Student Debt is Income Inequality
Student Debt is Income Inequality
A misleading narrative hides the deeper issue.
As the debates around canceling school debt raged on, one narrative took front and center among detractors of the measure: that entitled youth shouldn’t have taken on loans they weren’t willing to pay back and they need to take responsibility for their choices.
It is a narrative that seems logical at first glance. At the outset, I was dubious about the idea of canceling voluntary loans as well. After all, any number of these students could have enlisted in the military like I did, or done apprenticeships, or gone straight to work. No one forced them to go to college.
Then I did something that many Americans no longer do. I researched the topic and the plan.
What I found was that not only were my initial thoughts off base, but that canceling student debt was about a much larger ongoing issue in America.
The term predatory gets thrown around a lot in the student debt conversation, along with for-profit schools. But those issues were neither the basis for, nor the topic of, the most recent student debt cancellation debates.
Predatory loans are loans that exploit the borrower through high fees, high interest rates, unexpected variable rates, and that often have terms which make it difficult for the borrower to protect themselves from aggressive lenders.
The student loan forgiveness plan was only for loans backed by the government which are not predatory loans. This is because the government can forgive its own debt, but not the debt held by private loan companies. It just so happens that almost all student loans are government backed loans.
The current issues also weren’t due to for-profit schools such as ITT Tech, Corinthian Colleges, or DeVry Institutes. There were previous settlements and loan forgiveness for students from those schools and there is currently an ongoing defrauded student payout program.
That means the loans we’re discussing are government backed, low interest, and used mainly on trustworthy schools. If that’s the case and there’s nothing predatory going on, why the call to forgive/cancel these loans?
America has the highest income inequality among wealthy nations and US wealth inequality continues to increase at a faster rate than other nations. While this is a problem for people from all walks of life, some groups have it worse than others:
For every dollar a white male worker earns:
Hispanic men make 91 cents
Black men make 87 cents
White Women make 83 cents
Black women make 70 cents
Hispanic women make 64 cents
For people who want to get ahead in life, and who want to close that pay gap, there is a clear path on how to do it: The pay gaps are lowest among people with a bachelor’s degree or higher.
So it should be no surprise to find out that the groups facing pay gaps have increased their college enrollment.
Women overtook men in college graduation rates in the mid 90s and now, almost 50% of all women aged 25-34 have a degree.
Black and Hispanic enrollment in college as a percentage of high school graduates has caught up to and even surpassed white enrollment.
In 1976, 84% of all college students were white. Today that number is only slightly above 50% due to a more diverse college student body.
Their hard work has been paying off, literally. Pay gaps have been narrowing slowly over the last several decades.
But something else has happened over those decades as well. Middle and Lower class wages have fallen further behind while the cost of college has continued to rise at a rapid pace. Since 1980, the cost of going to college has increased 180%, almost triple.
This means student loans have become larger while also becoming harder to pay off.
Then, the unexpected happened and a global pandemic hit America hard. Businesses were shut down, unemployment increased, and career growth stalled.
Suddenly, the millions of student loan borrowers that were already stretched to the limit were in very real trouble. The calls for student debt relief began.
The same groups who are facing a pay gap are also groups that have less generational wealth. Which in turn means that they hold more student debt.
Women hold more student debt than men
Hispanic and Black borrowers owe more than White borrowers
Black Women hold the most student debt with an average of $37,600
So the same groups that were taking on more debt to earn degrees in order to catch up both in pay and opportunities, were among the groups hit hardest by the pandemic and the following high inflation.
This is why canceling some amount of student debt isn’t about bailing out some irresponsible people who took out loans and simply don’t want to pay them back.
It is actually about working to reduce income inequality at a time when people are particularly in need. And because of the changing demographics of college students and student loan borrowers, student debt offers a surprisingly well targeted opportunity to tackle the income inequality problem.
However, Republican members of Congress did not see it this way.
Members of Congress:
make $174,000 a year
receive highly subsidized top tier healthcare
get tens of thousands of dollars in perks and expenditures
and get to hire a large staff
The average overall yearly cost per Senator is $3.5 million, per Representative $1.5 million. All of it fully paid for by taxpayers.
On top of that, many of the same members of Congress who opposed student debt relief also took out Payment Protection Program (PPP) loans and never paid them back:
Marjorie Taylor Greene - $182,000
Vicki Hartzler - $451,000
Matt Gaetz - $476,000
Ralph Norman - $608,000
Mike Kelly - $974,000
Kevin Hern - $1,070,000
Roger Williams - $1,430,000
Markwayne Mullin - $1,440,000
Vern Buchanan - $2,600,000
Carol Miller - $3,100,000
Yes, PPP loans were designed to not be paid back. But their actual intent was to help out people struggling to stay afloat during the Pandemic. $757 billion in PPP loans were forgiven.
Yet, student loan borrowers were, and still are, struggling. They were simply looking to get up to $20,000 in relief. The total cost would have been $400 billion spread out over a decade. A little over half the cost of the PPP program and paid for over a much longer period of time.
That forgiveness only applied to those who make less than $125,000 a year, unlike the PPP loans which went to many very wealthy individuals.
$400 billion is far from nothing. It would have an average cost of $2500 per taxpayer, although again that would be spread out over 10 years, creating an average of $250 per year to help solve income inequality. And the majority of that investment would end up being spent right back into the economy.
The question to ask is: if we aren’t prepared to forgive some student debt to help reduce income inequality, how will we solve the problem?
Or is America going to do what it has been doing for generations and simply ignore our problems all together.
