The Real Origins of the Student Debt Crisis | Crooked Media
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April 13, 2024
What A Day
The Real Origins of the Student Debt Crisis

In This Episode

Once upon a time, borrowing money for college was an affordable path towards upward mobility. Today, it’s a crisis. With Americans owing a whopping $1.7 trillion in student loans. So how did the student debt crisis get so out of control? From bungled government programs to Sputnik to the Great Recession, “How We Got Here” unpacks the history behind spiraling student debt…with interest!





Only 25% of those with student loans went to graduate school—but they owe around 50% of all student debt | CNBC

Student loans are now easier to discharge in bankruptcy, attorneys say: It’s ‘life changing’ | CNBC

Average Cost of College [2023]: Yearly Tuition + Expenses | Education Data Initiative

Everything you need to know about college costs – Vox

Student loan forgiveness: What to know about Biden’s $39 billion plan – Vox

Why Does College Cost So Much? – The New York Times

Introducing Bennett Hypothesis 2.0 | Center for College Affordability and Productivity 

Statement Before the House Committee on Education and Workforce On Lowering Costs and Increasing Value for Students, Institution | Texas Public Policy Foundation

Is Rising Student Debt Harming the U.S. Economy? | CFR

Student loan forgiveness: How much debt has Biden canceled? | CNN Politics

Federal Student Loan Borrowers Reveal Grim Expectations for Payment Resumption | Morning Consult

Drivers of the Rising Price of a College Education | MHEC 

MSD Annual Report 2022 – Student Debt and Young America

State Funding for Higher Education Still Lagging | NEA

Education; College Officials Defend Sharply Rising Tuition – The New York Times

Student loan forgiveness: How much debt has Biden canceled? | CNN Politics

The Political Case For Student Debt Cancellation | Data for Progress

Public Law 94-482 94th Congress An Act





Max Fisher: Erin, let me read you an old New York Times article from 1988 that is going to make you lose your mind. 


Erin Ryan: Is it about how George H.W. Bush got 426 electoral votes in the election that year? Because I hate that fact. What was wrong with us? We had just had Reagan. 


Max Fisher: Uh no, it’s a different article. The headline is, quote, “College officials defend sharply rising tuition.” 


Erin Ryan: Sounds familiar. 


Max Fisher: It quotes college presidents from all sorts of universities, big and small, elite and community colleges, apologetically explaining why tuition is going up by five or even 10%. 


Erin Ryan: So you’re sure this isn’t from last year. 


Max Fisher: And it even has the deputy undersecretary of education accusing colleges of, quote, “pigging out” by charging what he considered exorbitantly high tuitions. This is like a national outrage. 


Erin Ryan: I see what you’re doing here. You’re going to tell me that the cost of college in 1988, this big tuition jump that had everyone up in arms, was still some tiny fraction of what we pay today. 


Max Fisher: Oh, it’s going to make you so mad. 


Erin Ryan: Okay, fine. Get it over with. 


Max Fisher: $6,725 per year, which in today’s dollars would be about $17,000 a year, including room and board. 


Erin Ryan: If people were angry at the 1988 equivalent of $17,000, could you imagine how mad they would have been if they’d known what their kids were going to pay? 


Max Fisher: Yeah, the average tuition now is more than double. It’s over 36,000 per year. And if you look at just private colleges, it’s even higher at about 55,000 a year. For comparison, in 1988 a Rolls Royce cost $39,000. 


Erin Ryan: Oh my God, if that keeps up, by the time my daughter goes to college, it’s going to be cheaper to just buy her a Bentley and wish her the best. [music break]


Max Fisher: I’m Erin Ryan and I’m Max Fisher. This is How We Got Here, a series where Erin and I explore a big question behind the week’s headlines, and then tell a story that answers that question. 


Erin Ryan: We’re talking about one big consequence of those out-of-control tuition costs. There’s now more than $1.7 trillion worth of student loan debt on the books. 


