Student Debt: Hey Boomer, STFU

We started the audio essay with a heartwarming tale. A clip of the founders of Snapchat paying off the student debt of an entire graduating class of college students. Ah, the performative benevolence of the capitalist class. Operating under the assumption that tech oligarchs won’t be able to subsidize education in the entire country, the Biden administration is weighing options to potentially relieve millions of student debt holders.

What will the process be? Who will qualify for relief? Can he do it with an executive order? What happens next? As of right now, payments on outstanding federal student debt remain suspended until August, as it has been through the bulk of the pandemic. But the date is fast approaching when President Joe Biden will announce his plan going forward.

It’s become a hot button topic on both the left and the right. It’s created a generational divide with those who have shouldered student debt for most of their adult lives, looking at younger borrowers and asking what makes them so fucking special.

Proponents of debt cancellation on the left demand action because it alleviates enormous stress and burden on the lower and middle classes of the country. Those in the middle acknowledge the issue, but say that cancellation is regressive because it would also assist those who can afford to pay off their loans; so debt relief would be more just and appropriate. Those on the right are apoplectic because it’s yet another in a string of unearned entitlements and that those who took on debt did so willingly, and therefore they’re obligated.

They can’t all be right. Or can they?

Chapter One

So…How Bad Is It?

The short answer is, it’s really fucking bad. We’re pulling from a number of resources, clips and articles to frame the debate today. The one we’ll reference the most is a book that came out in 2021, titled The Debt Trap: How Student Loans Became a National Catastrophe, by Josh Mitchell. Mitchell reported on the issue of student debt for several years and compiled hundreds of interviews with students, government officials and executives from corporations that are a key ingredient to the mess. It’s a very straightforward narrative with solid sourcing and documentation, and he even puts forward a few constructive suggestions for how to fix the problem going forward. So, we’ll pull a lot from his work today.

In terms of the issue itself, I’m going to focus on the areas of student debt that relate to undergraduate college and university. Over the past couple of decades, there has been a tremendous push from lenders to create programs for graduate students, most notably for med school and law school. And it’s a huge problem. But, we’re going to narrow our discussion today to undergraduate degrees, because it strikes more at the heart of equity and disparity in race and class.

As far as how large the problem is, like I said, it’s pretty fucking big. I’ve seen pundits quoting pollsters who claim that it’s not as bad as the left would make it seem because it rarely comes up as a top issue on calls. But think about the methodology of most polls. Still being done by phone. And who the fuck answers their phone anymore? Older people. So, consider the source. Plus, you would have to drill deep on a poll to unearth student debt as a direct response, but there are a number of implications of the problem that stem from student debt as part of a larger issue.

Declining income relative to the cost of living. An inability to afford a home. Lack of retirement savings, etc. One contributing factor to each of these for many Americans is student debt. As Mitchell states in the introduction of his book, “Americans owe more in student debt than they owe in credit card debt and car loans. Combined, student debt in the U.S. is the size of Canada’s economy… Eight million borrowers are in default on a student loan as of this book’s writing.”

Furthermore, the data trends worsen along racial lines, as nearly 40% of all black student debt holders who started school in the 2000s have defaulted on their loans. There are so many socioeconomic factors that contribute to this statistic that simply don’t show up in polling data. But that doesn’t make the data less real.

To put the scope of the issue in dollar terms, as the Atlantic reports:

“Total student debt has grown in size, shooting up from $948.2 billion in 2012 to $1.6 trillion in 2022. But so has the number of student-loan recipients, from 38.3 million in 2012 to 43.4 million in 2022. In that time, the average debt burden has gone from roughly $24,700 to $36,800. And that per-capita rise can be explained in part by the increasing numbers of student-loan recipients attending graduate school.”

“This is unacceptable. 65% of all jobs in this country require an education beyond high school. First generation college students are two times as likely to report being behind on student loan payments. And 63% of borrowers who made payments with Navient during the COVID forbearance, still owe more now than they originally borrowed.” -Rep. Alexandria Ocasio-Cortez from the House floor

The question remains as to what shape a debt relief, or perhaps cancellation policy, would take. There are clips of Bernie that go back years calling for debt relief, refinancing, system reform and, in more recent years, full cancellation. Here he is just a month ago:

“My own view, as I’ve been saying for years, is I think it is appropriate at a time when so many of our younger generations are struggling that we should cancel all student debt.”

