US economy

Student Loans Don’t Need to Be Tied to False Promises


President Biden says that he is taking a “hard look” at student debt relief, which probably means that some significant relief is coming. For one thing, Biden promised relief during the 2020 campaign. For another, it’s one progressive priority he can address by executive action, which is important given the extreme difficulty of getting anything through an evenly divided Senate.

How much relief will he offer? I have no idea. How much relief should he offer? I’m for going as big as political realities allow, but I understand that too generous a debt write-off might produce a backlash. And I have no confidence that I know where the line should be drawn.

What I think I do know is that much of the backlash to proposals for student debt relief is based on a false premise: the belief that Americans who have gone to college are, in general, members of the economic elite.

The falsity of this proposition is obvious for those who were exploited by predatory for-profit institutions that encouraged them to go into debt to get more or less worthless credentials. The same applies to those who took on educational debt but never managed to get a degree — not a small group. In fact, around 40 percent of student loan borrowers never finish their education.

But even among those who make it through, a college degree is hardly a guarantee of economic success. And I’m not sure how widely that reality is understood.

What is widely understood is that America has become a far more unequal society over the past 40 years or so. The nature of rising inequality, however, isn’t as broadly known. I keep encountering seemingly well-informed people who believe that we’re mainly looking at a widening gap between the college-educated and everyone else.

This story had some truth to it in the 1980s and 1990s, although even then it didn’t account for the huge income gains at the top of the distribution — the rise of the 1 percent and even more among the 0.01 percent. Since 2000, however, most college graduates have actually seen their real incomes stagnate or even decline.

The Economic Policy Institute had a very useful analysis of this data just before the pandemic. Between 1979 and 2000, there was a rough match between growth in one measure of overall inequality — the gap between wages at the 95th percentile and those of the median worker — and its estimate of the average wage premium for college-educated workers. Since 2000, however, wage inequality has continued to rise, while the college premium has barely changed:

Furthermore, not all college graduates have had the same experience. Some have done pretty well, but many have seen no gains at all:

I have my own version of this observation, comparing growth of incomes of households at the 95th percentile with those of the median male college graduate:

Now, Americans at the 95th percentile don’t consider themselves rich, because they aren’t, surely as compared with C.E.O.s, hedge funders and so on. Nonetheless, they have seen substantial gains. On the other hand, the typical college graduate — who is, remember, someone who made it through and received an accredited degree — hasn’t.

So here’s how I see it: Much of the student debt weighing down millions of Americans can be attributed to false promises.

Some of these promises were scams pure and simple; think Trump University. Even those who weren’t outright cheated, however, were pulled in by elite messaging assuring them that a college degree was a ticket to financial success. Too many didn’t realize that their life circumstances might make it impossible to finish their education — it’s hard for comfortable, upper-middle-class Americans to realize how difficult staying in school can be for young people from poorer families with unstable incomes. Many of those who did manage to finish found that the financial rewards were far smaller than they expected.

And all too many of those who fell victim to these false promises ended up saddled with large debts.

Of course, there are many Americans who have suffered from rising inequality. I wouldn’t argue that college debtors are greater victims than, say, truck drivers who have seen their real wages plunge or families stuck in declining rural areas and small towns. And we should be helping all of these people.

Unfortunately, most things we could and should be doing for Americans in need — like extending the expanded child tax credit — can’t be done in the face of 50 Republican senators, plus Joe Manchin. Student debt relief, by contrast, is something President Biden can do. So he should.



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