Yves here. Student loans are one of those background issues, like stagnating/falling lifespans, that we highlight occasionally and wish we could focus on more but suffer from being on the receiving end of an informational firehose. The same way debt-financed housing has made homes increasingly unaffordable, so to have student loans turbo-charged the increase in college costs and created a largely parasitic adminisphere. And of course, there’s a political issue, in that university staffers overwhelmingly vote Democrat, feeding right-wing antipathy to higher education on political as well as ideological grounds.
Another not-sufficiently acknowledged abuse is that financially unsophisticated students are regularly, if not pervasively, given unrealistic information about their earnings prospects, leading them to take on bigger debt loads than they can later carry comfortably. And that’s before skipping over the risk of job loss versus the costly consequences of missing payments.
By Alan Michael Collinge. the founder of StudentLoanJustice.org, the first grassroots organization in the United States to advocate for student loan borrowers. Since founding the organization in 2005, Collinge has been featured on “60 Minutes” and in numerous print publications, including Fortune magazine, the San Francisco Chronicle, Boston Phoenix, Village Voice, and Inside Higher Ed. He has published editorials in the New York Times, Los Angeles Times, and the Hill. Before founding StudentLoanJustice.Org, Collinge was an associate scientist of aeronautics at the California Institute of Technology and the regional project director for a government loan program administered by the U.S. Department of Transportation. Produced for the Observatory by the Independent Media Institute
With the student debt crisis spiraling out of control, some media outlets have called it a “national emergency.” Outpacing most other borrowings by consumers, Americans who owed federal student loans more than doubled between 2000 and 2020, “from 21 million to 45 million, and the total amount they owed more than quadrupled from $387 billion to $1.8 trillion,” according to a 2024 article in Brookings.
A notable demographic shift has also emerged, with older borrowers now outnumbering younger ones, holding more debt despite having taken out smaller loans many years earlier. According to my analysis of the 2024 second quarter figures from the Department of Education, there are now 2.1 million more people over the age of 35 (23.7 million) with student loans than under the age of 35 (21.6 million), and they owe 160 percent more on average ($43,680 versus $27,250).
Approximately 5.3 million borrowers who had taken federal student loans are “in default,” states an April 2025 PBS article.
Improving access to education is integral to ensuring the economic success of any nation, leading to substantial returns in terms of salaries and gross domestic product. “When more individuals hold high-value credentials, workforce participation increases, financial security becomes attainable for more families, and economic growth accelerates. But these benefits won’t materialize without action. Federal and state governments must prioritize education funding, align learning with workforce needs, and reaffirm education as a public good,” according to an opinion piece in the nonprofit news publication, The 74.
Unlike the U.S., many other countries are prioritizing investing in education to support economic growth. If America doesn’t rectify its policies, which have led to “declining confidence in the value of a degree,” the situation could become irreparable in the future.
The Vicious Cycle That Has Made Education Inaccessible
Student loans were introduced to make education more accessible for students from low-income backgrounds, which would eventually lead to better job opportunities. Far from achieving this goal, the flawed loan system has been monetized by politicians and companies over the years, keeping students in an endless cycle of debt.
“A generation ago, Congress privatized a student loan program intended to give more Americans access to higher education. In its place, lawmakers created another profit center for Wall Street and a system of college finance that has fed the nation’s cycle of inequality. Step by step, Congress has enacted one law after another to make student debt the worst kind of debt for Americans—and the best kind for banks and debt collectors,” states ABC15 Arizona.
The consequences of this financial burden are severe and worsening, leading to tragedy in some instances, like in the case of the Nelson family from Broken Arrow, Oklahoma. They filed for bankruptcy in 2020 as their debt grew, “most of which was unpaid student loans,” according to the New York Post. The family, including six children, was found dead in 2022 in what was termed a “murder-suicide,” owing mainly to their financial circumstances.
The Ballooning Student Loan Debt
The student debt exceeds the state budget in most states (particularly Southern states), based on the first quarter 2025 data I analyzed. The increasing debt has resulted from a significant increase in borrowing and the cost of education over the years. The lending system, by all rational metrics, is a catastrophic failure.
Unfortunately, the political dynamics that have taken hold of both Congress and the White House over the past couple of decades—from both parties—have only solidified against student loan borrowers, perpetuating this broken and dangerous loan program. It is crucial that the public understand the history of how we arrived at this point, the current political and other dynamics at play, and, most importantly, how we can move away from the ledge we, as a nation, now find ourselves on.
How Sallie Mae Monopolized the Lending Industry
The debtor’s revolt in Western Massachusetts, which took place in the 1780s and came to be called “Shays’ Rebellion,” was believed to have compelled the drafting and ratification of the U.S. Constitution, which called for uniform bankruptcy laws ahead of the power to raise an army, coin currency, and declare war in Article I, Section 8.
When President Lyndon Johnson came to power, he signed the Higher Education Act (HEA) into law in 1965. The HEA “created… guaranteed loan programs establishing that loans borrowed by students from private loan companies were now guaranteed by the federal government if students defaulted,” according to the Boston University website. During the signing ceremony, Johnson declared that the loans would be “free of interest,” pointing out that the act would ensure that “the path of knowledge is open to all… [who] have the determination to walk it.”
In 1972, a hybrid, public-private company, Student Loan Marketing Association, which was later called Sallie Mae, was established to serve as a repurchaser and guarantor for federal student loans made by private banks. The company had all the profit-making incentives of a private company, but also had the full backing of the U.S. Treasury, whose money it used for its operations. This created a monopoly over the nascent student loan industry, and the company became the de facto expert and driving force, along with Congress, on legislative matters.
