A nonprofit publication of the Kentucky Center for Public Service Journalism

Jason Bailey: It’s time to cancel student debt and recommit to education as a public good


President Biden’s recent statements that he will cancel some student loan debt is hopeful news for the 616,000 Kentuckians who owe it, our communities and economy. It will also be a chance to begin fixing a broken and unsustainable system and recommit to education as a public good that benefits us all.

Student loan debt, which exceeds $1.6 trillion nationally and $20.5 billion in Kentucky, is a spiraling problem decades in the making. Josh Mitchell’s recent book The Debt Trap: How Student Loans Became a National Catastrophe recounts how we got here through the financial motives of powerful interests and misguided assumptions about the purpose and benefits of education.

The story begins with the admirable aim of expanding access to college in the 1960s. But in the debate at the time over whether higher education was primarily a public good or an individual responsibility, the latter won out. Congress made the pivotal decision to finance college primarily with loans rather than grants.

Jason Bailey

Banks and other private lenders got involved and lobbied to create a system that gave them huge profits with full federal financial backing and little governmental oversight. Since students could rely on easy access to loans, universities increased tuition substantially. Predatory for-profit colleges also entered the scene, using heavy marketing budgets to channel students into programs of questionable value and low completion rates. And lenders successfully lobbied to continually expand the loan programs and make student debt nearly impossible to eliminate through bankruptcy.

States like Kentucky then pulled back on funding universities and community colleges through public dollars, using the money instead for tax cuts to corporations and the wealthy and letting loan debt fill the gap. In Kentucky, the legislature has cut state funding for higher education by 1/3 just since 2008. And as public dollars provided a shrinking share of their budgets, universities became increasingly unmoored from their public missions and began acting more like corporations — with the salaries at the top to reflect it.

Also spurring these trends was the widely shared canard that education was the answer to all our economic problems ranging from poverty to stagnant wages to disappearing union jobs. If the problem of bad jobs was a “skills gap,” it could be solved if workers just got more and better credentials. The debt would be worth it.

Those claims have now been shattered by decades of real-world experience. In Kentucky the share of adults with at least a four-year degree rose from 11% in 1980 to 24% today, but median wages have not improved over that time. Resulting frustration is why some of the workers now involved in unionizing their workplaces at companies like Starbucks and Amazon have college degrees. The problem was always a lack of worker power, not a lack of education.

The state of the student loan debt problem today is staggering. Since 1964 tuition has increased an inflation-adjusted 376% at the University of Louisville, for example. As a Kentucky Center for Economic Policy report shows, nearly 1 in 5 adult Kentuckians now owe student loan debt. These borrowers aren’t all young people — about 20,000 Kentuckians with an average debt of $38,000 are at or near retirement age. Black students in Kentucky are more likely to have student debt due to lower family wealth caused by discrimination, and many of the Kentuckians with debt lack a degree — in no small part because they cannot afford to continue.

If President Biden were to eliminate $18,000 in loans, it would entirely wipe out the debt of half of Kentucky borrowers. If he were to eliminate $40,000 in debt, 75% or 462,000 Kentucky borrowers would have their loans eliminated. Such assistance would be transformational to those affected, and will benefit the whole economy as that debt no longer hinders families’ ability to start a business, buy a home, save for retirement and more.

Knowing how popular it will be, opponents are outraged at the idea of student debt cancellation and are grasping at straws. One argument says it wouldn’t be fair to all the people who have already paid off their student debt. That’s as silly as saying we should never have created Head Start in the 1960s because it isn’t fair to the kids that couldn’t go to preschool before then. Progress is good!

Student debt cancellation isn’t the only thing we need to do to help people financially (for that, a good place to start is for Congress to stop blocking the Build Back Better Act, which addresses family costs in a myriad of ways). But it’s on the table because of a unique law that gives the President the authority to cancel student debt through the Department of Education without congressional action.

Periodic forgiveness of debts is a tradition as old as the jubilees declared in the Bible. Then it was seen as a sacred declaration and a way for a whole people to start anew. Given the sordid history of student loans, the economic drag of this debt, and the importance of education to our democracy, it’s time for sweeping action on this issue.

