo the damage wrought on several generations by past loan practices.
The burden of student debt is a key contributor to the decline in class mobility for people born in the 1980s and later. With wages stagnant, jobs concentrated in a handful of expensive cities, and the few existing social welfare programs in the United States difficult to access and under constant threat, millions of people delay purchasing a home, having a child, saving for retirement, or even getting medical care because of crushing student debt.
Student debt cuts so deep because it doesn’t just rip you off, it makes you feel like a failure. If college is supposed to be the key to a successful life, but you come out of it unable to make ends meet, you can’t help but feel it’s your fault.
Forty-four million people are rightly sensitive about this issue — and they’re primed to be mobilized around it.
There is a solution. As Meagan Day points out, the Higher Education Act in 1965 gives the secretary of education the power to write off federally owned student debt unilaterally, under the “compromise and settlement” provision. Doing so would wipe out an enormous financial burden on the working and middle classes overnight. The Department of Education could also purchase the roughly $64 billion in privately held student debt, then use the same authority to write it off.
One objection to this idea will be to ask if the government really can afford to forego $1.5 trillion or more in funds that writing off the debt would involve. In short, it can.
$1.5 trillion is the total amount that debtors owe the government, and only a small fraction of that is collected each year. But the federal government takes in $1.6 trillion every year just from personal income taxes. In fact, in 2017, the government had an annual revenue of roughly $3.3 trillion, 92 percent of which derived from income and payroll taxes. The remaining 8 percent includes all other forms of revenue, not just revenue from student loans.
Whatever part of the $1.5 trillion balance the government actually collects in a given year thus represents a trivial part of the federal budget. In terms of maintaining the current budget, it could simply be ignored. Otherwise, it could easily be balanced by cutting mismanaged defense spending, or just vetoing the $1.7 trillion the Pentagon wants to develop a new generation of nuclear missiles. Other options include lifting the income cap on payroll taxes or imposing a financial transaction tax — all policies that would benefit the government coffers anyway. And that’s before we even get to more politically difficult yet necessary proposals like raising the historically low top marginal tax rate.
But the funding question can come after the debt has been canceled. To date, the compromise and settlement provision has been executed very narrowly, but there are virtually no legal or regulatory restrictions on how widely it may be applied. This leads to the strategic advantage of making cancellation of student debt an early priority for a Sanders administration: most of Sanders’s proposals require new legislation, but even a Democratic-controlled Congress is unlikely to back Sanders’s legislation as proposed without significant pressure from below.
From eliminating cash bail to tuition-free college to Medicare for All to an increased minimum wage, some moderate and conservative Democrats will join Republicans in opposing pro-working-class legislation altogether. Others will try to undermine it from within, perhaps conceding the ideas are good in theory while insisting that they be applied in a narrow, bureaucratic, means-tested manner rather than in a solidaristic, class-wide way.
Because it requires no legislation, eliminating student debt would be an important early win for a Sanders administration likely to face harsh opposition from both parties in Congress. But beyond giving the impression of pro-Sanders momentum in the press, writing off student debt has the potential to galvanize millions of working people.
People who thought they couldn’t afford to have children would have an enormous obligation off their backs — thanks to President Sanders. People whose loan-scarred credit scores kept them from buying a home, or who couldn’t even think of saving for a down payment until they’d paid off their loans would be unshackled — thanks to President Sanders. People would be released from soul-crushing jobs and free to pursue more fulfilling but less lucrative occupations — thanks to President Sanders. People who have nothing saved for retirement could put the money they resentfully pay Navient into a nest egg — thanks to President Sanders. $1.5 trillion would go into stimulating the economy rather than back to a government that doesn’t need it via for-profit loan servicers that shouldn’t exist — thanks to President Sanders.
By unburdening millions of people from thousands of dollars of debt each, Sanders would directly demonstrate what his brand of “class-struggle social democracy” means in practice. He would show that these ideas are not abstract and far away, but practical, material, and immensely beneficial. And he would win the loyalty of millions of Americans by freeing them from an enormous financial burden — many of whom would be newly ready to join the fight as he geared up for the big legislative battles to follow.
How would those millions feel when they got a first taste of financial freedom, presented to them with the rhetoric of class solidarity — when they saw that Sanders’s government was truly looking out for people like them? What would Sanders be able to do with those millions ready to fight alongside him?