“In the mid-1990s, skyrocketing demand for student loans prompted by escalating college tuitions, expanding eligibility for student loans, and a host of new types of lending combined to make the student loan industry infinitely more complex, larger, and more lucrative. And Sallie Mae emerged as the industry’s biggest player,” stated a 2007 report, “Leading Lady: Sallie Mae and the Origins of Today’s Student Loan Controversy.”
In 1976, bipartisan legislation—pushed by Sallie Mae and other related financial interests in Washington—was enacted by Congress, which made federal student loans non-dischargeable in bankruptcy for five years after the repayment period started, unless borrowers could show “undue hardship.” The reason given for this unprecedented removal of standard bankruptcy rights from student loans was that there was a crisis of graduates flocking to bankruptcy court in droves to expunge their debts.
According to a 2013 policy brief by the nonprofit Reason Foundation, however, “the narrative that students are routinely graduating from college with debt and immediately declaring bankruptcy after graduation was pushed by Sallie Mae and other student lending companies in the hopes that these measures would even further reduce the risk shouldered by lenders when issuing student loans.” The discharge rate of student loans in bankruptcy at that time turned out to be far less than 1 percent—lower than almost all other debts in bankruptcy court.
While a waiting period for bankruptcy discharge surely seemed inconsequential to most in Congress at the time, Sallie Mae was just getting started. In the ensuing years, this unique exception to discharge was extended to include loans made or insured by nonprofit companies. Then, the waiting period was extended to seven years in 1990.
In 1991, Sallie Mae (and the lending industry it essentially controlled) successfully convinced Congress to remove statutes of limitations from federal student loans. And in 1998, Sallie Mae and the student loan industry managed to end any “waiting period” for bankruptcy discharge with the passage of the Higher Education Amendments.
Policy Changes That Helped the Lending Industry Thrive
The number of loans made annually between 1990 and 2000 doubled from 4.5 million to 9.4 million, according to the American Council on Education 2001 brief. “This increase in student borrowing was fueled, in large part, by legislative changes enacted early in the decade.”
To keep up with the increasing demand, Sallie Mae went on an acquisitional drive, purchasing two of the largest student loan guarantors, USA Group and Southwest Student Services, in 2022, and also “went on to purchase the student loan collection companies, so that by 2006 it dominated all aspects of the student loan industry,” according to a 2010 article by World Socialist Web Site (WSWS). These companies generated most, if not all, of their revenue from collecting on defaulted student loans.
Sallie Mae eventually became a completely private company in 2004. “Sallie Mae’s moves to acquire numerous guarantee, origination, and collections companies under a single corporate banner had fundamentally altered the student loan marketplace and made Sallie Mae the undisputed leviathan of the student loan industry,” stated the Reason Foundation brief.
But Sallie Mae and the student loan industry weren’t finished. In 2005, they managed to convince Congress, after spending millions of dollars in lobbying, to end bankruptcy rights from all student loans—including those made by private lenders—as a part of the landmark bankruptcy bill, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. At the time, they argued that this would allow the industry to lend to more needy students. But this never happened. Instead, they begandemanding cosigners (typically parents or grandparents) for nearly all of their private loans.
These were truly the “happy times” for the student loan industry. Sallie Mae’s stock price shot up. “In 2005, Sallie Mae was named by Fortune as the second most profitable company in the U.S. (Microsoft was 18th that year),” according to WSWS. The company’s CEO at the time, Albert Lord, was the “highest-paid CEO in Washington, D.C., that year.” He built his own private luxury 18-hole golf course.
By 2004, Lord even bragged to shareholders that the company was actually “writing checks” to the Treasury at the end of every year—a reference to the fact that the government was making a profit on defaulted student loans through Sallie Mae’s collection activities.
No lender makes a profit on defaulted student loans in any other lending industry. The fact that the federal government profits from defaulted loans is a defining hallmark of a predatory lending system, resulting from the removal of bankruptcy rights and statutes of limitations. It is even more true todayfor the Department of Education, as it now owns the loans outright, rather than the old-style lending model where it only guaranteed the loans.
How Politicians Supported the Growth of the Student Loan Industry
The federal student loan servicers (who were largely the lenders and guarantors under the older FFELP program) can generate more revenue from defaulted loans than from those that remain in good standing through a program called “student loan rehabilitation,” where a defaulted borrower is coerced into making nine payments for 10 months and ultimately signs for a new, much larger loan. The private companies that facilitate these loan rehabilitations receive 16 percent of the value of the new loans, for instance, on a $50,000 defaulted loan that is rehabilitated into a new $100,000 loan, a $16,000 payment is made by the taxpayer to these companies. This, of course, gives the industry a perverted incentive to want loans to default.
Wall Street and Washington had found a way to make profits on a lending instrument: Remove all standard consumer protections, hyperinflate loan balances—including and especially through defaulting loans—and use collection powers that would “make a mobster envious,” as stated by Senator Elizabeth Warren, to extract the money from the borrowers and their families.
This is precisely the sort of lending tyranny that the founding fathers wanted to avoid when they called for uniform bankruptcy rights and equal protection under the law.
Under President Barack Obama, the lending program was nationalized, resulting in the Department of Education making and owning all new loans from July 2010 onward. While private companies like Sallie Mae did not like this change, they remained in the mix by both servicing healthy loans and collecting on defaulted student loans.
