Who is Profiting from Student Loans?
Americans naturally want to find good jobs; and they believe (with reason) that their most reliable asset is a college or trade-school degree.
We could be helping nearly all of them with free or low-cost colleges and vocational schools.
But that would mean higher taxes, and less revenue for educational profiteers.
Professors Louise Seamster and Tressie McMillan Cottom are doing wonderful work in this area. They recently appeared on Ezra Klein’s New York Times podcast on 11/02/2021…..
They describe for-profit colleges as a “negative social insurance program”.
“Unlike actual social insurance programs,” Cottom explains, “negative social insurance doesn’t actually make us more secure. It only makes our collective insecurity profitable……
We are spending tax dollars to enrich the shareholders of for-profit institutions. It’s as if the unemployment system required one to use payday lenders to get one’s unemployment check……
The federal government, the schools, and the loan servicers are all getting a piece out of what individual, and increasingly low-income people of color are paying into the system….it amounts to trickle-up economics. The massive wealth of for-profit college owners is built on economic misery of defrauded and bankrupt ex-students.”
Seamster and Cottom look to European and Nordic countries, as places where they get this right. These nations finance higher education through meaningful taxation; they don’t have a student loan debt crisis like we have, and they still produce competitive labor market incentives.
Seamster notes that “America made a devil’s bargain about how higher education would be paid for between 60 and 70 years ago. Just read the accounts of the debates about the Higher Education Act in 1965, which was the start-up of the era of relying on student loans and individual funding, rather than robustly funding public infrastructure.. ….
This is like how we ended up with a 401(k) instead of a pension. This is like instead of getting secured low interest debts from the Federal Housing Administration, you now go out into the private mortgage market, right? It’s this shift over and over again of who is responsible for a good quality of life……
It’s actually not too hard to find other alternatives. But there’s a lot of money invested in making us feel like this is the only alternative.”
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