Max Fisher: President Biden took another big swing this week at erasing a bunch of that debt. 


[clip of President Joe Biden] By freeing millions of Americans from this crushing debt of student debt, it means they can finally get on with their lives instead of being put their lives being put on hold. 


Max Fisher: His new plan would be on top of the 144 billion in student debt that he’s already canceled. 


Erin Ryan: Not counting his plan that got blocked by the Supreme Court last year. That would have forgiven another $430 billion in student debt. 


Max Fisher: Thank you, Supreme Court. The student debt crisis has kind of become this monster with its tentacles wrapped around the US economy. It’s making it harder for people to buy homes or to afford things like health care, child care. And more and more people are defaulting on student loans, too, which entails all sorts of hardships and costs that can take years to climb out from.


Erin Ryan: Health care, child care, luxuries. It was not always like this. Even in years like 1988, when that jump in tuition happened. Yes, people had to take out loans to pay for college, but they were typically much easier to pay back. Defaults were rarer. Student debt was, for most of the history of student debt, just not as big of a deal as it is today. 


Max Fisher: So our question this week, how did student loans go from something that most people agreed were a big net positive for borrowers and for the country into a crisis burdening the whole US economy? 


Erin Ryan: The story we want to tell you is about the confluence of a bunch of different forces that transformed student loans from a source of upward mobility for millions of Americans into something that’s now dragging them down instead. 


Max Fisher: So the earliest student loans started in 1958. I was actually surprised how recent that was. Before then, college was just simply out of reach for the overwhelming majority of Americans. Something like six or 7% of Americans even had college degrees. 


Erin Ryan: College, of course, was extremely cheap by today’s standards. A few thousand dollars per year in 2024 dollars. Still, how was an 18 year old supposed to come up with that? 


Max Fisher: So that year, 1958, Congress passed the National Defense Education Act, which authorized the first student loans. 


Erin Ryan: And this being 1958, the goal was, you guessed it, to defeat the commies. 


Max Fisher: The idea wasn’t to meaningfully broaden access to higher education, it was to train scientists to design more rockets and stuff like that to win the Cold War. 


[clip of Cold War era advertisement] Studying this scene, you may ask, just how important is it that these young people become teachers, scientists, administrators? Here’s one answer. Sputnik is a product of higher education, of instructors who teach much of the physics and mathematics in high school that we teach in college. How important? Our survival may depend on degrees and graduates we are not now equipped to produce. 


Max Fisher: Our survival. 


Erin Ryan: Our survival might depend. You know what did produce Sputnik, though? Communism, interestingly enough. Uh. 


Max Fisher: Which had a lot of public education. 


Erin Ryan: Which had a lot of public education. 


Max Fisher: So these loans did not work like student loans today. Congress gave money directly to the colleges and the schools then lent that money out to students to help them cover tuition. 


Erin Ryan: But Americans clamored to sign up. It turns out a lot of people really wanted to go to college, but the program didn’t provide nearly enough loans to meet demand. 


Max Fisher: Congress faced all this demand to make student loans more widely available. 


Erin Ryan: And that is precisely what President Lyndon Johnson did in 1965 with the Higher Education Act, which for the first time allowed any qualified student to take out a loan to pay for college. 


Max Fisher: Here’s Johnson at his alma mater, Texas State University, where he held the signing ceremony for that bill. 


[clip of Lyndon B. Johnson] Our individual education is the path to achievement and fulfillment. And for the nation it is a path to society that is not only free, but civilized. And for the world, it is the path to peace. Or it is education that places reason over force.


Erin Ryan: Go, bobcats! 


Max Fisher: So this is kind of the start of the student loan era. From here on out, rather than taking out a loan from whatever college you were attending. You took the loan out from a bank, and the federal government set the terms of the loan, and it guaranteed that loan in case you defaulted. 


Erin Ryan: Student loans have changed in a few ways since then, but the basic idea is still the same. And that idea behind student loans was, we should say, a pretty good one. 


