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The Economic and Political Context of Student Debt

lan Collinge, author of “The Student Loan Scam: The Most Oppressive Debt in U.S. History and How We Can Fight Back,” recently spoke to students at the University of Illinois Urbana campus. His argument is detailed, persuasive, and heartbreaking; it is also a call to action for students and progressives. I was privileged to speak briefly at this event about the economic and political context of student debt, and I would like to elaborate on these remarks.

The inability of students to afford college without going into debt is the product of 40 years of policies advocated by ruling elites in this country which have resulted in astronomical increases in both student and credit card debt. These policies result from calculated choices, not from inevitable processes of globalization and technological progress.

Our country is twice as rich on a per capita basis as it was in 1970, when post-secondary students aged 18-25 constituted 4% (8.5 million) of the entire population of 200 million. Thus we should certainly be able to fund at the same level the current 21 million aged 18-25 that are now enrolled, who constitute less than 7% of the total U.S. population of over 300 million.

But while public higher education was virtually free or at least affordable in 1970, it is now prohibitively expensive for many. What I paid on a yearly basis to attend the University of California in 1970 would, if inflation were the only factor, now cost $4,000. Yet it costs over $13,000.

So why has our country gotten richer while our citizens and public institutions have gotten poorer?

First, labor’s (workers’) share of GDP has declined by at least 6% of total GDP, or at least $1 trillion per year in current dollars. This is reflected in stagnant wages over decades for most of the population, obviously including college students and their parents. Workers have not benefitted from gains in productivity—CEOs and shareholders have. In 1970, a year-round halftime (1000 hours per year) job at the common wage of $2 an hour could pay for all student tuition and living expenses. In 2013 such a job at $8 an hour would at best pay for one-third. Moreover, many parents are less able to help, see above.

Second, an inefficient and exorbitantly expensive for-profit healthcare system, spending $1 trillion more of our GDP than would “Medicare for All,” consumes increasing portions of federal and state budgets. This is not due to Medicare or Medicaid per se, but to health insurance, pharmaceutical, and medical supply corporations’ profits. In 1980, state governments spent 13% of their budgets on health and 39% on education; in 2010 those figures were 22% and 33%.

It is of course higher education funding that has decreased at a more rapid pace than K-12, because tuitions can be raised to compensate, and predatory student lenders like that just fine. Wasteful and needless military spending can be added to this increasingly constricted federal-to-state budgetary calculus.

Finally, federal tax rates over the past decades have remained low in relation to other developed nations and have become more regressive (unfair to low income workers) for a variety of reasons. Meanwhile, state taxation systems which are more regressive by nature because of their dependence on sales taxes are increasingly burdened with mandatory healthcare expenses—see above—in terms of states being required to match federal Medicaid expenses.

It needs to be emphasized that as an economy develops, a smaller percentage of its GDP is spent on the basics of food, clothing, shelter, and normal consumption. A higher percentage of the GDP should be available for governmental social and human services of all kinds, including education. This would result from a higher but easily affordable level of taxation in a country that—again—is twice as rich per capita in real terms.

But due to dramatically lower tax rates for the richest among us, the overall level of federal income taxes as a percentage of GDP decreased from 8.9% in 1970 to 7.6% in 2013; the corresponding figures for federal corporate taxes actually collected are 3.2% and 1.8%. This trend is exactly backwards, and has done enormous damage to funding for services at all levels of government, from federal to state to local.

Federal spending is not properly and beneficially used to ease pressure on state and local budgets and provide more funding room for public higher education, traditionally a function of state governments. Meanwhile, corporations play state governments off against each other in a race to the bottom regarding lower taxation and decreased public services—all while congratulating themselves for their self-serving donations to higher education.

All of these factors have conspired to put the current generation of college students at risk of indebtedness, inadequate employment, and “delayed futures” in terms of marriage and children. Specific reforms are urgently needed, especially in regard to interest rates and bankruptcy law. But we must address the overall economic and political context of student debt; by doing so many other systemic problems that have been manufactured by the 1% to the detriment of the 99% would fall by the wayside.

David Green lives in Champaign, IL and is a social policy analyst at the University of Illinois. He can be reached at davidgreen50@gmail.com.

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David Green lives in Champaign, IL and can be reached at davidgreen50@gmail.com.

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