When I talk to undergraduates about student debt, I always begin with the same question: “How many of you have ever heard your parents talk about paying off their student loans?” Very few hands go up. Then I ask how many of them assume that they, unlike their parents, will still be paying off their education well into their 30s. Almost all the hands go up.
Indeed, if you’re looking for what really distinguishes this generation of college students from past ones, it’s not Facebook and fidget spinners, or even trigger warnings and “safe spaces.” It’s student debt.
In recent years, student loans have been absolutely skyrocketing. The average student borrower graduates with her diploma in one hand and $35,000 of debt in the other, a figure that’s gone up more than 70% just since 2007. Nationwide, student loan debt is now over $1.3 trillion, more than double what it was a decade ago. Almost a quarter of Americans have some amount of student loan debt, and it’s not just young people suffering under the burden of student debt: The fastest growing segment of the student loan market is adults 60 and over, most of them borrowing to help pay for the education of a child or grandchild.
Why has student loan debt climbed so high, so fast?
Student loans themselves aren’t a new concept. They date back to 1958, when Dwight Eisenhower wanted to encourage students to train in Cold War-related fields like foreign languages and engineering. The National Defense Student Loan program (NDSL) provided low-interest loans directly from the federal government, but not for long; in 1965, Lyndon Johnson’s Higher Education Act shifted the disbursal and management of loans from the federal government to the banks. And in 1972, “Sallie Mae,” was created as a “government sponsored enterprise” designed to issue its own debt in order to purchase student loans from banks.
From the perspective of a bank, however, student loans pose one big problem: unlike a mortgage or a car loan, there’s no valuable collateral backing them up. In order to keep banks in the student loan business, student loans had to change. So while student loans started out as dischargeable through bankruptcy, in 2005, congressional legislation ensured that student loans could basically never be discharged, putting them in the company of back taxes, criminal penalties, and unpaid child support.
But coupled with the privatization of student loans came another crucial factor that has landed this generation of college kids deep in debt. College tuition has gone up at a meteoric rate. Between 1980 and 2014, tuition increased 260%, nearly three times the rate of inflation. In the mid-1990s, a student could pay tuition at a public university by working 15-20 hours a week at a minimum wage job; today, it would require 50-60 hours a week of minimum wage work to do the same (and that’s not counting expenses like campus housing, the price of which has climbed even faster than tuition).
The rising cost of college has not only meant more loans, but more private loans, issued directly from banks, often with higher interest than federal loans; private loan volume rose 800% between the late 1990s and 2008. It is currently a $9 billion industry.
But the ubiquity of debt is not just about demand; it’s also about supply. Desire on the part of banks and investors to supply student credit has been fierce, especially since the collapse of riskier forms of lending like credit cards and mortgages. Securitized student loans—wonderfully named SLABS, for Student Loan Asset Backed Securities—are a hot commodity on Wall Street and a $200 billion industry overall. Considered a very safe investment because of the unique protections given by the federal government, SLABS are often part of the institutional portfolios of pension funds, meaning that it’s entirely possible for a professor like me to be indirectly invested in the debt of her own students.
Less well known, however, is the fact that universities themselves benefit from an increase in student loans. Sometimes the benefits are very direct: A 2006–7 investigation by Andrew Cuomo found that many universities, including New York University and University of Texas at Austin, had actually colluded with the private lenders who were aggressively marketing high-interest loans to their students. These universities allowed the banks to have desks in university financial aid offices, and in return received a cut of the fees they charged students.
The other way schools benefit is less obvious. Although much of the increase in tuition over the last two decades is due to declining state and federal support, it’s also been driven by the increased availability of student loans (this is partly why private schools, which don’t depend on state support, have raised tuition just as fast as public ones). Put simply, schools know that they can continue to raise prices so long as students and their families can continue to borrow more. Moreover, university administrators often prefer tuition dollars to public funding, since money from state and federal governments is restricted to explicitly educational costs, whereas tuition dollars are much more flexible and can be used to pay for almost anything the university feels it needs, whether that’s fancy dorms to help them bring in more students, or massive growth in the number of highly paid administrators, or capital and real estate projects of all kinds. As UC Santa Cruz professor Robert Meister has demonstrated, university leaders have been active participants in the tuition bubble, since they recognized tuition as an opportunity for aggressive revenue growth.
Students’ willingness to borrow was also driven, of course, by the long-standing belief that student loan debt is “good debt.” In some ways, that’s still accurate: Even though federal loans are not dischargeable under bankruptcy, they do have better repayment plans and lower interest rates than most other forms of debt. Decades of wage stagnation and employment volatility also means that a college degree is more necessary for economic survival than ever before, even as the income gains from a college degree have been flat or falling for the last two decades and even though more college graduates than ever work in jobs that don’t actually require a degree.
Yet the narrative of student debt as “good” is becoming less persuasive every year. Recent reports on the lending practices of intermediary agencies and banks including Sallie Mae, Navient, and Wells Fargo suggest that lenders are exploiting students, failing to adequately serve those paying off their loans, and using aggressive and opportunistic debt collection practices. Meanwhile, Trump-appointed education secretary Betsy de Vos seems primed to make things even worse for borrowers, starting with her decision to rescind an Obama-era directive preventing debt collectors from charging exorbitant interest rates to student borrowers. In recent weeks the administration also suggested it is “reconsidering” the Public Service Loan Forgiveness program, created in 2007 to allow those who work in the public or non-profit sector to have their outstanding loans “forgiven” after ten years of payments. Finally, as if the bankruptcy exclusions weren’t enough to protect lenders from the absence of collateral that used to make student loans seem risky, 25 states have put in place laws allowing debt collectors to “foreclose” on a graduate’s certification and credentials—her right to work as a teacher, or lawyer, or nurse—as punishment for loan default.
All of this is dire news indeed. And yet there are glimmers of light on the horizon. The brightest of those glimmers are the small victories achieved by student loan activists in the wake of the Occupy movement. In 2016, the Department of Education granted $171 million in debt relief to more than 11,000 students who attended for-profit schools associated with the Corinthian Colleges chain, which lost its accreditation and declared bankruptcy in 2015. They did so entirely because of the organizing efforts—including a collective refusal to repay—of a small group of former Corinthian students. Similar movements seem poised to emerge among students at other for-profit schools, and possibly even around the much larger portion of student borrowers whose loans are serviced by disreputable institutions like Navient. The other thing that makes me hopeful is admittedly a bit more anecdotal. When I first started talking to undergraduates about student debt nearly ten years ago, I used to begin the conversation by saying “I’m going to confess something to you: I have $90,000 of student debt.” I would then ask them why I would call this a “confession,” and we’d talk about how uncomfortable it felt to talk about our debt. After all, I’d tell them, the very word “debt” comes from the words for sin and guilt, and creditors from medieval Europe to contemporary Bangladesh have used borrowers’ feelings of responsibility and shame to force debtors to pay up.
Ten years on, though, I find fewer and fewer students feel that kind of shame about their student loan debt. They don’t see it as their fault, nor do they think it’s fair or right. And they are also more likely than ever before to see themselves in solidarity with other students and former students—and with other debtors, including those too poor for student loans or those burdened with subprime debt of other kinds.
This isn’t a shift that’s obvious (yet) in statistics or figures, but it’s a shift that matters a lot to the question of whether movements like the Corinthian College debt strike can get bigger, more expansive, more radical. After all, as the Corinthian Debt Collective put it when they first began their organizing, “Alone, our debts are a burden; together, they make us powerful.”
Annie McClanahan is a professor of English at the University of California, Irvine, and the author of Dead Pledges: Debt, Crisis, and 21st Century Culture.