Disturbingly, because lending companies could now only make revenue through these two means—where rehabilitating defaults would be far more profitable for them than servicing loans—this only strengthened the perverted incentives these companies already had to frustrate, baffle, and bamboozle borrowers into default.
This change was clearly a boon for the Department of Education, which now stood to earn interest on the loans. Some of the profit was even used as an offset to pay for the Affordable Care Act. The federal government loved this new arrangement, as lending skyrocketed, leading to the accrual of interest.
It also became apparent that the Department of Education had no intention of fairly administering the lending program under Obama’s presidency. The various income-driven repayment (IDR) plans that were in place were run in ways that would lead to the disqualification of the overwhelming majority of borrowers. Between 2013 and 2014, the department found that an astonishing 57 percent of borrowers had “fallen out” of these programs for failing to verify their incomes—just one of many hurdles borrowers must overcome to receive the promised loan cancellation after 20–25 years of making payments.
The Department of Education also fought tooth and nail behind the scenes to keep bankruptcy rights away from student loans on Obama’s watch. They regularly submitted testimony to judges in bankruptcy cases and even micromanaged such cases directly or through contracted attorneys.
Despite the long-standing promise by Democrats to return bankruptcy rights to federal student loans (which they failed to do in 2008), the best we saw from President Obama was an order to “study” the feasibility of returning bankruptcy rights to the loans. There was no meaningful action on this front. During Obama’s two terms in office, nearly $1 trillion was added to the nation’s student debt tab, according to my analysis.
The Worsening of the Crisis
President Donald Trump’s first term in office was—with a couple of notable exceptions—a nightmare. He hired Betsy DeVos—who held stock in student loan collection companies—to be his secretary of education. DeVos ran the department in even worse faith than seen during Obama’s term. She was even threatened with possible prison time by a federal judge for violating “a court order to stop collecting loans from former students of a now-bankrupt for-profit college,” according to the online news publication Government Executive.
There were, however, a couple of surprising bright spots from Trump’s first term. First, he became the first president to cancel student loans broadly, and by executive order. He first did this in August 2019 when he canceled student loans for 25,000 disabled veterans. He did it for a second time for everyone when he first enacted the repayment pause at the onset of the COVID-19 pandemic. This proved that the president can, indeed, cancel federal student loans by executive order. There were no lawsuits or controversies surrounding either of these actions.
Interestingly, it was these actions that compelled my group to start the petition in March 2020 to return bankruptcy rights to all student loans, igniting public conversation about canceling student loans by executive order. The petition quickly grew to hundreds of thousands of signatures and went viral in the mainstream media. Within six months, leading senators, including Elizabeth Warren and Chuck Schumer, began making a similar call.
Joe Biden, who won the election in 2020, meanwhile, promised to both “eliminate” the student debt of people who went to public colleges and Historically Black Colleges and Universities (HBCU), and also committed to restoring standard bankruptcy rights to student loans.
The feeble attempt that Biden made in 2023, however, toward fulfilling these promises was struck down by the Supreme Court. While most point to the obvious reasons—Republican attorneys general and their lawsuits—the key reason was opposition to it from leading Democrats.
Shortly after the 2020 election, Steven and Mary Swig, a billionaire San Francisco “power couple,” circulated a memo within Democratic circles declaring that the president could not cancel student loans by executive order.
Soon after, Democratic leaders like Nancy Pelosi and Susan Rice were parroting this memo, declaring that the president could not cancel the loans administratively. When the Supreme Court handed down its verdict, Chief Justice John Roberts actually quoted Pelosi in the majority opinion.
It seems like Biden himself wasn’t entirely behind this plan. He rejected a “$50,000 student loan forgiveness plan” shortly after the elections, according to ABC News, and the law that he attempted to use to justify the cancellation was “ill-fitting.”
The loans that were canceled during Biden’s term weren’t because of anything that Biden did or didn’t do. Instead, these were loans that were, by and large, supposed to have been canceled through existing rule or law, years or even decades ago. While Democrats often cited them as evidence of their concern for student loan borrowers, the fact remains that these cancellations were relatively small compared to the loan portfolio’s growth over four years.
On returning bankruptcy rights to student loans, the Biden administration did, indeed, stop “opposing” student loan borrowers in bankruptcy court, but the “new bankruptcy process” they put in its place effectively transferred the power to determine the case from the judges to the departments of Education and Justice. The process has proven to be an expensive joke on the borrowers, with only a few borrowers getting discharges. In fact, out of 450,000 student loan borrowers who have filed bankruptcy since the new process was implemented, only around 2,500 people (0.6 percent) have received partial relief.
Meanwhile, Dick Durbin, former chairman of the Senate Judiciary Committee, had a good bipartisan bill called the FRESH START Through Bankruptcy Act of 2021, which he introduced along with Republican Senator John Cornyn. It proposed making “federal student loans eligible for discharge in a bankruptcy proceeding ten years after the first loan payment comes due.” Leading Democrats, like Elizabeth Warren, however, refused to endorse the bill.
In 2025, Trump returned to the presidency, and the Republicans gained control of the White House, the House, and the Senate. He has promised to “eliminate” the Department of Education, and “return student loans to the states” (which is incredibly ambiguous). Trump has already gotten the go-aheadfrom the Supreme Court to dismantle the department.
In fact, the passage of the One Big, Beautiful Bill in July 2025 makes the situation worse for student borrowers. It reduces “the number of repayment plan options down to two from seven… [also] capping the amount individuals can borrow for higher education,” states CBS News. Critically, the bill eliminates the President’s ability to cancel loans by executive order and allows defaulted borrowers to rehabilitate their loans twice. This provision is tantamount to an economic death sentence for these borrowers, whose loans will default again around 80 percent of the time.