During the presidential campaign, the issue of student debt was a big differentiator between the candidates. There was Pete Buttegieg, who was a human cudgel against the progressive preference of cancellation, repeating the fraudulent notion that it’s regressive. Not to be outdone, Amy Klobuchar adopted the same stance, which ultimately became the stance of Joe Biden. Though, to woo over the progressive wing of the party and appeal to younger voters, Biden promised to do something in terms of relief.

So, the ideas on the left range from cancellation to some means-tested relief. All proposals contain elements of structural reform, but most of these proposals are murky at best. That’s not where the attention and energy is at the moment. Throughout the episode, we’ll touch on all of it, from debunking the concept of regressivism to structural changes in federal programs.

Predictably, the right is pretty aligned with a message that any form of relief or cancellation beyond the temporary forbearance is a resounding “fuck you” to student debt holders. It’s all part of a continuing war on entitlements, which is what the right wing of the country and conservative wing of the Democrats always seem to be fighting. It’s just that the right is more overt in its criticism. Here’s current Fox host, former judge and always drunk Jeanine Pirro cramming all the right wing talking points into one succinct statement:

“This asinine ‘I want to pay off student debt’ is an insult to the senior citizens, to the people who pay taxes, to people that decide ‘do I want to buy meat this week or pay for my medicine?’ That’s hogwash. You got so many jobs, you got a great economy. Let ‘em work to pay off their bills, just the way all of us do.”

Right. Because the cost of living, health of the economy, available jobs and tuition are all the same as when you went to school in the '50s. As one might imagine, the corporate media—even media perceived to be left—is filled with lazy reporting on the subject. Here’s reporter Megan Cerullo on CBS talking about the downside of people being able to pay their fucking bills:

Interviewer: “Could this—canceling student debt loan—could it contribute to inflation?”

Cerullo: “It could, certainly, for those folks whose debt is canceled, presumably they’ll have a little bit of cushion in their monthly budgets and that could lend to greater spending on goods and services. And that could stoke inflation. So that’s another criticism or concern.”

It’s the same argument conservatives make against direct child tax payments or ongoing stimulus relief. That consumers will suddenly go hog wild on goods and services and that will lead to inflation. An argument that somehow disappears when we give tax breaks to millionaires. Not to mention that it has been proven over and over again that the majority of families who experience marginal increases in disposable income spend it on food, bills and paying down debt.

God forbid we reduce the stress and pressure on the working poor.

Debt relief advocates like Senator Elizabeth Warren often make the point that many student debt holders don’t have the credit profile or savings to buy a home, which is why so many younger people are putting off home ownership. Her argument is that trading student debt for better debt—debt that builds equity and provides security—is more favorable in the long-run. But even outlets like The Atlantic say that, “The skyrocketing cost of housing, not student-loan debt, is what’s locking so many people out of homeownership.”

That same Atlantic article goes on to say that, “One could argue that debt forgiveness increases the wealth of nonwhite families, making it easier for them to support future children in attending universities.” Though it also acknowledges that, “The wealth boost would be marginal at best, however, given that the majority of nonwhite borrowers owe less than $40,000 one year after graduation.”

The fact of the matter is that since World War II the nation has sold Americans, rightly or wrongly, that the path to prosperity is through higher education. And the government has done anything and everything in its power through multiple administrations to see to it that people have the ability to access higher education. The problem is, from the jump, they’ve gone about it the wrong way.

Chapter Two

The Best of Intentions

The movement toward a four year degree started immediately after World War II. The introduction of the G.I. Bill for veterans included stipends to attend college and begin retraining the American workforce. In order to take advantage of our newfound position as the world leader, every administration from this point forward made a concerted effort to educate and train workers. Of course, the vast majority of black people and women were excluded, partially because southern colleges didn’t accept black students and most women who served were deemed civilians and ineligible for loans. (Just don’t teach that in schools, whatever you do.)