Jason Bailey is executive director of the Kentucky Center for Economic Policy.


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6 Comments

  1. J says:

    This is exactly right – over the years, reduced state support for public universities caused them to raise tuition, which forced students to borrow more.

    Debt forgiveness is the federal government taking responsibility for the mess created by state governments, which embrace corporate tax cuts pushed by lobbyists.

  2. Wasn’t it President Obama the federalized the student loan program with no safeguard or limits to amount loan a student could qualify for based on the typical average salary a particular major typically generates to service the debt (make the loan payment) once? Not only can a student borrow the cost of tuition and books but also “living expenses” likely with little consulting on the Debt Serice (loan payments and term) once they graduate, assuming they even graduate! And why are teaching institutions- for profit or not, not culpable to reimburse students for excess borrowing beyond what the debt service the average actual salary their major or their likelihood of obtaining a job in their major? What is the correct total loan amount be a student receives? I have read not greater than 10% of the graduate’s income. – e. g. Assuming a $50,000 annual salary, 10% this works out to $5,000 per year or $416.67/month which supports a maximum loan amount of $21,552.49 assuming typical 5-year term at 5% interest that student can afford! Likely students are NOT advised of the debt service, percentage of students graduate and average actual salary and number of years to graduates, if they graduate and GPA typically needed to secure the average salary in that major – FOR THAT SCHOOL – before they are approved for these loans.
    You also mention Amazon and Starbucks unionizing, neither of which pay well nor likely require a college degree. If they do your students with loan payback issues should likely aim higher in their degree selection or opt out of college for higher paying positions/ careers that do not require a college degree.
    One must ask the value provided by a learning institution when an apparent large quantity of its graduates end up at low paying jobs in the graduate’s anticipated major!
    Should the above be the norm, students would be more informed, likely make more better choices, Colleges and University would have “skin in the game” to ensure a given student’s success if forced to refund tuition for those that do not make the industry standard salary thus likely make better choices on whom they admit. These combined, would severely reduce the demand for colleges and universities thus markedly lowering cost for those that do attend (assuming the law of supply and demand still applies)!

  3. J says:

    Students who borrowed to attend public universities should get greater debt forgiveness than students who borrowed to attend private or proprietary schools.

    As the author says, public support for higher education has been greatly reduced, but the private schools were not hit as hard by those cuts as the public schools, so U.S. taxpayers have less incentive to forgive those loans.

    Loan forgiveness will put more dollars into local small businesses, and encourage people to start their own businesses, buy homes, and essentially give debtors a raise without costing employers, so morale improves along with financial outlook.

  4. Don says:

    So, a kid chooses to go into the trade field, not get a useless college degree in some field where you are not employable , this kid has to borrow 50 grand for tools for this trade, his tuition for trade school, along with all other expenses and he gets NO RELIEF. And this kid is expected to bail out the snow
    Flakes who can’t get employed to pay back a loan they very well knew they had to pay back. Look into some of the expenses for trade schools and tools for such. These people are out working and paying the taxes that the democrats are wanting to abuse to pay off debts that should never be paid by no one except the person who signed the loan, or their parents. Both my kids had student loans, and they paid them off. It’s easy to do if you quit looking over your shoulder waiting for the government to take care of it.

    • J says:

      The good news is that any debt forgiveness would apply to anybody who borrowed from the federal student loan program – including to go to trade school.

      Most people think of federal student loans as only being for four-year colleges and universities. The truth is that there are many trade and vocational schools that also qualify for federal loans.

      When you complete the Free Application for Federal Student Aid (FAFSA), which is the first step in getting any financial aid from the federal government, you can enter the trade school’s code just like any other college.

      That school will then receive a report based on your FAFSA data and will create a financial aid package that may include federal student loans.

  5. J says:

    Republicans give tax breaks and corporate welfare to businesses that give them campaign contributions. How is that fair to businesses that don’t get those government handouts?

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