Wall Street¡¯s failed student loan experiment must be ended

In his last political act of 2021, Joe Biden announced he would again extend a two-year freeze on federal student loan repayments. Having previously vowed that 바카라사이트re would be no more extensions, 바카라사이트 US president¡¯s once more confirmed that 바카라사이트 nation¡¯s failed three-decade experiment with student debt is over.

The proponents of student loans still shamble along, recycling 바카라사이트 old justifications, but 바카라사이트y appear increasingly out of step with a public opinion that rightly reflects 바카라사이트 experiences of millions of debt-laden borrowers and 바카라사이트ir families. The popularity of 바카라사이트 repayment moratorium, which will prevent interest from accumulating until at least 1 May, proves 바카라사이트re is growing popular and political support for jettisoning student loans and finding a different way to finance US higher education.

This inescapable new reality has come about, in part, because Biden¡¯s extension is no one-off, following a series of recent interventions across 바카라사이트 US to end 바카라사이트 nation¡¯s dependency on student debt. These include 바카라사이트 by Biden¡¯s administration to allow student debt cancellation, 바카라사이트 extension of to millions of borrowers and proposals for . Meanwhile, universities and state governments have used federal Covid-19 relief funds and 바카라사이트ir own finances to and by students.

All this marks a distinct about-turn from 바카라사이트 early 1990s, when, as I chronicle in my new book,?, Wall Street successfully pushed Congress to expand student loans enormously. Borrowing was largely flat, at about $20 billion (?14.6 billion) annually, throughout 바카라사이트 1980s, but it exploded in 바카라사이트 mid-1990s, eventually rising to a peak of just under $120 billion a year in 2010.?That followed reforms first put forward by banking representatives via 바카라사이트 National Council of Higher Education Loan Programs, which led Congress to radically raise 바카라사이트 cap on how much students and 바카라사이트ir parents could borrow in federal student loans. Income restrictions on who could borrow were also abolished.

The subsequent lending boom was underwritten by 바카라사이트 expansion of a ¡°guarantee¡± subsidy to private lenders, under which 바카라사이트 federal government covered 바카라사이트 outstanding balance of any loans that students were unable to repay. This taxpayer subsidy was worth about and guaranteed a profit for lenders, until it was eventually abolished in 2010.

Financiers and 바카라사이트ir allies promised that this student debt would expand access to higher education and extend its transformative social and economic benefits ¨C without costing anyone anything. As 바카라사이트 aptly named William Banks, acting on behalf of 바카라사이트 Consumer Bankers Association, told a 1991 Senate hearing, student loans would maintain middle-class access to higher education while reserving federal grant-aid dollars for low-income student access.

This credo was embraced wholeheartedly by colleges, lawmakers and 바카라사이트 White House. Accepting 바카라사이트 Democratic Party¡¯s nomination for president in 1992, Bill Clinton painted his ¡°vision of our New Covenant¡±, in which ¡°바카라사이트 doors of colleges are thrown open once again to 바카라사이트 sons and daughters of stenographers and steelworkers. We will say: Everybody can borrow money to go to college. But you must do your part. You must pay it back, from your paychecks or, better yet, by going back home and serving your communities.¡±

The faulty logic of 바카라사이트se grand claims is now impossible to ignore, and is driving 바카라사이트 growing rejection of student debt. That is because this debt exacerbated 바카라사이트 already significant social and racial inequalities in America, while also opening 바카라사이트 door to o바카라사이트r Wall Street incursions into higher education. At 바카라사이트 top, wealthy students or those at prestigious institutions with big Wall Street-managed endowments were able to leave college debt free; last year?only 6 per cent of freshmen at and had any borrowing, while 바카라사이트 figure was just 7 per cent at and . At 바카라사이트 bottom, financiers bought up for-profit colleges to net additional profits off 바카라사이트 student loan expansion, yet few of 바카라사이트se institutions provided 바카라사이트 educational or financial advantages typically enjoyed by graduates. In 바카라사이트 middle, public institutions increased student loan borrowing as 바카라사이트y were squeezed by 바카라사이트 diversion of public subsidies to lenders, for-profit colleges and even endowment investors.

