President Biden says he is looking closely at student debt relief, which likely means significant relief is coming. On the one hand, Biden has promised relief in the 2020 campaign. On the other hand, it’s a progressive priority that he can address through executive action, which is important given the extreme difficulty to push anything through an equally divided Senate.
What relief will it offer? I have no idea. how much relief should he proposes ? I am for going as far as political realities allow, but I understand that overly generous debt cancellation could produce a backlash. And I have no confidence that I know where the line should be drawn.
What I think I know is that much of the backlash to student debt relief proposals is based on a false premise: the belief that Americans who have gone to college are, in general, members of the economic elite.
The fallacy of this proposition is obvious to those who have been exploited by predatory for-profit institutions that have encouraged them to go into debt to obtain more or less worthless credentials. The same is true for those who incurred student debt but never managed to graduate – not a small group. In fact, about 40% of student borrowers never complete their studies.
But even among those who succeed, a university degree is hardly a guarantee of economic success. And I don’t know to what extent this reality is understood.
What is widely understood is that America has become a much more unequal society over the past 40 or so years. The nature of growing inequality, however, is not as widely known. I keep coming across seemingly well-informed people who believe that we are primarily looking at a growing gap between college graduates and everyone else.
This story had some truth in the 1980s and 1990s, even if it did not take into account the huge income gains at the top of the distribution – the 1% rise and even more among the 0.01%. Since 2000, however, most college graduates have actually seen their real income stagnate or even decline.
The Economic Policy Institute had a very helpful analysis of this data just before the pandemic. Between 1979 and 2000, there was a rough correspondence between the growth of a 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 steadily increased, while the college premium has changed little:
Also, not all college graduates have had the same experience. Some have done quite well, but many have seen no gain:
I have my own version of this observation, comparing household income growth at the 95th percentile with that of the median male college graduate:
Now, Americans at the 95th percentile don’t consider themselves wealthy, because they’re not, surely relative to CEOs, hedge funders, etc. Nevertheless, they have seen substantial gains. On the other hand, the typical college graduate – who is, remember, someone who was successful and earned an accredited degree – did not.
So here’s how I see it: Much of the student debt that weighs on millions of Americans can be traced to false promises.
Some of these promises were outright scams; think of Trump University. Even those who weren’t outright deceived, however, were lured in by elite messages assuring them that a college degree was a ticket to financial success. Too many people didn’t realize that their life circumstances could make it impossible to complete their education – it’s hard for upper-middle-class Americans to realize how difficult it can be for young people to stay in school from poor families with unstable incomes. Many of those who managed to complete found that the financial rewards were far less than they expected.
And too many of those who fell victim to these false promises found themselves saddled with heavy debts.
Of course, many Americans have suffered from rising inequality. I wouldn’t say college debtors are bigger victims than, say, truckers who’ve seen their real wages plummet or families stuck in rural areas and small towns in decline. And we should help all these people.
Sadly, most things we could and should do 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, on the other hand, is something that President Biden can To do. So he should.