Max Fisher: The thinking was that student loans would benefit the country overall by creating a lot of highly skilled professionals who would drive economic growth. 


Erin Ryan: And most of all, they would benefit individual students because people who go to college typically live longer, they’re less likely to be unemployed, and they tend to make substantially more money so that those student loans should more than pay for themselves. 


Max Fisher: And this is still true today. Like today, according to one estimate, someone with a bachelor’s degree makes on average $27,000 more per year than someone with just a high school diploma. 


Erin Ryan: That means a lifetime boost worth hundreds of thousands of dollars, depending on things like when you retire and of course, what you studied. 


Max Fisher: Right. And the average debt burden today for a bachelor’s degree is $29,000, which is a lot, but it seems like that should, at least in theory, still be a good deal. Like everybody wins, right? 


Erin Ryan: For a long time, this did work pretty well. Rates of college enrollment went up and up. The economy boomed, in part thanks to a growing base of highly educated professionals, and the students who’d taken out those loans were generally better off for it. 


Max Fisher: It wasn’t until a few decades into this, in the 2000s, that the system started to break. 


Erin Ryan: But a few things happened between 1965 and the 2000s that you need to know about to understand how things went wrong. 


Max Fisher: The first thing is the federal government set the program up with no limits on how many loans got issued or to who. But usually to get a loan, like for a house or a credit card, you have to prove that you’re able to pay the loan back, but not with student loans. The banks are just taking it on faith that these borrowers will eventually get a good enough job to repay. 


Erin Ryan: I’m getting flashbacks to the housing bubble and all those mortgages that got pushed on to people who couldn’t afford them, which of course, both helped drive up the cost of housing and also set up millions of homeowners for default. 


Max Fisher: Right. So that doesn’t happen with student loans. At first, the scheme of handing out five figure loans to any 18 year old with an acceptance letter, it actually works for a while. 


Erin Ryan: Congress helped to pump a bunch more hot air into this bubble in 1972, when it created a government backed corporation called Sallie Mae, which is so innocent sounding. 


Max Fisher: It doesn’t sound, it’s a it’s baked goods. 


Erin Ryan: She’s going to make me a pie. No, she’s going to break your thumbs. 


Max Fisher: Yeah. So what you are hearing in our voices is that if you were born anywhere between 1950 and 1990 and you took out a student loan, odds are that your bills came from Sallie Mae. 


Erin Ryan: When Congress had first created student loans, it had given itself the job of managing things like the interest rate. But by 1972, it wanted to get out of that business. I don’t blame them. 


Max Fisher: Sallie Mae was formed to buy up student loans from banks and administer those loans.


Erin Ryan: But this makes banks even less interested in whether the loans it’s handing out will get repaid, because that’s not their problem anymore. It’s Sallie Mae’s problem. 


Max Fisher: Sallie Mae is also a for profit company, so its incentive is to broaden the number of loans as much as possible and to make each loan for as much money as possible. 


Erin Ryan: In the 1980s, something else pushed up the cost of college. The US shifted from a manufacturing economy to a services economy. That meant fewer and fewer jobs making things like steel or cars. But more and more jobs in banking, software development, or health care, you know, soft boy work. 


Max Fisher: [laugh] Or podcasting. 


Erin Ryan: Yes. 


[clip from TV show The Wire] You know what the trouble is Brucey. We used to make shit in this country. Built shit. Now we just put our hand in the next guy’s pocket. 


Erin Ryan: I’ve seen so many clips from The Wire that now I don’t even feel like I need to watch it. 


Max Fisher: I know, so that is fictional dockworker Frank Sobotka from, as you mentioned, TV show The Wire. And he is right that this economic shift is bad for blue collar workers like him without college degrees. But it’s very, very good for people who do have a college degree and can work in these new fields. 


Erin Ryan: People catch on to the idea that college is no longer optional. 