Both parties in Washington have joined hands in keeping this failed loan scam going. At this point, this is not just unwise, but also immoral. We are truly in uncharted territory here. Going forward, we can easily expect half of all student loan borrowers to wind up in default in the next few years. This is precisely what the founding fathers wanted to avoid when they called for uniform bankruptcy rights. The worsening of this situation is going to take a tremendous toll on millions of people.
We can take action to prevent this by compelling Congress and the president to restore the standard, constitutional bankruptcy rights that were removed in the first place. This will end the widespread abuse that we’ve seen, prevent the far greater financial and social harms that the lending industry is poised to inflict on the country (particularly in light of the passage of the “One, Big, Beautiful Bill” law in 2025, and, over time, should lead to more rational pricing and more sensible lending.
What Other Countries Are Doing to Ensure Access to Higher Education
As the U.S. lags in understanding the value of investing in public education, other nations have recognized the importance of an educated workforce to ensure a thriving economy.
In Norway and Sweden, higher education is “tuition-free,” which guarantees equitable access to learning. To prepare students to meet industry demands, Germany offers a dual apprenticeship system, which “integrates classroom learning with paid, on-the-job training, producing well-prepared graduates for industry demands,” according to The 74 opinion piece by Courtney Brown, vice president of impact and planning at Lumina Foundation. Denmark provides students with grants to support them financially.
“Switzerland has a vocational education system that allows students to split their time between school and work in fields like health care, information technology, and advanced manufacturing. Singapore’s SkillsFuture program gives adults financial credits they can use to pursue short courses and certificates at any stage of their careers. In Finland, adults can attend publicly funded retraining programs to gain new skills when industries shift or disappear,” adds the May 2025 opinion piece.
The U.S. student loan crisis is not simply the result of rising tuition costs, but of decades of deliberate policy choices that transformed higher education from a public good into a profit engine for lenders, politicians, and corporations. The stripping of bankruptcy protections, the monopolization of the lending system by an unholy alliance of the Department of Education and its private financial partners, and the bipartisan complicity of Congress have entrenched borrowers in a cycle of debt with no escape, leaving millions in financial ruin and undermining confidence in the very value of a degree. Meanwhile, other nations are investing in free or low-cost education, apprenticeships, and lifelong learning as a foundation for economic growth and social equity. Unless the United States confronts this broken system head-on—by restoring basic consumer protections, reducing costs, and reaffirming education as a public good—the crisis will continue to deepen, threatening not only individual livelihoods but the country’s long-term economic stability.
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So what is the solution from here? To forgive student loans altogether, both principal and interest, would create a huge moral hazard and a huge backlash. We cannot penalize students who understood the math and made conservative choices.
Perhaps make students liable for the principal but let the state assume the burden of the interest?
Or simply make student debt dischargeable in banktuptcy?
Or offer a Steve Keen-style limited jubilee: If you spent more than $100,000 on university, you get a $50,000 cash payout — but if you have outstanding loans, you must apply the credit to your loans first.
There are two parts–design the appropriate go-forward system, then resolve the problems created by the past system.
As you state, student loan forgiveness to address past problems creates extreme moral hazard on a go-forward basis, in addition to other concerns around equity. However, with a go-forward system in place, forgiveness can be targeted and moral hazard mitigated depending on specific design issues.
While I do not think education is purely an economic investment in human capital, I do think there is an instructive exercise on that model. If education actually works to increase human capital, improving productivity and future earnings in aggregate, the federal government already reaps rewards through the progressive income tax system. In other words, *if* education results in the average college graduate earning more, they will pay more taxes, meaning the federal government *already* achieves a return on higher education.
Last time I did the math on this, I took the average earnings of a high school graduate, the average earnings of a college graduate, and plotted out the higher taxes on college graduate earnings (including the delay to go to college and using tax brackets, e.g. mostly 22%), then entered particular “investments” the federal government could make to achieve reasonable rates of return. I concluded that the federal government could spend approximately $50,000 per student and still get something like a 5% financial return–about the cost of attendance for four years at a state school. In other words, using the national average statistics (which I do not pretend is a final and complete analysis), the federal government could pay for everyone to attend a four-year state university with no loans involved and still make back a financial return in the tax system.
There are some big caveats with my assumptions–for example, surely many people who go to college would have earned well above the high school graduate earning level regardless of going to college. In other words, perhaps college operates somewhat under a signaling model versus just an investment model. On the other hand, education is surely valuable in more ways than just as an investment in human capital. Hence, you could debate either way. Nevertheless, I would suggest that basically anything more generous than strict student loans is still financially viable for the federal government, whether the income-based loan system we have now, or an income-based loan system with slightly better terms, or one where all the loans are 0%.
The other side is how to reduce incentives for colleges and universities to inflate the cost of attendance. As long as college operates on a market model, and as long as many families see college as both an important economic investment and a source of status and connections (inelastic demand), the cost of attendance will rise to absorb the purchasing power of interested families. That means any federal incentive will be folded into the price along with the family’s willingness to add money, minus any scholarship incentives because the student is themselves uniquely competitive among colleges.