The idea that workers required a four year degree has become so ingrained in our society that it’s hard to recall a time when it wasn’t a thing. That’s beginning to change, but it’s going to take some time.

In a CBS Sunday Morning interview with Ken Frazier—the former CEO of Merck who has partnered with the former CEO of IBM—he discusses the effort to eliminate the college requirement from as many positions as possible, where it makes sense to do so. They’re addressing the disparity in the country today between employers who say there aren’t enough applicants and applicants who say they're ready, willing and able to work, but cannot pass company screening filters. Here’s Frazier:

“80% of what we call ‘family sustaining’ jobs, 60,000 or more generally speaking, require a four-year degree. And so, companies screen out people no matter what their intelligence is, their curiosity, their work ethic, their adaptability. But if we don’t have enough people to fill all the jobs that we need in this country, I think we need to reexamine it.”

To go back, the government had a major challenge on its hands coming out of the war. Pushing for as many people to get a degree was one thing. Affording it was another. So economists and policy makers started a debate that rages to this day as to how best to accomplish this. For this section, we’ll pull heavily from The Debt Trap and Mitchell’s work to carefully walk through a complete history of student loans. It’s impossible to attack this issue without the knowledge and understanding of how loans became such an integral part of American society.

Let’s start with some familiar Unf*cking territory to really warm up. Here’s Mitchell:

“In a 1955 essay, the conservative economist Milton Friedman wrote that students should be treated like companies, with investors lending them money as a type of equity investment and the student repaying them with future earnings.”

Yup, once again we get to bring uncle poopy-butt (#FMF) into the conversation. But, to be clear, he was hardly alone in making this argument. While European education models focused on providing higher education as a right and making it widely available, America pondered the exact opposite.

Instead of looking at education as an investment, an imperative to society and national welfare, from the start we treated it as a privilege.

The fact is, we’ve been grappling with how to promote higher education to the public and get them to foot the bill since the Eisenhower administration. Truman and Kennedy would also test programs to offer grants, tax credits and loans to students to obtain a degree. But, it was the Johnson administration that introduced the framework for the situation we find ourselves in today.

Seeking to appease advocates for the poor, the colleges and universities themselves and hardline conservatives loath to offer any sort of handouts, “Johnson developed a compromise: scholarships for the poor and loans for the middle class,” writes Mitchell. Within this solution, we can begin to identify the seeds of the modern student debt crisis.

Remember, this was at a time when even though Johnson sought to implement historic programs for his Great Society, there was little tolerance for exploding deficits. So, when it came to who would actually be able to issue the loans themselves, Johnson faced an uphill battle in Congress. Even though loans were theoretically a money maker over time, the proposition of adding so much to the federal budget would create a short-term deficit that would blow too much political capital in Johnson’s estimation.

As Mitchell writes:

“This is why Johnson didn’t seek to simply expand the National Defense Student Loan Program, which drew money from the Treasury. Instead, Johnson turned to banks.”

This way, Johnson could keep student loans essentially off the government’s books. Now, here’s the key. Fearing that colleges would simply raise tuition to take as much money as possible—which proved to be a prescient concern—he wanted schools to have skin in the game. Under his initial plan, schools and the feds would put part of the proceeds into an insured risk pool. This way, they both had an incentive to minimize defaults.

After intense lobbying in DC, an alternative solution was proposed and adopted and the Higher Education Act was passed. It included scholarships for the poor and a loan program for the middle class. These loans for households earning less than $15,000 per year were guaranteed up to 80% if they defaulted, and they set an interest rate of 6%, considered competitive at the time. The problem was that banks were raising rates on other products faster than school loans so they found little incentive to offer them, despite the backstop of the federal government. In the meantime, college admission was growing due to the maturity of the Baby Boomer generation, so the colleges were flush with private paying students anyway. The whole thing just wasn’t working.