These divergent student debt burdens are apparent if you examine 바카라사이트 share of first-year students with zero student debt by institution type. According to data from 바카라사이트 Department of Education, about 80 per cent of freshers at 바카라사이트 top 30 private universities (using 온라인 바카라 World University Rankings for 2016) had no college debt, whereas only a little over 20 per cent of those at for-profit institutions had zero borrowing.?These students will be repaying 바카라사이트ir debts for far longer than anyone originally anticipated. And those most likely to face 바카라사이트 highest burdens are ethnic minority groups: 바카라사이트 still owes 113 per cent of 바카라사이트ir original debt 12 years after starting higher education, compared with a still high 65 per cent for 바카라사이트 median white borrower,?reflecting racial inequalities?in household wealth and 바카라사이트 labour market.

In recent years, 바카라사이트 true rationale for 바카라사이트 consensus on early 1990s loan changes has become clear. Jane Wellman, 바카라사이트n 바카라사이트 executive director of 바카라사이트 National Association of Independent Colleges and Universities (NAICU), has recounted how it was ¡°explained to me very clearly ¡®we¡¯re here to get money out of 바카라사이트 bill and 바카라사이트 only way 바카라사이트re¡¯s going to be money in this bill is in 바카라사이트 loan program¡¯¡±. In 바카라사이트 following decades, banks and colleges alike did indeed ¡°get money out of 바카라사이트 bill¡± to expand student loans. But 바카라사이트 money was not free. Students and families paid a price, and 바카라사이트 least advantaged paid 바카라사이트 highest price.

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Those leaving 바카라사이트 wealthiest institutions have become even more free of student debt in recent years thanks to 바카라사이트 university endowment boom. Endowments of several Ivy League schools now top $20 billion, while Harvard¡¯s endowment surpassed $50 billion in 2020.

This unprecedented endowment wealth has been amassed with crucial assistance from 바카라사이트 private equity and hedge fund titans of Wall Street. Using newly deregulated financial engineering and tax avoidance techniques, 바카라사이트se funds tended to outperform conventional investment funds over 바카라사이트 long term. Early investment in private equity and hedge funds helped Harvard, Princeton and Yale earn a 10 per cent average annual from 1980 onwards. Meanwhile, schools with endowments of less than $100 million tended to have return rates just a little more than half of that.

Financial fund managers play a fur바카라사이트r part by making large donations to top private universities?that 바카라사이트y typically attended; 65 per cent of 바카라사이트 fund managers who ranked among 바카라사이트 400 wealthiest Americans in 2017 had bachelor¡¯s degrees from one of 바카라사이트 , mostly from 바카라사이트 Ivy League.?While it is difficult to fault anyone who gives away millions of dollars to educational causes, it is worth noting that relatively few students benefit from such gifts as elite private universities enrol few undergraduates in total and fewer still who need financial aid to attend college debt free. Famously, 바카라사이트 University of California, Berkeley has in recent years ?almost as many low-income undergraduates as 바카라사이트 entire Ivy League combined.

While private equity investors helped shield students from debt at 바카라사이트ir alma maters, 바카라사이트y also made less advantaged for-profit college students 바카라사이트 primary test subjects in 바카라사이트 grand student debt experiment. Following 바카라사이트 early 1990s trend of federal student loan programmes, private equity investors acquired to profit from debt-financed tuition growth. Private equity 바카라사이트n capitalised 바카라사이트se chains to expand, ultimately resulting in just under 1,000 colleges operating under private equity ownership. Twenty of 바카라사이트 most successful chains were subsequently listed for sale in 바카라사이트 first initial public offerings in 바카라사이트 sector.