Max Fisher: This poll kind of blew my mind. In 1978, according to Gallup, only 35% of Americans said a college education was very important. By 1985, that number had shot up to 65%. 


Erin Ryan: And you don’t need an economics degree to know that when demand goes up for something, the price goes up too. 


Max Fisher: Remember that news report from the start of the show about tuition jumping 5% in a single year? That starts to become typical. 


Erin Ryan: Still, the whole economic arrangement behind student loans held. Yeah, the loans were getting more expensive. But the average American college graduate was also making more money. 


Max Fisher: Here’s a local news segment from 1987 interviewing students at the University of New Hampshire about rising tuition. 


[clip of unspecified 1987 interviewer] And speaking of numbers, have you checked out what it costs to go to college this year? 


[clip of  1987 University of New Hampshire student 1] I think it’s expensive, but I think it pays off in the long run. You know, you you’re just investing in your future. 


[clip of  1987 University of New Hampshire student 2] There’s a lot of financial aid available, so that helps out a lot. I don’t think it’s that bad. 


[clip of  1987 University of New Hampshire student 3] No, I think it’s high. I disagree with what you say because I have to work constantly. 


Erin Ryan: These people are speaking in the voices of those unencumbered with ever having to pay. They’ve never had to pay bills before. They’re like talking about adult stuff. 


Max Fisher: To be 18. 


Erin Ryan: Oh. You sweet summer children, wait until the Sallie Mae bills start arriving in the mail. Enter Bill Clinton, who tried to take the student loan business away from private banks, including Sallie Mae, and just put it in the hands of the federal government. 


Max Fisher: He figured that if he could remove the profit incentive from the student loan business, then the price of those loans might not go up by so much. 


Erin Ryan: But the banks lobbied to resist this, and Congress watered down Clinton’s reforms. 


Max Fisher: The federal government did start issuing student loans directly, but the banks were still issuing them, too. 


Erin Ryan: This is the mixed public private student loan system you had to navigate. If you’re around me and Max’s ages. 


Max Fisher: How old are we again? 


Erin Ryan: We’re 25. 


Max Fisher: Yeah. That’s right. I can’t wait for the new Billie Eilish album. Will you uh pass the peach mango elf bar?


Erin Ryan: I don’t know. I don’t even know what that second thing is. [laugh] This was when managing student loans started to become a real nightmare, because the amount you had to borrow was continuing to rise faster than the wages you could expect to earn. 


Max Fisher: And thanks to this mixed public private system, you had to navigate a morass of multiple loans. 


Erin Ryan: This is also bad because it gives lenders very little incentive to care about default risk. They just want to issue as many student loans as possible so it can sell them off. 


Max Fisher: All of which fuels the rise of a big culprit in this story, for profit colleges. [music break]




Erin Ryan: Max, imagine that you’re a shady business man. 


Max Fisher: [laugh] I’m picturing it. 


Erin Ryan: Okay, good. You see this firehose of money, billions and billions of dollars of student loans being churned out. And you want a piece.


Max Fisher: Ah. So I start a for profit college. 


[clip of Everest college commercial] Are you ready to train for a career? Call Everest and get on the road to a rewarding career and a better life. 1-800-875-9981. Everest for life. 


Erin Ryan: You know, the real Mount Everest is covered in human poop, and people die on it all the time. So I guess it is a good name for a for profit university. You’ve seen ads for these in the subway. Corinthian Colleges, ITT Technical Institute, maybe even Trump University. They typically offer part time classes, maybe taken online, geared toward people who feel stuck in low wage, hourly work and who want to break into a professional career. 


Max Fisher: These exist basically to generate and capture student loans. 


Erin Ryan: But the quality of education they offer is often not very good. So dropout rates are high. 


Max Fisher: And because they’re targeting people who are lower income, default rates are much higher too. 


Erin Ryan: Again, the hallmarks of a bubble market. 