Again, Mitchell:

“Banks needed more money. Colleges needed more money. Students needed more money. The government’s foray into student lending was already a mess, producing unintended consequences. Congress had passed the two loan programs hastily, with deference to banks and schools and little thought to the perverse incentives that might lead to even higher tuition and taxpayer costs.”

Johnson turned to a young economist in the Department of Ed named Alice Rivlin who sought to answer a crucial question; whether to give money to the students or the schools. It was decided that students were better equipped to manage the debts directly, but there needed to be an agency to originate the loans. As Johnson exited the stage and the Nixon regime began, a new corporation was established to provide a solution. Sallie Mae.

Chapter Three

Take It Away, Sallie Mae.

This is probably the most important concept to understand. Remember, the government wants kids to get an education. It wants the schools to accept qualified candidates, irrespective of their financial status. We all want an educated population and a more advanced workforce, as a result. But the government refused to carry the burden of debt on its books. So Sallie Mae was established as a quasi-government organization that would sit off the books and pour liquidity into the banking system to be given out as loans. The obvious question became, where would Sallie Mae get the money to lend?

To answer this, the government gave Sallie Mae an unbelievable advantage. It allowed the corporation to borrow money cheaply. Almost as cheaply as the government. As Mitchell writes:

“Sallie Mae was part of a circuitous route between lender and borrower. The Treasury Department gave money to the Federal Financing Bank, which lent to Sallie Mae, which provided cash—through warehouse advances and student loan purchases—to banks, which lent to students, who paid schools.”

It was a Rube Goldberg financing scheme that only got worse over the years, as corporate lobbyists and banks found ways to squeeze more and more out of the system and lay off risk.

First came the abuse of for-profit private schools, which qualified for loans but offered a shitty product. So egregious was the abuse of the system from jump street that Congress was ready to pull the plug entirely and tell Sallie Mae’s executives to go fuck themselves. On top of this, the government itself, under pressure of inflation and rising tuition, expanded grants and federal loans, which further jeopardized Sallie Mae’s position in the market.

Things were looking shaky over at the agency until a lobbyist named Mary Whalen came up with a solution to the problem that turned this into one of the most lucrative scams in history.

Whalen and Sallie Mae executives pushed the government to get even more involved under the theory that, if it was more in control of the process and flush, it could streamline the process and create a more efficient market. They just needed a little help and a little more independence. The idea was to institutionalize a form of arbitrage whereby Congress guaranteed Sallie Mae an additional 3.5% over its existing borrowing rate on every loan. And to allow Sallie Mae to tap into the market by offering shares of the company. Essentially guaranteeing profits to Sallie Mae and setting it free to operate in the “free market.”

With guaranteed profits, Sallie Mae had no problem raising funds from both banks and colleges, and the company exploded. In 1983, Sallie Mae officially went public and, as Mitchell writes, “In April 1984, Sallie Mae joined the New York Stock Exchange. The company earned a triple-A rating from Standard and Poor’s—the equivalent of a perfect credit score. Investors bid up the stock price.”

The more money they took in, the more they lent out. The more they lent, the more students took on debt. The more money the students were able to obtain, the higher colleges pushed tuition. And on, and on, and on.

The fuckery didn’t end there. You can’t make this much guaranteed money without anyone noticing.

“By 1986, most states had set up nonprofit agencies to lend to students or to buy student loans from banks, performing the same task as Sallie Mae. The agencies raised money by selling tax-exempt bonds—the buyer of which was often Sallie Mae—which allowed them to borrow at interest rates below 7%, exceptionally low at the time. They would then collect interest rates of 9–14% on every student loan on their books—rates that had been set by Congress and that students paid on their loans.” 

Everything they did was arbitrage. Guaranteed arbitrage. It was a thing of beauty for only two parties. Sallie Mae and its investors, and the colleges that were all too happy to take the money lent to students.

Sallie Mae was having its way with the system and getting away with murder. This did not escape the incoming Clinton administration that came from a generation that understood how fucked the system had become. Almost immediately, Clinton set Sallie Mae in his sights and devised ways to bring the company to heel.

