The Real Student Debt Debate
It's about the social order.
I have a new piece up for Slate on the history of debt relief as an essential safety valve for a functioning credit-based economy. Hillary Frey is running a great shop over there, and I encourage you to read Mark Joseph Stern's piece on Biden's legal options should the Supreme Court engineer any problems for his new student debt forgiveness program.
As I emphasize in the Slate piece, debts are discharged every day in the United States. But as CNN's John Harwood notes, there's a striking degree of animosity over the prospect of student debt in particular that doesn't seem to be about, well, debt:
For those who haven't been following closely, the internet is littered with really nasty stuff like this from the conservative commentariat:
Even the somewhat more sober macroeconomic critics are letting their rhetoric get the best of them. Jason Furman attacked Biden's plan as "reckless," saying it would pour a "half trillion dollars of gasoline on the inflationary fire that is already burning." But when he finally got around to talking numbers, Furman informed us that he expects just 0.2 - 0.3 percentage points of inflation from the plan. That does not sound like pouring gasoline on a fire to me.
Marc Goldwein from the Center for a Responsible Federal Budget is also really fuming about the inflationary impact, but when CRFB looked at student debt cancellation in 2020 and 2021, they dismissed it as a feeble measure that would do next to nothing to stimulate the economy. Last year, student debt relief wouldn't juice the economy enough, this year, it will juice it too much. It's hard to escape the conclusion that many of the economic impact claims are just being invented on the fly. I agree with Paul Krugman -- at worst, the macro numbers just don't seem very significant.
And as I note in the Slate essay, the hand-wringing about student debt relief being regressive is just wrong. When we think of higher ed we think of beautiful timeworn universities, but 40 percent of people who attend college are enrolled in a community college. People making more than $125,000 a year are excluded from Biden’s program, as is nearly all debt from law, medical and business school, while a higher level of forgiveness is available to low-income Pell Grant recipients. About half of the total write-off will benefit people in the bottom half of the income spectrum, nearly all of it to those in the bottom four quintiles. And of course the government subsidizes middle-class people all the time. It’s the central promise of nearly every political campaign.
So why all the vitriol over student debt? When we argue about student debt, we aren't really debating credit policy, inflation, growth or the separation of powers under the U.S. Constitution. All of these avenues of discussion are elaborate detours around the central issue: the structure of the American social order.
In the United States, a college degree is about much more than securing a higher wage. People without college degrees aren't just excluded from a lot of jobs that pay well. They're more likely to be laid off and less likely to be hired during recessions. They're less likely to have health insurance, and more likely to have a disability (the causal arrow there probably points both ways, but the combination is particularly cruel). People who do not graduate from college even have shorter life expectancies than people who do. Higher education is perhaps the single most important factor in determining who has access to a financially secure lifestyle and the leisure to pursue intellectually interesting activities. A college degree confers respect and prestige.
In a better world, the simple fact of being human would command equal respect for everyone. That is not our world, but we can imagine such a place and work toward realizing it. Prestige, by contrast, is inherently exclusive. The less there is to go around, the better it is for the people who have it. And so the more people we exclude from higher education, the more secure people with college degrees will feel about their place in society.
The recent student debt freak-out reminds me a lot of God and Man at Yale -- the 1951 memoir that launched William F. Buckley into the conservative intellectual stratosphere. It's remarkably bad for a book that enjoys a reputation as a political classic. A wealthy conservative Catholic goes to Yale and is horrified to find Protestants and Keynesians: What, pray, can the Board of Trustees do to save our dear, beloved Yale? The ideological material is generic McCarthyism, the writing is flat (Buckley would get better at that), and the entire project is preoccupied with weird provincial details. At one point he even complains about the vending machines. The literary establishment basically laughed at it, with both The New York Times and The Atlantic running devastating reviews.
But God and Man at Yale became a publishing sensation. After World War II, millions of new college students arrived on campuses around the country to receive an education funded by the G.I. Bill. Suddenly, an experience that had once been restricted almost exclusively to the very rich became open to infantrymen. And though the vast majority of colleges and universities continued to exclude Black students, millions of white people who had never dreamed of going to college eventually earned degrees. For many prior graduates, this step toward democratization was threatening. Their credential was being diluted. Buckley's book about the waywardness of newfangled university life spoke to this new and unexpected status anxiety among the American upper-class, and so it flew off the shelves.
We've been democratizing college ever since, of course, but there was a genuine enrollment explosion during the first decade of the 21st century, when the total number of students in school each year jumped by more than 35 percent -- more than triple the rate of increase over the prior decade. This is also when the volume of student debt began to skyrocket, more than doubling between 2006 and 2012.
Student debt allows a certain kind of prestige-hoarder to pay lip service to the ideal of universal education, while also looking down on some graduates as, well, not quite the real thing. "Technically, you have a degree, but we all know you don't truly belong up here, dear." Erase that debt, and this distinction disappears. College graduates are all just college graduates again. A little bit more equality has entered the picture, and a little bit of prestige has departed.
I suspect this is what most people really mean when they say student debt relief is "unfair."
A previous version of this post incorrectly stated that all graduate school debt is excluded from the program. Grad school debt is excluded from Biden’s new income-driven repayment reforms, but is eligible for $10,000 - $20,000 in cancellation, depending on Pell Grant status.