Max Fisher: But we should pause here to say that even with this rise in the number of people who want to go to college and the rise of banks lending the money to do it, there is still kind of a mystery as to why the cost of college is rising so much faster than the rest of the economy. 


Erin Ryan: Right. Like car ownership went way up in the 20th century, and a lot of banks gave out loans to finance this. But the cost of cars didn’t spike like the cost of college did. And in fact, the cost of a car has come down as automakers competed with each other on price. So clearly, there’s something strange going on here with the cost of college. 


Max Fisher: Very strange. And there are a couple of different theories for this. 


Erin Ryan: Lay them on me. 


Max Fisher: The first says that the cost of running a college like really actually has gone up by a lot, partly because the cost of highly skilled labor has risen. The thinking is that starting in the ’80s, the demand for college professors and researchers went up faster than the supply. 


Erin Ryan: But let’s not discount administrative bloat. In California, for example, the average college administrator makes north of 195K, but the average tenured professor gets paid only $72,000 per year. And a 2023 report from the Progressive Policy Institute found that there are now three times as many administrators and staffers as there are teaching faculty at top schools. Like Max, do you know anyone who selected a university based on its robust administrative team? 


Max Fisher: I don’t, although in fairness, most students go to colleges that are nonselective, so they’re just kind of going with what’s available to them. And those staffers you mentioned are often the lowest paid workers at a college. So, you know, it’s not like they’re money grubbing for your tuition bucks. Kind of like a restaurant whose costs go up as servers become more expensive to hire, colleges are heavily dependent on labor. And as the cost of living has gone up in the country, even the cheapest labor has gotten more expensive. And there’s another big theory that says that colleges have basically limitless spending needs, because there are always more gaps to fill in human knowledge. So there is a constant upward pressure on the price for college in a way that just isn’t true of other industries. 


Erin Ryan: In other words, if colleges can charge more, they always will, because there’s always another grant proposal to fund a lab studying cancer cells in mice or something. 


Max Fisher: There’s a quote about this from the economist Charles [?] Felter. He said, quote, “The operational objective of the research university is simply to be the best. Expenditures in salaries, facilities and amenities are crucial to this competition. And therein lies the source of an ongoing unsatisfied demand on the part of universities for more revenue.” 


Erin Ryan: I actually prefer the way that former Harvard president Derek Bok put this. Universities share one characteristic with compulsive gamblers and exiled royalty, there’s never enough money to satisfy their desires. 


Max Fisher: Part of the evidence that this might actually be a real thing is something called the Bennett hypothesis, named for a former education secretary. Basically, when the government has brought about tuition assistance programs meant to subsidize the price of college. 


Erin Ryan: In other words, when Uncle Sam tries to pick up part of the tuition tab through grants. 


Max Fisher: What happens is that the price of college simply goes up by that amount. 


Erin Ryan: So in this theory, if the government issues me a voucher for $5 off a large Domino’s pizza, Domino’s is just going to raise their prices $5. 


Max Fisher: It would be like if your voucher suddenly resulted in all pizzas becoming not just $5 more expensive to buy, but $5 more expensive to make. Um. So it’s it’s a weird phenomenon. But the exception to this rule is need based aid, which does not have this effect, but basically all other tuition assistance programs do, which is just more evidence that the cost of running a college can go up and up in a way that is not true of other goods or services. 


Erin Ryan: We should say that the student loan industry is helpful here, because it is always ready to offload those rising costs onto a new generation of 18 year olds. 


Max Fisher: All of which leads us up to the moment when, well, the bubble doesn’t burst exactly, but the whole student loan system that had been growing and growing finally teeters over into disaster. 


Erin Ryan: The 2008 financial crisis. 


[clip of unspecified news clip about the 2008 financial crisis] There are fears this sell off will continue on Wall Street. Now it’s official we are in a recession. 


Max Fisher: A few things happened that quickly took student loans from something that were growing, but manageable into something that was unmanageable. 


