AMAC Exclusive – By Daniel Berman
President Joe Biden’s move to forgive $10,000 in debt for those with outstanding loans who earn less than $125,000 a year has rightly been slammed as little more than a transfer of wealth to the richest Americans. But perhaps the greatest tragedy of Biden’s scheme is that it fails to deal with the underlying problems with the U.S. higher education system that created the student debt crisis in the first place.
Two things can be true at once: many individuals saddled by student loan debt have the ability to escape it through hard work and sacrifice, and many of those same individuals were victims of the decades-long scam perpetrated by the higher education industry. For the past four decades, America and the Western world have seen one of the largest transfers of wealth in history to the “haves” from the “have nots” in the form of political efforts to “universalize” higher education, efforts which have served to enrich institutions and allowed them to coerce hundreds of millions into paying exorbitant fees not just for degrees they do not need, but for services they do not want.
The student debt crisis in many ways has its roots in the 1980s, when a new obsession took hold with the “modernizing” left. Reckoning with political defeat at the hands of Ronald Reagan in the U.S., Margaret Thatcher in the U.K., Helmut Kohl in Germany, and Brian Mulroney in Canada, liberal elites concluded that a focus on the values of their old working-class base no longer could deliver electoral victory.
Until that point, center-left parties, at least the non-Marxist ones, had generally tried to represent the values of working-class culture as an ideal against those of the upper-middle-class professionals who voted for conservative parties. Suddenly, they abandoned that. Internalizing their own caricature of what Reaganism and Thatcherism represented, they adopted a contempt for the working class, and instead sought ways to win over the upper and middle-class elites while at the same time expanding this demographic by transforming everyone into “professionals.
For the left, the way to do this was universal higher education. It was true that having a university degree, especially from a four-year institution, was a major dividing line of class prior to the 1980s. So, it was easy for the Tony Blairs and Bill Clintons of the world to convince themselves that if everyone went to college, everyone would become middle class, at which point there would only be one class which they would need to win. If they won it, they would win every election.
The current federal student loan program in the U.S. was part of this effort to make college affordable for everyone – in other words, to ensure that no one would be unable to afford college because of their income. Yet there were three major flaws at the heart of this plan.
The first was the premise that a college education should be universal. To the extent to which degrees had value, that value was diluted by increasing the supply. When 20% of workers had degrees, they were an asset. When 60% did, they became a requirement for hiring, even in roles where whatever skills were ostensibly acquired by attaining a college degree contributed nothing.
Secondly, the universal college idea ignored that not all degrees contributed genuinely useful skill sets. There was and continues to be a shortage of workers with programming, mathematical, or hard science experience. But absent a few gestures, the major effect of removing any cost barrier to degrees was to remove an incentive to study more lucrative fields. Because schools were not responsible if their graduates earned little, they had an incentive to pander to what their faculties wished to teach, not what students needed to learn in order to earn a living. By allowing anyone to borrow enough to attend universities, the federal student loan program directly subsidized the rise of “Critical Gender Studies” and other obscure disciplines.
Finally, subsidizing higher rates of college attendance upset cost and demand. In 1981, tuition at the University of Southern California was $6,304. By 1991 it was $15,300. By 2001, it had hit $25,533, reached $42,818 in 2011, and will be $62,505 this year. This charts almost exactly with tuition at Stanford and Tufts. So closely, in fact, one might be tempted to allege some sort of cartel, designed to ensure that no major institution underprices in an effort to attract stronger applicants who might be tempted to make a tradeoff between price and reputation. In fact, the most striking feature of American higher education tuition since the introduction of the modern federal student loan program is the complete consistency in prices across institutions. Rather than a market in which options would exist, and where higher ranked institutions charge more (which, given how much the earning potential of degrees rests on institutional reputation rather than skill set, would make sense), everyone charges the same rate.
The same is true of the major cause of cost increases. There has been an increasing trend of schools competing by offering steadily more expensive facilities. One of the major reasons for the high cost of a U.S. education versus those in Europe is that in Europe you can, if you choose, merely attend class and live off campus. Many U.S. schools actively forbid students from living off-campus in private housing in their first year and often even longer, forcing them instead to pay tens of thousands of dollars for what are, in effect, luxury resorts with Olympic-level athletic facilities and inflated food services. Not only is there no incentive not to provide this, as schools seem to have agreed not to allow anyone to try to compete on price by offering lower tuition, but this reinforces the coddled attitude of younger Americans who, when they enter the workforce, expect the same level of services they paid $65,000 a year for at college.
Students are the victims of a system which forces them to take extortionate loans. To be sure, many lack personal responsibility and made bad choices, but they are nevertheless part of a system that does not allow those who do wish to make sensible, conservative choices to do so. Yes, students can opt out of the system and forgo college, but the 1990s transformed a degree from an asset into a requirement for many jobs, and it is a legal requirement for a host of professions. If young people do choose a four-year private program, a cartel prevents them from even having the option of trading off a lesser-known institution for lower tuition. The 40th-ranked school costs the same or sometimes even more than the top-ranked institution. Aside from community colleges, most students do not even have the option to save money on housing or food by opting out of living in dorms or purchasing expensive meal plans. With hard work and sacrifice, it is possible to pay down loans, but victims of a financial scam who managed to dig their way out of it were still victims – just victims Joe Biden and Democrats don’t respect enough to recognize.
The problem then with Biden’s approach is not moral hazard, though his plan is targeted to reward Democratic-leaning voters and exclude those least likely to vote for Democrats, while also encouraging the same sort of irresponsible borrowing to continue unabated. Rather, the problem is that it does nothing to address the fundamental problems with the system. It compensates victims of a scam at the expense of other victims who either worked harder to pay down their loans, or who are victims of the scam’s success in limiting the career prospects of those who refused to opt into American higher education. Biden’s action is an immoral wealth transfer, but it pales in comparison to the one it fails to address.
The Federal Student Loan program has transferred trillions to American higher education institutions, enriched endowments, and funded esoteric academic disciplines which have poisoned discourse. While those schools have reaped the financial rewards, and academics luxuriated in their tenured positions and grand athletic facilities, the various victims of the scam have been turned against each other in a culture war which is tearing America apart. A culture war which is also a class war.
Biden’s actions on student debt are immoral and political, but conservatives cannot allow themselves to forget that Biden is not the only culprit here. The federal government and the higher education industry empowered a corrupt loan system to begin with. This scheme needs to be confronted, and the victims aided – all of the victims, not just those who voted for Democrats.
Daniel Berman is a frequent commentator and lecturer on foreign policy and political affairs, both nationally and internationally. He holds a Ph.D. in International Relations from the London School of Economics. He also writes as Daniel Roman.
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