As the purveyor of grants and loans, the federal government can take a more active role in capping attendance costs for colleges that want access to the grants and loans for their students. For example, if a four-year cost of attendance is $50,000, grants. If it’s $200,000, no grants whatsoever. This is not a cap; it is a cliff. Another thing the fed could do is target grants and loans only for majors that it expects have high employability and value-add, e.g. grants for engineering school, no grants for political science. For those concerned about too much centralized oversight, the federal government could figure out a way to kick oversight to states. I’m not suggesting a particular design; I’m just suggesting that he who has the gold makes the rules, and the federal government could attach strings to its gold that mitigate some of the problems in the old system.
If we could settle on a go-forward aid program and some kind of accountability system, then it would say a lot about what to do with past borrowers, e.g. getting rid of interest on the loans or forgiving some fixed balance that wipes out a large number of small debts without giving a windfall to doctors and lawyers.
Really interesting! Thank you!
This seems like a good way to further incentive colleges and universities to emphasize recruiting students who don’t require financial aid. My guess is that you’d create a system similar to that which exists for U.S. K-12 education now, which consists of free, poorly perceived, publicly provided education for the poor, and expensive, higher-prestige, privately funded education for the rich.
Would you say that the U.S. has become smarter as the humanities have been slowly defunded for the last 25 years?
Was the solution to silicon valley bank imploding itself to say “tough on you, you shoulda known more math?”
And if you don’t get a job that can pay the debt, how exactly is that “math”?
Furthermore, students are the ultimate subprime borrower, and no one is reminding people of the “math” when they hand out the check.
There is no moral hazard here that is not dwarfed the lack of morals in the entirety of the financial system…a bunch of socialist grifters who get bailed out for literally anything.
Yes as a matter of fact, allow student loans in bankruptcy, it is that simple. Our political system is entirely beholden to billionaires, and honestly the dems to my mind have revealed themselves to be the greater evil particularly in, but not isolated to, the student loan industry.
Something about “eating the seed corn” goes here…
S.L.A.B.S.
https://manifold.umn.edu/read/untitled-85740014-9b15-46f2-be8c-5d261d587877/section/a7d7ced8-7b4f-4cd0-99f2-e997d6d78f39
There is no moral hazard here that is not dwarfed the lack of morals in the entirety of the financial system…a bunch of socialist grifters who get bailed out for literally anything.
Well-said, thank you for that.
It seems that for many borrowers, it’s not the principle borrowed that’s the problem, it’s the fees, penalties, and ever-compounding interest that sink them: who benefits from these? How do they serve public interest?
As pointed-out, loan servicers often will deliberately push borrowers into default because it is more profitable, yet people still point towards the debtor as the morally deficient one– it’s sickening.
I see no problem with people walking away from a scam, con, or rigged-game once they realize they’ve been had– you owe no debt to thieves, and just because they can cover themselves with fig-leaves of legalese doesn’t make what they do right.
The social contract is broken: do what you have to do in order to protect yourself.
yes,We are eating our young. Then we wonder why there is a decline in college attendance. Parents are still paying their own student debts.
But we have a solution. All you have to do is serve on active duty for 90 days .
Then, at 89 days, simply change the rules.
Not unlike the promises made to, for example, nurses, to work in socioeconomically depressed area hospitals for a length of time for loan forgiveness. Which my daughter in law considered until she realized there’s a multitude of sleazy tactics which are used to void any agreement.
Here’s an idea. The government provides free education including university.
But since the demand will almost always exceed supply (free stuff), find a way of filtering who gets in and who doesn’t.
Say a weighted system, depending on marks at school, parental income, perhaps race (US), etc. I’m sure someone smarter than me could work it out.
Otherwise it looks to me like the US is going to end up like Dickensian UK of 200 years ago. Debtors prisons with little hope of getting out. Debt slavery.
They say the opposite to love isn’t hatred, it’s indifference. And it looks to me like the US, from oligarchs down, are indifferent to young people to from ordinary backgrounds. ‘Let them eat cake’ say the tech bros.
High school district in Chicago western suburbs I moved away from several years ago, college night talking about admissions and financial aid (not cost). My opinion is if you don’t have kid in the mix at the time then what is really going on here is more obvious.
Quotes / agenda / hysteria / what’s not mentioned:
-Apply to at least 12 different colleges. Categories Dream, Reach, Target/Match, Safety!!!
-Talk about FAFSA, but never about CSS Profile.
– Never talk about mismatch of cost of particular college / degree / career ROI.
-Read several typical application essays. Seemed like the more the word ‘amazing’ was used, the better.
-There’s nothing like the Big Game Weekend Experience, especially at ‘The State Flagships’!
-One mom asked about the district community college, College Of DuPage. On the way out several parents whispered to her, “you’re brave.”
-Most of the high school guidance counselors went to Wossomatta U with Bullwinkle The Moose and were all making at least $150,000 / year at the time.
My financial planning advice, especially if CSS Profile in play, is listen to a random Peter Schiff or Bill Holter podcast on your way to the hand tools aisle in the gardening section of your local hardware store with your eighth grader.
As far as a ‘Steve Keen Jubilee’ that’s fine, as long as everyone, as in everyone, in the country gets the $100,000 check, regardless of whether they have an outstanding student loan balance, debt or no debt of any kind, paid their loans, never had a loan, never went to college. Quite equitable. Those who don’t need the money for paying back any debt can listen to more Bill Holter interviews – as soon as possible.
As someone in the Secondary education industry, yes it all marketing to the kids. They need to realize what their degree will pay them as they get out, so they can afford the debt they take on. I routinely point my students to the BLS so that they can look up median salaries and can discuss what kind of things they will be able to afford in the future.
That sounds depressing!
