The origins of student debt
In a capitalist society, your debt is someone else’s asset. Student debt belongs to private equity firms, not the federal government. Why is the current proposal to forgive student loans so controversial? When did student and parent loans replace scholarships as the primary form of student aid? Who is making money from your debt?
Before Ronald Reagan was elected governor of California in 1966, for example, attending college did not automatically mean massive debt. One difference between a grant and a loan is that the latter is the monetization of the former. The subsidy money comes from a redistribution of the social wage. The evolution of the student aid function – from access and opportunity to competition and high-stakes testing – was no accident; it was ideological.
Consider that the social wage “is the amount of deferred wages that is used to create various goods accessible to the public, such as public transport, health services, schools, parks, postal delivery, security, etc. Public services are accessible to all , regardless of their income and social status, even though a progressive tax remunerates them.” Deferred wages have funded public infrastructure, from bridges, highways and roadblocks, to public K-12 schools and higher education.
What happened between the late 1960s and the 1970s to the will to spend public resources for the public? How is it that when more groups of people have historically been denied access to these social rights by de jure and de facto laws, policies and cultures, has the rhetoric of “small government” and undeserving minorities become dominant? What were the conservative and liberal elites afraid of?
Depends on Gallup poll, questions from the late 1960s focused on young people—between 40 and 60 percent—who were against the Vietnam War, supported civil rights, and believed a revolution was needed in the United States. Check out Seymour M. Lipset’s “Polls and Protest,” from a 1971 edition of Foreign Affairs log.
Trafficking in the false assumption that the United States is a Meritocracy, while ignoring the massive amounts of social wage transferred to corporate tax breaks under a regressive tax system, Reagan and subsequent neoliberal ideologues on both sides of the island cut off workers’ access to a relatively without debt. This system has been replaced by a loan system which monetizes the right to learn.
For ideologues like Barry Goldwater and Ronald Reagan, and even more, the advisers who surrounded them, from Donald Rumsfeld and Dick Cheney to Lee Atwater and educational adviser Robert K. Freeman, the terms of the economic order were at stake when of the “long civil rights movement.”
While capitalists decried FDR’s New Deal as socialism, the redistributive element of Keynesianism, “a universal concept in the abstract, the social wage during this period remained highly gendered and racialized.” The redistribution of social wealth has disproportionately favored specific groups of people while intentionally excluding others.
Reagan had made his attack on public education, particularly the University of California at Berkeley, organized resistance to the Vietnam War, support for free speech, and civil and human rights, a centerpiece of his his bid for governor in 1966. While elevating private enterprise and the individualistic culture of capitalist consumption in public discourse and through policy and legislation, this attack on the public propelled Reagan into the national arena. power. These attacks were aimed at attempts to redistribute the social wage fairly through policies that invested directly in people rather than in the supply-side economy of Reagan’s trickle-down theories.
Consider Republican Party strategist Lee Atwater position on taxes and the use of policies for social engineering of the population:
“You start in 1954 saying, ‘N——, n——, n——.” In 1968, you can’t say ‘n——’—it hurts you, it backfires. So you say stuff like, uh, forced buses, state rights, and all that, and you get so abstract Now you’re talking about lowering taxes, and all these things you’re talking about are totally economic things and a sub -product of these is, black people are more hurt than white people.… “We want to cut this”, it’s much more abstract than even the bus thing, uh, and much more abstract than “N——, not–“.
The abstract language of taxes could be used to undo the gains of civil rights movements, including labor unions, and especially economic progress through the GI Bill and the federal home equity loan subsidy.
Like housing assistance after 1968, federal student aid had three purposes: to equalize educational opportunity, access, and freedom of choice in programs and institutions that met their needs. It was a broader set of policies aimed at tackling economic inequality.
Now consider Robert K. Freeman’s position on student aid. According to an article in the San Francisco Chronicle, quoted in this Intercept reportFreeman said, “We risk producing an educated proletariat. … It’s dynamite ! We need to be selective about who we allow [to go to college]. Otherwise,” Freeman continued, “we will have a lot of highly skilled, unemployed people.”
As reported by New York Times, at a press conference in Barbados on April 10, 1982, Reagan clarified his views on student financial aid, “Mr. Reagan claimed that students had been deliberately misled into believing that the government was ‘squeezing out’ their loans and that they had been “incited to organize protest demonstrations against what were called the draconian student aid cuts… We did not cut loans, we reduced the cost to taxpayers of making these loans available”. This haircut is misleading. First of all, the “proverbial” taxpayer is coded language. Second, as coded language, it assumes that people on scholarships do not contribute to the social wage.
Summarizing the impact of Reagan’s state and federal changes, Alfred D. Sumberg wrote in 1981: “The administration would limit guaranteed student loans…eliminate the in-school interest subsidy and the subsidy to lenders on parental loans…. effect, the administration’s proposal would gut the Guaranteed Student Loans Program. Along with the modified proposals for the Pell Grants, the administration would radically reverse the goals of access and choice.”
Consider other capitalist ideologues on the function of public education. In 1971, soon-to-be Chief Justice of the Supreme Court, Louis Powell Jr. made his views clear on the importance of capitalism, and primarily corporate personality, to the agenda and culture of the United States. In the Memorandum Powella confidential report for the United States Chamber of Commerce titled “Attack on American Free Enterprise System”, Powell clearly lays out a war plan to defend against “the massive attack on the system itself”.
Essentially, the Powell memorandum was a corporate blueprint of strategies and tactics for dominating democracy and the social engineering society: “We are not faced with sporadic or isolated attacks from a relatively small number of extremists or even minority socialist cadres. The business system is broadly based and consistently pursued. It grows and converts.
For Powell and others of his ilk, the enemies were and are clear: “The most disturbing voices joining the chorus of criticism come from perfectly respectable elements of society: from the college campus, from the pulpit, from the media, scholarly and literary journals, the arts and sciences, and politicians. In most of these groups, the movement against the system is only participated by minorities. Yet they are often the most articulate, the loudest, the most prolific in their writing and speaking.
Powell was not a neutral observer judge; he was a former executive and lawyer for global tobacco company Phillip Morris. Prior to his appointment, Powell battled accusations from scientists and politicians that the tobacco industry knew cigarettes caused cancer.
The political controversy over student loans, their repayment and their impact on production, consumption and inflation is not new. Learning about the ideological stories that contextualize the current state of affairs is paramount. This ideological battle could help explain how the Mohela lender, identified as the only lender to process loans that may be eligible for payment forgiveness or reduction, are litigants in legal action against Biden’s debt cancellation.
The company argues that “MOHELA faces an imminent loss of revenue in its role as a Direct Loan Program (DLP) loan servicer,” the lawsuit states. “MOHELA’s income as a DLP loan servicer is a function of the number of accounts it manages. So when student loan balances drop to zero, as they will en masse under the mass cancellation of debt, MOHELA will lose income from servicing these loans.”
At its heart it’s a 14e Amendment case of equal protection – of corporate profits. The Powell memorandum affirms: that the legal personality, and therefore the security of the capacity and the right to profitis a constitutional right.
For an in-depth and expertly written account of the Reagan regime, see Rick Perlstein, reaganland: America’s right turn 1976-1980. Check podcast“Student Loan ForgiveMESS”, for an overview of these issues.