“The month after his inauguration…he successfully pushed Congress to create a permanent version of the Direct Loan program to compete against the Guaranteed Student Loan program. As part of a bill passed by Congress months after he took office, the Direct Loan program would steadily grow, and within four years, originate up to 60% of all federal student loans.”

This was crushing to Sallie Mae.

But hope was around the corner in the form of a Republican-controlled Congress, a CEO named Al Lord who was determined to crush Clinton’s plan, and a battery of lobbyists and Wall Street investors determined to keep pushing the envelope. The multi-pronged strategy was brilliantly executed. Here’s how they did it:

• They removed the quasi-governmental status tie and began removing government appointed board members.

• They created pools of student loan investments that were securitized, similar to how they bundled mortgages.

• They incentivized everyone in the company and board members alike with stock options to promote their offerings.

• They offered discounts in the market to incentivize students to use their programs instead of the government’s direct programs.

• They essentially bribed schools with equipment to get them to switch their recommended platform.

• Then they went hard after the adult learning market and for-profit colleges like University of Phoenix to take advantage of the growing interest in skills and certificate learning.

• And they wined and dined college and university leadership.

Taken together, these measures worked, and Sallie Mae was once again crushing it:

“Student debt took off. In 2000, Americans owed about $230 billion in federal student debt. By 2005, that figure had nearly doubled, to roughly $415 billion.”

Around this time, Sallie Mae lobbied for one of the shittier rule changes: making it near impossible to charge off student loans in bankruptcy.

This doesn’t begin to explore the fuckery that ensued in the graduate market, which is a significant story in and of itself.

This isn’t the end of the story, mind you. Sallie Mae would continue to run afoul of Congress at various times. And during the financial crisis, when so many student debt holders suddenly began to default on their loans, the government actually had to bail out Sallie Mae. The financial crisis would create even bigger problems in the country, as citizens struggled to get back on their feet. And in an attempt to promote higher education, as so many presidents before him had done, President Obama looked for ways to reduce the deficit while inducing more kids to obtain a degree.

“In 2010, he attached a provision to the [Affordable Care Act] ACA…to eliminate the Guaranteed Student Loan program, which since 1965 had insured student loans originated by private lenders. Ending the program would save taxpayers $60 billion over 10 years…All federal loans from 2010 onward would be originated by the Treasury Department, using Bill Clinton’s Direct Loan program.”

But, as Mitchell notes, “By encouraging all Americans to go to college, through debt if they needed to, he had opened the spigot up further.”

And the cycle continued. More kids. More debt. Higher tuition. Higher cost of living. Fewer high paying jobs. Compounding interest. Default. Rinse. Repeat. To make matters worse, states were in such dire straits that they intensified the decades-long trend of cutting funding to state and community colleges, prompting them to increase the percentage of private tuition dollars required to attend. Underwriting standards were loosened to allow poor families, particularly those of color, to obtain federal loans. Terms were extended. Interest would continue to grow.

“During President Obama’s two terms, student debt doubled to $1.31 trillion. Those years showcased his—and the nation’s—unquestioned faith in higher education as a vehicle for societal change, upward mobility, and achieving the American Dream. But well-intentioned policies led, once again, to detrimental outcomes for families.”

Nothing would change during the Trump years, save for forbearance during the pandemic that continues today. And that’s how we got here, Unf*ckers.

Chapter Four

The Tuition Death Spiral

Nearly everyone who studies the issue of student debt acknowledges that colleges have a big part to play in this mess. Mitchell puts it in very simple terms:

“Another theory better explains why public-college tuition has risen so fast. The idea, outlined in the early 1980s by a former college president named Howard Bowen, is simple: Colleges will find a way to spend money, no matter how much of it they have.”

He’s right. They’re right. We sold the idea of college with great success in America. Then we opened up the lending floodgates to both private and public institutions. Relaxed standards enough to allow nearly everyone to qualify for some money, which colleges took as a signal to increase spending and raise tuition, thereby necessitating larger and larger loans. Every recession or economic downturn resulted in defaults or declining income that made loans more difficult to manage.

