Opinion: What Biden and nearly everyone else is getting wrong on student debt

Biden’s slow movement on student loans and his skepticism about more generous relief might be easily written off as generational: In Biden’s era, far fewer Americans attended college and when they did, it was far more affordable. Not only that, but when Biden was an undergraduate in the early 1960s, it was still possible to land a middle-class job without a college degree. (My parents, typical of their generation, moved from their poor and working-class origins into the middle class in the 1970s without a college education.)
But Biden’s hesitance says less about his age and more about his analysis of the problem. The President seems eager to divide the nation’s enormous student debt load — $1.6 trillion owed to the federal government by 45 million Americans — into the deserving and undeserving debtors.
More than half the debt load is carried by households with an income over $74,000 — one reason Biden prefers means-testing debt relief. But debt holders are also disproportionately women and people of color, with Black debtors carrying the highest levels of student debt. And, even higher-income households find themselves servicing enormous debts at rates that only nibble away at the principal, leaving many people paying back far more than they originally borrowed.

That muddy picture of who “deserves” relief suggests the Biden administration and other observers of and participants in this debate are asking the wrong question. It’s not about who carries student debt, but why† And the answer to that question points toward a much broader economic crisis in the US, one that needs a far more comprehensive approach than piecemeal relief.

Elizabeth Warren: I could go to college on a waitress'  salary.  Americans can't do that anymore
Since the 1980s, the US economy has been marked by greater inequality and more abundant debt. The two go hand in hand. The American dream of middle-class careers and home ownership has moved out of reach for more and more people: Housing prices have shot up and college education — increasingly a requirement for entry into the middle-class — has become increasingly unaffordable. yet both appear attainable thanks to enormous amounts of easily accessible debt.

With the rise of subprime mortgages and abundant student loans in the early 2000s, Americans could tell themselves that the inequality and precarity that had come to define life in the United States had not touched them. They could still afford a home, could still afford to send their children to college, could still afford to participate in the fantasy of class mobility and economic stability. But that debt turned out to be inordinately expensive, and paying it back has had a crippling effect on people’s ability to make ends meet — so even households with incomes over $74,000 find themselves struggling with large monthly student debt payments.

The pandemic has driven home exactly how much precarity student debt had caused: Households suddenly relieved of repayment found their budgets suddenly had breathing room, even in the uncertainty of the pandemic. (Savings grew rapidly during the pandemic, in part because of stimulus and child tax credits, and in part because of the student loan repayment pause.)
Yet those payments will soon resume in some form, and families will find themselves back beneath the debt burden. And it comes as home prices are soaring, underwritten once again by subprime mortgages.

It is easy for some people to write all this off as Americans living beyond their means, and debt-relief as an unearned bailout for financial recklessness. But that perspective misses that these are also Americans playing by the rules: told to work hard and go to college in order to get a good paying job, told to buy a home rather than rent because it builds equity and intergenerational wealth. Yet those rules are a path to prosperity for fewer and fewer Americans, a reality papered over by all that easy, expensive debt.

Debt, rather than taxes on the wealthy and generous government services, is how the US has chosen to deal with inequality. As a result, we have an increasingly precarious society, where one failure, one accident, one missed payment can collapse a person’s entire financial future. So much activism over the past three decades has sought to ease that precarity: Elizabeth Warren’s fight for bankruptcy reforms, to rescue families who fall on hard times; the call to bailout homeowners rather than banks during the financial crisis of 2008; the Debt Collective that grew out of Occupy Wall Street, moving student debt relief into mainstream Democratic politics.
Yet, these efforts are repeatedly countered by claims that those who need relief are ultimately undeserving. For example, Rick Santelli, speaking from the floor of the Chicago mercantile exchange in February 2009, railed against a homeowner’s bailout, arguing it was not the bankers and financiers at fault for toxic mortgages, but the people who bought the homes. It is not the lenders and universities that saddle teenagers with six-figure debt who are to blame, but the students who failed to land a high-paying job to immediately service all that debt.

So long as we insist that the solution to America’s debt crisis requires evaluating the worthiness of individual borrowers, we will remain trapped in a system of precarity and inequality. If the Biden administration wants to enact real reform, it will not only provide the most generous loan forgiveness possible, but begin the long, difficult project of addressing the inequality that makes expensive debt the engine of the American economy.

Leave a Comment