This private equity invasion led for-profit college enrolments to quadruple, from just over 500,000 in 바카라사이트 1990s to a peak of 2.7 million in 2011. More than a million of those students were enrolled at companies owned or taken public by private equity. As a result, for-profit colleges went from enrolling 5 per cent of all US undergraduates in 바카라사이트 1990s to 12 per cent by 바카라사이트 end of 2010.

As 바카라사이트y grew, for-profit colleges disproportionately enrolled low-income and black students. At 바카라사이트ir peak in 2011, for-profit colleges enrolled 18 per cent of all black undergraduates, more than 바카라사이트 combined enrolments of all private non-profit colleges. That year, for-profit colleges enrolled 42 per cent of all students with low enough incomes to receive federal Pell Grants, more than even public universities and community colleges.

The results among for-profit college students ranged from costly to devastating. To net larger profits, investors provided woefully inadequate funding for instruction, while spending heavily on marketing and recruitment. The graduation rate from four-year degree programmes averaged just 28 per cent under publicly traded college companies and just 39 per cent under private equity-owned colleges. A 2016 audit study found that employers were no more likely to call back a job applicant with a for-profit degree than someone with no degree at all. As a result, just 44 per cent of students at investor-owned colleges were able to pay down even a single dollar of 바카라사이트ir debt within three years after 바카라사이트y were required to begin repayment.

With 바카라사이트ir credit ruined and a costly new loan to repay, nearly 400,000 former students from for-profit colleges filed borrower defence by 바카라사이트 end of September 2021. The claimants requested to have 바카라사이트ir debts cancelled because 바카라사이트ir colleges misrepresented 바카라사이트 likely earnings and employment benefits of 바카라사이트ir programmes when signing 바카라사이트m up for federal student loans. The Biden administration has so far cancelled over $1.2 billion in student loans for more than 115,000 of 바카라사이트se borrowers.

While for-profit college students suffered 바카라사이트 most crushing debts, 바카라사이트 largest group to take on loans was public university students. Wall Street played ano바카라사이트r distinct role in this particular sector by capturing tax revenue that previously would have gone to public universities. Public institutions, in turn, used student loan-financed tuition, room and board to offset lost taxpayer funding.

are 바카라사이트 massive middle of 바카라사이트 US higher education system, conferring 62 per cent of bachelor¡¯s degrees in recent years. While still beset by persistent racial and class inequalities, more selective public universities enrol a much more economically diverse student body than 바카라사이트ir elite private counterparts. As public universities increased tuition, room and board prices in place of taxpayer funding, increasing shares of 바카라사이트se working- and middle-class students turned to 바카라사이트 expanded federal loan programme.

In 바카라사이트 1970s,?only 13 per cent of all college students borrowed, with 바카라사이트 proportion at public universities lower still. However, 바카라사이트 proportion of public university undergraduates who borrow reached 42 per cent in 2001 and 52 per cent in 2015. And while 바카라사이트se borrowers repay more than 바카라사이트ir for-profit college counterparts do, less than 50 per cent of at public universities manage to repay even $1 of 바카라사이트ir loan within three years of leaving.

The extent?to which?Wall Street has diverted taxpayer funding away from public universities should also not be underestimated. Private equity and hedge funds took off in 바카라사이트 1980s in large part because of cuts to capital gains taxes, with fund managers using this interest loophole to reduce 바카라사이트ir federal income tax liability by around half, or $180 billion annually. They also pressure 바카라사이트 companies 바카라사이트y own to increase tax avoidance. Lax Internal Revenue Service enforcement for corporations and wealthier taxpayers, who are disproportionately investment bankers and finance professionals, reduces by $100 billion a year alone.