The big economic downturns had even more deleterious effects as states slashed community and state college subsidies, forcing public colleges to raise tuition to fill the gaps. And the cycle continued in a death spiral. Moreover, inflation outpaced wage growth for even middle class jobs, creating a squeeze on every aspect of the economy except the very top earning families.

The private institutions, with the promise of better job placements and the ability to attract wealthy, full pay candidates, determined that there was no limit to the amount of increases they could push through. All the while they aggressively pursued donations from wealthy individuals and were earning money on their private investments into companies like Sallie Mae. Which is why a university such as Harvard has a sticker price of $75,000 per year despite having a $53 billion endowment. They collect it because they can.

And the more money they raise and spend turning campuses into Disneyland, the more the public colleges feel the need to raise funds to compete. And the beat goes on.

But they’re not alone in their greed.

And remember, we’re coming off a pandemic, so when you look at these figures, they’re even more astonishing. In 2021, Sallie Mae had net income after taxes of over $1.1 billion. The company has returned 143% on investment since 2018, which is way ahead of its peers.

And their top executives are paid handsomely for their cunning. In 2021, their CEO pulled in $7 million in total compensation. Sallie Mae’s president hauled in $2.3 million. And their Executive VP made $2 million. But that’s just the tip of the iceberg.

But ridonkulous executive comp is nothing new these days, even though most people still don’t understand that Sallie Mae is a publicly traded, for-profit corporation. Which brings us to who exactly their shareholders are.

While there are a couple of individual institutional shareholders that own more than 5% of Sallie Mae, the threshold that requires them to list their holdings publicly in their proxy statement, I want to draw your attention to one in particular. BlackRock. BlackRock owns 8.5% of Sallie Mae. The same BlackRock that is buying up rental properties across the country and is the largest single landlord as a result—that BlackRock—owns the second largest stake in Sallie Mae. Not only is this shitbag company partially responsible for spiking rents, they’re the beneficiary of public student indebtedness. If ever there was an example of a predatory company, they’re it.

Greedy private colleges. Public colleges trying to keep up with the Joneses while losing state support and funding. A private company competing with the government for student loans by lobbying for every advantage possible. Hideous predatory investors sucking the savings out of the pockets of millions of American borrowers. Defaults through the roof. Rising inflation. Rising interest rates. The inability to discharge student loans in bankruptcy. And a system so complex that one side thinks we should just cancel it all and the other thinks we should just let it ride.

Chapter Five

To Forgive, or Not to Forgive? That is “a” Question.

So here we are. To forgive or not to forgive. In the coming weeks, or perhaps days, we’re going to learn of Joe Biden’s plan. Odds are, it will be a means tested partial forgiveness and some recalculation of interest on particular loans. Here’s a couple of predictions. First off, they’ll fuck it up politically. Meaning, it won’t be enough to garner a groundswell of popular support that delivers for Democrats in the fall. On the flip side, it will give Republicans key talking points to say that Democrats are robbing taxpayers by letting the soft generation off the hook. Another participation trophy.

The other prediction is that nothing structural will change, and we’re going to be arguing about this well into the next term. And the one after that. Cynical, I know. But that’s just how bad this White House is.

Much of the frustration on the left has to do with this notion that forgiveness is regressive. But this idea is inconsistent with the facts. Here is Dr. Jalil Mustaffa Bishop offering a response to this very question posed by Senator Elizabeth Warren in a congressional hearing on student debt:

Warren: “What does the data say about who borrows money to attend college? Are they generally very wealthy?”

Mustaffa Bishop: “I think the data is quite clear that those who borrow student loans are not wealthy. They are not people that have a high level of assets; that more than half of student debt is held by families with zero or negative household health. And especially when we’re looking at communities of color where again we see almost 90% of black students borrowing student loans, compared to 68% of white students. So the idea that student loans are carried by wealthy families is something that doesn’t show up in the data.”

Centrist establishment sources like The New York Times and Brookings are aligned with the false regressive narrative though, and that’s not helping. A recent op-ed in The Times pushes for income limits to help the most in need:

“Most debt is held by higher-income households, and so any amount of universal forgiveness will benefit them disproportionately. In fact, the growth of student debt for graduate school — held by students whose degrees will offer them the greatest future earning potential — is a major driver of overall student debt.”

