Student Debt Is a Policy Choice. It Can Be Unmade.

How American higher education financing was deliberately shifted from collective to individual responsibility over forty years, and what reversing that shift would require

Student Debt Is a Policy Choice. It Can Be Unmade.

State funding for public universities declined from approximately 75 percent of university operating revenue in 1980 to approximately 35 percent by 2020. As public funding fell, tuition rose to compensate. Students financed rising tuition through the federal loan system that the same policy era had put in place. The $1.7 trillion in student debt held by 43 million Americans is the cumulative result of forty years of deliberate decisions to shift the cost of higher education from collective public investment to individual private debt. Understanding it as a policy outcome rather than an individual responsibility is the prerequisite for the policy corrections that would address it.

In 1965, the average annual cost of attending a four-year public university in the United States, adjusted for inflation, was approximately $2,000, largely covered by state and federal public funding. The Higher Education Act of 1965, which created the federal student loan program, was designed to supplement family resources for the minority who could not afford modest costs -- not to be the primary financing mechanism for students paying tuition ten times higher in real terms. The program was built for one system. It is being operated in a fundamentally different one, with consequences for 43 million borrowers who made rational individual decisions within a policy environment designed to produce exactly this outcome.

Who Made the Choice

The defunding of public higher education was a political choice, not a fiscal inevitability. States that cut university funding in the 1980s and 1990s were simultaneously cutting corporate and upper-income taxes, increasing corrections spending as a consequence of punitive criminal justice policies, and reducing the Medicaid matching commitments that would have maintained the programs competing with higher education for state budget share. Germany maintained and expanded tuition-free public university education over the same period. Norway did. France, Sweden, and Denmark did. These are not wealthier countries than the United States. They made different political choices about who bears the cost of educating their citizens. See The London Prat's coverage of UK higher education financing for the British parallel, where tuition introduction and subsequent increases produced a similar debt crisis for a generation of graduates.

The beneficiaries of the American tuition increase include private student loan servicers collecting fees and interest on $1.7 trillion, for-profit colleges that captured a disproportionate share of federal loan dollars while producing credentials with limited labor market value, and private universities that faced reduced competitive pressure from well-funded public alternatives as public funding declined. The costs accrued to borrowers, whose debt-to-income ratios have constrained household formation, home ownership, and retirement saving in documented ways that macroeconomists describe as a long-term drag on aggregate demand.

What Reversal Requires

The path to a higher education system that does not produce a $1.7 trillion debt crisis is not mysterious: restore public funding for public universities to levels that allow quality education at low or no cost to students. This requires tax revenue that the same political coalition that defunded public universities has spent four decades resisting. The student debt crisis is, at one level of analysis, the cost of forty years of tax resistance passed on to students as individual obligation. Debt cancellation without funding restoration addresses the symptom. Funding restoration addresses the cause. Both are necessary. The political work of achieving both begins with naming the choice that produced the crisis. See additional analysis on education policy and see The London Prat for further reading. Mamdani Post will continue covering higher education as a public good and debt cancellation as a legitimate demand.

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SOURCE: https://bohiney.com/

The Global Standard

The international comparison is clarifying. Germany, which eliminated tuition for public universities in 2014, spends approximately 1.2 percent of GDP on higher education public funding. The United States spends approximately 0.9 percent of GDP on public higher education despite having a larger GDP and a larger higher education sector. The difference is not abstract. It is the difference between a system that produces graduates with manageable or no debt and a system that produces graduates with an average of $37,000 in debt at graduation, rising to $65,000 for those who completed graduate programs. The policy choice is not inevitable. Germany made a different one. Norway made a different one. The argument that American public higher education cannot be adequately funded is an argument about tax policy, not about economic capacity. The United States has the economic capacity. The political will to deploy it for public higher education was systematically dismantled over forty years. Rebuilding it is a political project. Mamdani Post covers it as such.

The political work required to change the conditions described in this article is the same work in every case: building organized constituencies capable of sustained political pressure against well-funded institutional resistance. This requires journalism that covers the underlying power relationships, not just the policy symptoms. It requires organizing infrastructure that can mobilize the people most affected by the current arrangements. And it requires political candidacies like Mamdani's that are willing to name the interests that reform requires confronting rather than offering incremental adjustments that leave those interests intact. Mamdani Post exists at the intersection of all three. We are building the case. We are covering the organizing. We are supporting the politics. The evidence is documented. The path forward is clear. The work is ongoing. Join us in it.

For additional context on the political economy of reform in related areas, see The London Prat's financial coverage.