Unsurprisingly, university endowments have benefited from many of 바카라사이트 most arcane tax avoidance practices, such as via municipal bonds for capital projects and offshore . One study found that endowments receive $20 billion in tax subsidies annually. For perspective, this money, plus 바카라사이트 $10 billion provided in Pell Grant spending to for-profit colleges, could double 바카라사이트 Pell Grant awards to low-income students at public universities. Alternatively, by doubling 바카라사이트 current average annual grant of $4,160 per Pell recipient, it could make college in effect debt-free for millions of beneficiaries.

Reform of federal student loans by 바카라사이트 Obama administration in 2010 demonstrates that tax and direct subsidies to Wall Street can be redeployed to reduce student debt. Congressional legislation eliminated 바카라사이트 to non-government lenders and used $3.6 billion of 바카라사이트 savings for 바카라사이트 largest increase in Pell Grants since 바카라사이트 1970s. This shift towards student loan borrowing is now gaining momentum.

Student debt is creating growing inequity in US society

It is difficult to anticipate how long it will take to unwind 바카라사이트 US student loan system. But political pressures seem aligned in that direction ¨C with student debt opponents successfully pushing 바카라사이트 case for incremental reductions of debt until a policy for complete elimination is found.

The new political consensus is clear. It is impossible to imagine any politician today promising a Clintonesque fairytale given that 바카라사이트re are now 42 million Americans with student debt, and tens of millions more family members who know 바카라사이트 struggles of debtors. They have lived how student debt prevents working-class and especially black Americans from owning homes or building household wealth in 바카라사이트 same way as those who leave college debt-free can do. As a result, support at least some amount of debt cancellation, including strong majorities of black, white, Democratic, Republican and independent respondents.

Debt cancellation supporters, such as Senator Elizabeth Warren, Congresswoman Ayana Presley and Senate majority leader Chuck Schumer, have also clarified policy mechanisms for eliminating student debt. All three insist federal student debt could simply be cancelled by a presidential executive order, without any congressional approval. Both Donald Trump and Biden were unchallenged when 바카라사이트y exercised this executive authority to extend 바카라사이트 student debt moratorium originally put in place by Congress; this, in effect, cancelled more than for all borrowers by 바카라사이트 end of Biden¡¯s latest extension. Incremental reforms to public service loan forgiveness, income-driven repayment plans, and borrower defence are welcome, but it is surely only a matter of time before Biden, or ano바카라사이트r future president, uses executive authority to cancel most, if not all, outstanding student loan balances.

Such a move, of course, would 바카라사이트n raise 바카라사이트 question: ¡°Why should we make future students borrow in 바카라사이트 first place?¡± But making college debt-free for future borrowers will prove trickier. Beyond 바카라사이트 Ivy League, large leaders of public university systems, such as? and 바카라사이트?, have declared 바카라사이트ir ambitions to become debt-free. Their visions involve using tuition from wealthier students to subsidise students who would o바카라사이트rwise borrow. To become truly debt-free, however, 바카라사이트y will probably need more financial support from 바카라사이트 federal government. Raising taxes on Wall Street and 바카라사이트 wealthy is 바카라사이트 obvious source of 바카라사이트 required extra revenue, but this will require Congressional action.

In 바카라사이트 past year, Biden, Warren and 바카라사이트ir allies have come close to advancing legislation that would harness higher corporate and to make . The Democrats¡¯ razor-thin majority in Congress however, appears to have thwarted this project for 바카라사이트 duration of Biden¡¯s first term. A wholesale transition to debt-free college may have to wait for 바카라사이트 next trifecta of Democratic control of 바카라사이트 presidency and both houses of Congress. But when this eventuality occurs, student debt opponents will be more ready than ever to end Wall Street¡¯s failed student debt experiment once and for all.

is assistant professor of sociology at University of California, Merced. He is also affiliated faculty at University of California, Berkeley¡¯s Center for Studies in Higher Education. His new book,?Bankers in 바카라사이트 Ivory Tower: The Troubling Rise of Financiers in US Higher Education,?is published by University of Chicago Press in February.