This entire narrative is built around the false premise that most debt is held by higher-income households. The fallacy is that the largest loans are for graduate school, which is where the argument makes sense. But, in sheer volume and impact, it’s on the lower and middle classes. But the concept is repealed and pushed by organizations like Brookings as well, which states “student loan borrowers are better off than other Americans,” with such certainty that it sticks in the public narrative.

So, these ostensibly conservative institutions, that promote themselves as liberal, build arguments for means testing on these false premises. Here’s a passage from the Jacobin that explains the fundamental flaw of this logic so beautifully:

“Have you ever noticed that means-testing proponents don’t want means-testing for giant income tax cuts, tax deductions, corporate subsidies, bank bailouts, or any other government handouts to the rich? Have you ever noticed that demands for means-testing only emerge during debates over social programs for the non rich? Yeah, that’s the tell — the one that lets you know means-testing isn’t anti-oligarchy, it is pro-immiseration and otherization.

 

“Means-testing is a way to take simple universal programs and make them complicated and inaccessible. In practice, calculating exact income levels and then proving them for eligibility means reams of red tape for both the potential beneficiary and a government bureaucracy that must be created to process that paperwork. They are let-them-eat-cake austerians who see means-testing as a technocratic way to weaponize red tape in service of limiting help to the poor.”

This is so wonderfully stated. Tying up forgiveness programs in red tape that few understand is a signature move of today’s liberals. It’s why the child tax direct payments were so effective at reducing poverty, as opposed to the child tax credits. On paper, they’re the same thing. Except the latter is just more complicated and inaccessible.

Take, for example, the current path to student loan forgiveness available to public service employees. Liberals hold this up as an example of good forgiveness. Forgiveness that works. The model. So why do such a ridiculously low percentage of public service employees actually have their student loans forgiven? Let’s read directly from the government aid program text:

“To qualify for PSLF, you must:

• be employed by a U.S. federal, state, local, or tribal government or not-for-profit organization (federal service includes U.S. military service);

• work full-time for that agency or organization;

• have Direct Loans (or consolidate other federal student loans into a Direct Loan);

• repay your loans under an income-driven repayment plan*; and

• make 120 qualifying payments.

“To ensure you’re on the right track, you should submit a Public Service Loan Forgiveness (PSLF) & Temporary Expanded PSLF (TEPSLF) Certification & Application (PSLF Form) annually, or when you change employers. We’ll use the information you provide on the form to let you know if you are making qualifying PSLF payments. This will help you determine if you’re on the right track as early as possible. Suspended Payments Count Toward PSLF and TEPSLF During the COVID-19 Administrative Forbearance. If you have a Direct Loan and work full-time for a qualifying employer during the payment suspension (administrative forbearance), then you will receive credit toward PSLF or TEPSLF for the period of suspension as though you made on-time monthly payments in the correct amount while on a qualifying repayment plan. To see these qualifying payments reflected in your account, you must submit a PSLF form certifying your employment for the same period of time as the suspension. Your count of qualifying payments toward PSLF is officially updated only when you update your employment certifications. Digital signatures from you or your employer must be hand-drawn (from a signature pad, mouse, finger, or by taking a picture of a signature drawn on a piece of paper that you then scan and embed on the signature line of the PSLF form) to be accepted. Typed signatures, even if made to mimic a hand-drawn signature, or security certificate-based signatures are not accepted. Note: In-grace, in-school, and certain deferment, forbearance, and bankruptcy statuses are not eligible for credit toward PSLF. Qualifying employment for the PSLF Program isn’t about the specific job that you do for your employer. Instead, it’s about who your employer is.”

Easy peasy. Just follow the above instructions and “poof,” you’re absolved. Give me a fucking break.

This is an utterly fascinating and maddening issue. Having gone through the system myself, I’ve seen how byzantine and frustrating it is. It is so easy to be swept up in it, and there’s a sense of groupthink about the system. That’s why there are 43 million Americans dealing with it. For those who have paid off their school loans, I can certainly understand the ‘what the fuck’ sentiment surrounding the forgiveness concept. And that’s why I thought it was important to do a deep dive into how we got here.