“Go Git ’em, Tiger”!
Put me in Coach, I’m ready to Play!
No excuses/ defense, but with my poop-tint shades, I can see where a thinking young person might lash out at the Pressure Points of society. Thus as it ever was… becoming Luigi. It ain’t Nihilism!
What’s more depressing us a 25 yr old who majored in something they could not support themselves with making 30k and paying loans for it.
And the inevitable outcome of that is that all our political science majors, journalists, social workers, artists, writers etc. will be from the socioeconomic caste which can afford paying tuitions. Every aspect of our society will be managed and run by the Bush, Obama, Trump, Bezos offspring.
There was a time when becoming an apprentice in skilled trades was desirable. These days we cannot find enough young people to sign on even though there is no tuition and the Union gives great benefits. There is even a college program through which you can get an associate degree. And, you make adequate money after you graduate.
I trained to be a welder in a shipyard. The money was certainly very
good, but when you’re welding on the side of a ship a hundred feet
up, you don’t step back to admire your work too often. Inside the
ship wasn’t much better with half a dozen welders fouling the atmosphere with smoke in an enclosed space. Cranes carrying
a couple tons of steel would have the cable snap. The backlash
of the cables could cut a map in half. Salvage work on rusty freighters would bring a constant rain of rust onto your face and body. Everybody smoked Camel unfiltered because it was better
for your lungs. For the first 3-4 years you were likely to get laid off
a lot until you got some seniority. And you were working outdoors,
so exposure to the weather was always a factor. The same kinds
of conditions applied to plumbers, electricians, etc (not to mention
steelworkers, who aged very fast) applied. People looked down on
you as being ‘lower class’ no matter how much money you made.
I have student loans and it was never my intent to avoid paying them. I doubt the majority of student borrowers take out loans with the intent to discharge them in bankruptcy the first time opportunity presents. That politicians and lobbyist think this the case is indicative of their pathological tendency to split off the worst in themselves and project it onto the body politic in the form of destructive legislation. When I started paying my loans I noticed the principal never moved, in fact, the balance increased over time. I have learned this is a feature of the student loan program, capitalizing interest. Of course, I dutifully paid on my loans but never made any progress and eventually stopped. Would I prefer to pay them? Of course I would! However, I realized that given the kind of work I’m doing (mental health) I will never make enough to pay them off given the way the student loan system is set up to work. I expect to hear from people here, “You shouldn’t have taken out the loans!”, “You should have this”, “You should have that.” No argument here, but hindsight is a luxury that comes with time and I had every hope and intention to make good on my loans when I signed the promissory document. I guess my question is when you have a predatory system, which Collinge has clearly described in the article above, can you even navigate the student loan industry unscathed? Finally, in some of his articles Collinge states this system cannot continue as it is. I find this curious and wonder what the outcome will be. What would collapse of the system look like? If defaults are monetized, how will this system ever collapse when there is a clear incentive to keep it running? Funny how the government is an incredibly efficient, well-oiled machine, when it comes to monetary extraction of the masses. There is a lot more that could be said about my experience and the student loan industry, its relationship to college, career prospects, etc. I reserve the right to be wrong and welcome any challenges to my understanding of the system, but at this point in life I only take solace in Michael Hudson’s tag line on his website: “Debts that can’t be paid, won’t be paid.” Take care everyone…
The idea that bankruptcy is some sort of gift is a right wing trope. It is a difficult process (and if you do Ch. 13, you are eating ramen and canned beans for 60 months) and gives you demerits in job searches.
Reset to pay back principal+COLA adjustment on a fixed timescale? No technically usurious interest forward at all + a limited lookback to apply some fraction of past interest paid to reduce the principal.
How about we don’t change interest on student loans?
I took out $50k in loans, have paid $25k, still owe $42k
An equitable solution? There isn’t one. Someone will always be unhappy whatever the outcome.
However a good start might be to cancel all outstanding student debt and henceforth and forever more make public college education free for all who can qualify.
I’ll take a rollback of the bankruptcy and discharge rules to something more reasonable between “forever” and when it was five years. Oh and not have a judge decide what is “undue hardship”, because many will just say “bootstraps” or “ask your family for help” instead of being able to measure the hardship of working 60 hour weeks for barely above minimum wage to survive in this current environment.
What happened to the interest free part of the federal loans from Johnson’s original Act? It seems to me that the fact that the loans bear interest is one of the biggest problems here.
More spit-balling:
Pass an act of congress, signed by President:
-all loans on hold for a year, while we:
-determine outstanding principal on each loan for each borrower. Ignore and strip-out accrued interest, negative amortized interest amounts.( It’s haircut time)
-purchase ALL the notes- whether fractionalized, securitized, atomized- whatever status, for $.10 cents -on-the dollar of the original note amount, or the lower principal balance, whichever is LOWER- NO loan balance can be determined to be HIGHER than the original note amount (predator guillotine)
-mint a Platinum Coin to cover the determined 10% total debt balance (Decreed Settlement )
-nationalize the administration of the payments on the 10% – of – principal balance, through a Federally administered DOGE wunderkid tech account and program, (nominal staff, nominal admin costs)
-force non-performing borrowers into Bankruptcy (incentivize participation by harsh disincentive)
-disallow any private entity from the process,
-collect decimated balances, interest free;
-create student loan bankruptcy chapter that has equivalent, harsh disincentives to debtors (BK is NOT a walk in the park— wear a scarlet letter pin “SLB” and be cash-and-carry sidelined for seven years in the land of credit? Sheesh!)