Because the circumstances have changed, and the system has become increasingly corrupt and out of control. All stemming back to Milton Friedman and others who just viewed education differently. While he called it an investment, he saw it as a personal investment instead of an investment into our people. And that’s really what this is all about.

Biden’s going to do what he’s going to do, and it will be marginal and somewhat helpful. But it’s clear it won’t be enough because, as you can tell after this episode, the roots of this problem are deep and entrenched.

As Mitchell concludes:

“Canceling student debt would help borrowers. But it wouldn’t solve rising tuition, low-quality programs, and indebtedness for future students. The government is on track to lend another $1 trillion to students and their parents over the next decade. Without reforms, the country will end up where it started—deep in student debt with another wave of defaults.”

In order to fix the entire system, there has to be a fundamental shift in both mindset and policy. The mindset we must change is similar to healthcare and welfare. Supporting your population, especially when you have the means to do so, doesn’t create a sense of entitlement that fosters laziness. There is just no data to support this idea. Educated and healthy people strive to do more and do better in their lives and in society. Without this shift in mindset, it will be nearly impossible to pursue structural change to the way in which we promote higher education in this country.

Another shift in mindset is on the employer side. To understand that many jobs in the modern economy don’t even require a college degree. Continuing corporate sponsored education can, and should, be part of the equation. Don’t get me wrong, some college for everyone is a very good thing because it allows young people the time to mature and find their lane. To that extent, one of the most significant policy changes that we must adopt is free state and community college.

Of course, these colleges need to be fully funded by the government in order to do this, so the burden must shift from consumer to provider. But these colleges also need to be able to compete against the private institutions that have so much fucking money they can raise the incentives to not just attend, but to work there. It’s a delicate balance to provide enough funding for free college and competitive teacher salaries, because colleges will indeed spend money just to spend it.

One of the ways to close the exploding tuition gap is to recognize that private colleges are a choice. We can’t concern ourselves with what they do as much as we can the public colleges. But, if we make the public colleges far more competitive and less expensive, this will put market pressure on them to part with more of their egregious endowments and slow the pace of tuition growth. That needs to happen.

But the other way is to force private institutions to have some skin in the game. I’m all for federal loan programs, but the character of these loans and the securitization of them has to fundamentally change. And, on this, we have the answer. It was Lyndon Johnson’s original idea of an insurance pool that colleges and the government pay into to cover defaults. The lynchpin of this idea, however, is to drastically cut the interest rates on loans. This works in a couple of ways.

First, like I said, I’m all for forgiveness at any level. 10 grand. 20 grand. 50. Whatever. Deal with the problem at hand. But if it’s 10, which I suspect it will be, then the federal government should refinance the outstanding balance of every loan out there at the federal funds rate. Let people borrow at the same rate of the banks and extend the terms of the loans out of the gate. This would dramatically reduce monthly payments.

Moreover, to drive the nail in Sallie Mae’s coffin, refinancing in this fashion should be available for all private loans as well. Fuck ‘em. Sallie Mae needs to be put out of business. Leave BlackRock holding the bag. Who gives a shit?

Other sensible policy measures that are easily achieved are to streamline the public service debt relief process and to revert to when it was allowable to discharge student loans in bankruptcy. The latter policy never should have happened. That was just pure greed pushed by corporate lobbyists.

And, for fuck’s sake, stop with the means testing. It’s wrong, stupid and mean. Wealthy people don’t carry student debt. And stop worrying about the feelings of people who paid off their loans. For every one of them, there’s another older person and sometimes senior citizen who is still paying theirs off and struggling. In fact, did you know that there is an entire segment of the senior population having their Social Security checks garnished to finish paying student debt? Come on, just knock it off already. Let Jeanine Pirro cry into her chardonnay, this isn’t about her.

Put Sallie Mae out of business and make colleges put skin in the game.

Offer some relief today, and fix the system for tomorrow.

Let students pay what the banks pay.

Here endeth the college lesson.