Not sure about the forward- look on reform… the comment by Cervantes which points out the notion that ‘ free’ education’ is collected and recouped through taxes is compelling.
America is on a steepening slippery slope of ignorance and shallow thhinking at the speed of light. We REALLY need an educated electorate and workforce. No wonder MAGA is trying to discount and marginalize ‘higher ed”. Trade schools/ guilds are great, we are hardly a monolith. But every person out there ought to be reading broadly, deeply, in a mentored Socratic methodology to ‘get smart’, especially the malleable developing minds of late adolescent/ young adults. Just lookit the Charlie Kirk effect?
my alloy-laden obsolete two pennies.
The cost of tuition is out of control as well. Addressing college costs seems almost as important as student debt.
Agreed. The run-up in tuition costs has been appalling. Personally, I see a two-part solution to the student loan crisis:
[1] Restore bankruptcy protection. The difficulty of bankruptcy proceedings and the negative impacts of a damaged credit rating are enough to keep people from abusing the process.
[2] Limit loan sizes to what people can reasonably repay in some limited time frame. There is some room for debate as to what the ideal numbers would be, but we should really limit total debt to what a graduate could reasonably be expected to repay. [I personally am thinking of debt where payments equal to 7.5% of wages would completely pay it off in 5 years.]
If we did the second, schools would rapidly discover that if they charged too much tuition, their students wouldn’t be able to borrow money to pay it. So they would have to cut costs and reduce tuition to be able to fill their seats. It would prevent abuses like the WSJ covered back in 2021: https://www.wsj.com/us-news/education/financially-hobbled-for-life-the-elite-masters-degrees-that-dont-pay-off-11625752773. Film students at Columbia owing more than 6 years of wages when they graduated? It’s shocking. Why is the US government directly participating in abuse of students like this?
Interesting take, but I’d say addressing college costs is vastly more important than student debt. If college was free (or at least affordable) for everyone, we would have next to no student debt. Frankly, what we have is a society that doesn’t want an educated populace unless it’s willing to submit to debt bondage.
I’m not sure what our society was thinking when it decided to make education prohibitively expensive without the loans, but I’m pretty sure it wasn’t about an ever increasing need for specialized training, or the social benefits of a populace with a well-rounded education.
To what end did this happen? I would go so far as to put it in the category of nihilism which has been a topic around here recently.
This cynically predatory system of debt peonage has done nothing less than to destroy any faith that most people might have had in the fairness of our public institutions.
Rightly, I might add.
fair chance folk’s under 45, degreed or not, seeing their future in real time,
pondering current populist rhetoric….to bring the house down
This is what you get when a welfare plan for the professional-managerial class is disguised as a program to “help” some other unfortunates (students, the poor, the sick, etc.). As Tom Waits said, “The large print giveth, the small print taketh away.” And we know who’s in charge of authoring the small print.
But I do think there’s a much larger issue around whether we need all these college educated people. When we fought World War II there were still jobs available even for people who didn’t finish high school. The PMC was just ramping up and using the requirement for a college degree as a covert class barrier for entry (see Vance Packard for the state of education and employment futures in the 1950s). A lot of the excessive credentialism (and generally overstated job requirements) is HR departments minimizing their workload (and hiring managers who don’t really understand what their employees do on the job day-to-day). In the 1970s employees were still hired to be trained by the company on the specifics of the job, but that went out the window when cost-cutting mania hit and H-1B visas became upper management’s dream solution.
Only 27% of college graduates work in jobs that utilize their majors. This raises questions about the necessity of higher education for the general population.
100% agree. My uncle left high school during WW 2 to join the Navy and when the war was over and he came home he went straight to work. He drove my school bus (we lived out in the sticks), was the chief of our volunteer fire department, and became head janitor (later head of maintenance) at our local junior high. On this salary he raised my three cousins and supported my aunt and bought several houses over the years. And he could do anything. He could pour a foundation for a house, build anything, it seemed, and when we had a family of 5 skunks move in under our farm house, he brought his gun and spent the night with my dad, hiding behind the wood chopping block, waiting for the skunks to appear from under the house so they could shoot them. Yes, in case you can’t tell, he was my favorite uncle and we all loved him dearly. And my cousin finally got him his high school diploma for his 80th birthday. We all cried.
My point is he built a good life without a college degree, not even a high school degree. I don’t know if that is even possible nowadays, but it should be. I cannot think of anything worse, really, than starting life loaded down with debt.
Peter Turchin gives the best simple analysis (in my humble working-class opinion).
Everything has been made into “money pumps” for the elites.
For profit, wars, prisons, healthcare, student loans, dentistry…basically everything.
The system is unfixable, once you add, private equity, near monopolies, bribery, media control and raw corruption.
The Democrats and Republicans build and protect all the “money pumps”. It’s their core function. Protecting the oligarchy and furthering their interests.
I cannot think of any federal laws that have passed in the last 50 years, that were written with a concern for the wellbeing of American families.
Neoliberalism.
It’s really us versus them (republicans and democrats), that is what people must realize.
Student loan issues will not be fixed.
I’ve been wrong about so many things, and I hope on wrong now.
Plus an in your face Genocide, dark times.
I find it difficult to feel concerned about the moral hazard which might arise from wiping student debt off the slate when the the central feature of a financialised, authoritarian, IPR cyber-based liberal oligarchy is the manipulation of unwise lending policies changing the terms and conditons of past educational loans made to people in their late teens.
In fact, I’m rather more concerned about odious student debt and the seemingly corruption of universities, corporate, government and legislative officials basking in the rewards of what is nothing more nor less than a legal Ponzi scheme designed to shift household wealth and income from an over-exploited population to a minority of the truly wealthy and their agents.
Of course it has the virtue of weakening the hegemon and creating the space allowing for the more rapid development of a multipolar world but it’s pretty tough on those carrying student debt when they find it difficult to meet the rent and clothe and feed their families.
The lack of concern about morals and ethics among lenders, as one example, is galling.
Promise naïve youngsters blue sky, get them to sign, pass the trash to the servicers.
Incentives point away from students and toward the lender, uni, pol combine.
Good PR for them while it lasts, and counts on short memories.
Side benefit, another generation in forced compliance, sullen debt peons, not too rebellious, yet.
Foily Rockefeller interpretation is that student loans are another means of control. Their prior handiwork a few decades ago spawned female taxpayers with attendant issues. Another way to channel and corral people.
One solution is to be self-employed in stable work that is harder to outsource, roll up by PE or get A.I.ed.
I’m surprised that a graduate tax form hasn’t formed part of the discussion. You pay x% on your earnings from graduation to retirement in return for no fees and your living costs covered… this could be a way both for current debtors to escape (swap debt for graduate tax commitment) as well as an alternative model for new borrowers. It could also make it easier for potential students to evaluate if college is worth it.
As an aside, in the UK there are some early signs of people preferring paid apprenticeships in traditional graduate jobs, rather than going to university and taking on the student debt. I have a niece who had the grades for a decent (Russell Group = top 30) university but instead has started on a paid apprenticeship at a Big 4 accountancy firm. Traditionally, that was a route for graduates followed by 3 years paid training for the ACA = CPA qualification. For my niece, it will take four years to get the ACA – she’ll have zero student debt and might even have been able to start saving.
If we were to do the monetary tango, ala Argentina since the turn of the century…
$50,000 in student loan debt might have the present buying power of $50, a DIY Jubilee, debts become equivalent to almost nothing, a pittance.
Of course your country is a basket case dependent on the good graces of the IMF~
and few jobs for the graduates above subsistence wages!
related:
JACOBIN
College Textbooks: Wall Street’s New Cash Cow
By Katya Schwenk
For years, textbook prices have burdened students already struggling with loans and sky-high tuition costs. Now Wall Street is taking over the market, tightening its grip on a staple campus institution: the college bookstore.
https://jacobin.com/2025/09/wall-street-college-bookstore-education
This is why if you are an educator you go to Openstax
Free textbooks online, and if you want them printed it cost me 60 dollars each last time. I use them for my AP classes. (Yes the AP approves them).
It’s just indentureship, really, isn’t it?
I joined the Army after getting my B.A. in the mid-90s precisely because it would pay off all student loans for a 4-year enlistment. Best decision I ever made.
… I read ‘Hillbilly Elegy” last autumn before the 2024 election.
The post-grad military reimbursement route was also the choice and path JD Vance took.
As to Vance, he was a “flack’ for the military in the mid-east. Then on to Yale Law.
Vance carries no student debt, is armed with a very interesting array of experiences– first and foremost silver-tongued, measured-pace uninterruptable water boarding of his present, ever-evolving version of the world.
There are alternatives. In California students can attend a junior college and if they complete program requirements they are guaranteed transfer to most UC schools. A 4 year degree for the price of two. (JC tuition is paid for in the UC transfer program.)
Putting some money away into a 529 plan covered the two years at the UC school.
I’ll admit I’ve been fortunate and this is not an avenue for everyone. But…not everyone has to go to college for four years and pay for four years. Junior colleges at least in California do offer a cheaper path to a degree.
Milton Friedman had a straight forward plan for student loans that went something like this; following completion of the formal education, the student/borrower would make repayment at a percent of gross income, say 10%, for a period of years, say 10. And yes, I realize that there are pesky details that need to be fleshed out, but the concept is simple and easily understood.
My recollection of econ classes was that one of the , ‘great assumptions’ was to assume a 10% savings rate.
It’s a puzzler on where exactly, in these days of hidden inflation everywhere (property taxes and property casualty insurance tied to every housing unit, whether owned or rented), food, a vehicle….
there really isn’t much wiggle room there.
Back when I was in college (Carter / Reagan Doldrums) my tuition was around $200 per quarter, as an in-state resident of a land grant U, books around $30-$50. My monthly rent share was $66.67 for a $200 3 bedroom sh*t-hole fondly referred to as Low Dog Mansion. A couple of us worked part-time, and were paid $2-$3/hr for part time restaurant service work.
Bony times, but sharing cost of fuel in a shared car, earn-your-turns instead of lift serviced skiing, cheap forays afield to fish and hunt, lifestyle tradeoff was embraced.
Comparing the cost of a basket of goods, a loaf of bread, a pitcher (growler of beer) , cover charge to see a red-hot regional band, college has really, really become vastly more expensive, in relative terms, to other commodities. I would not trade the experience for anyhing , and my BS in poli sci, econ, natural resources, has brought me nothing but torment as I ponder and mentally assail global events and US policies. No wonder ‘they’ want to dummy-down America!!
Y M M V
A disaster. As it was intended to be.
I married into a US student loan (thankfully not a large one). I was appalled at how predatory the terms were, and insisted we pay it off before anything else.
This was only possible because of my career choice. It wasn’t a large sum for me, but my wife’s interests lay in less financially rewarding careers, and it would likely have been very challenging for her to pay off on her own.