Erin Ryan: The most obvious is that millions of Americans suddenly became out of work or simply had to cut back. But they are still stuck with these big student loan payments. 


Max Fisher: You took out that student loan on an assumption that your wages would go up thanks to your degree. But after 2008, a lot of people’s wages did not go up by as much as they’d expected if they could get work at all. And student debt is not like credit cards, where you can cut back on personal expenses to get those monthly bills down. And it’s not like a house or apartment where you can move out or sell it for someplace smaller. You’re stuck. 


Erin Ryan: And there was another reason that student loans became more burdensome than other forms of debt after the financial crisis. It’s really, really hard to discharge a student loan thanks to amendments to the Higher Education Act, passed in 1976. 


Max Fisher: Lawmakers worried that doctors and lawyers were graduating and might immediately declare bankruptcy to avoid paying back those federal student loans. 


Erin Ryan: This law making student loans extra sticky was strengthened in 1990 and again in 1998. And in 2005, for profit companies convinced Congress to treat private student loans the same way. 


Max Fisher: And this creates a perfect storm heading into the financial crisis. All these people declaring bankruptcy can get out from under auto loans, home loans, bad credit card debt, but they can’t escape their student loans. 


Erin Ryan: And not paying down these student loans, even if it was just for a few years, meant that the interest kept compounding on itself. Even people who dutifully paid their student loans for years could see their balances ballooned to more than the amount that they’d initially borrowed. 


Max Fisher: So in 2009, the total amount of money that Americans owed on student loans exceeded what they owed on card loans for the first time. Two years later, that student debt burden outgrew even total consumer credit debt, which includes credit cards, and even as prices for pretty much everything were falling across the economy, the price of college was like the one thing that kept increasing. 


Erin Ryan: Which was very weird. It would be like if after the housing bubble burst, home prices instead of dropping just kept going up. 


Max Fisher: There were two big reasons for that. First was that the worse the economy got, the more the demand for a college education actually went up. If you couldn’t get a job, you might as well go back to school, right? 


Erin Ryan: And for those who don’t remember the Great Recession, or maybe don’t want to remember, unemployment stayed high for a really long time. For every year that stretched on, more people went to school. Between just 2005 and 2014, the amount of overall student debt nearly tripled from 363 billion to $1.2 trillion. 


Max Fisher: And a lot of those students are funneling into for profit colleges or community colleges, which, again, tend to have higher dropout rates. 


Erin Ryan: A lot of people end up with the worst of all worlds, where they have a high debt burden from their student loan but without the full earnings boost you get from finishing your degree. Like this guy who was profiled on PBS NewsHour. 


[clip of unspecified person profiled on PBS NewsHour] I just feel like I devoted years of my life and thousands of dollars um into developing specialized skills that I’m not using. 


Erin Ryan: There’s also a big, big rise in student debt at the other end of the spectrum among people who go to grad school. 


Max Fisher: Yeah. Millions of Americans who already have a bachelor’s degree, but as of 2008 suddenly can’t find work, go further into debt by getting a graduate degree, too. Between 2000 and 2018 the number of people aged 25 and up who earn a graduate degree doubles. 


Erin Ryan: A big proportion of these new grad students are women and people of color. Because research has shown that holding a graduate degree is one way to overcome the gender or race pay gap. 


Max Fisher: And this is all great news for private lenders, because the amount of debt you can take on to get a bachelor’s degree is capped by the law, but it’s not capped for graduate degrees. 


Erin Ryan: Today, the average debt for law school is $145,000. 


Max Fisher: Oof. 


Erin Ryan: And for med school, it’s $201,000. 


Max Fisher: So for any one individual borrower, this might be a risk worth taking. Professional degree holders do, on average make a lot more than bachelor’s degree holders. 


Erin Ryan: But because you have so many people taking out these loans all at once, the aggregate effect is to add something like a trillion dollars in debt to the economy. And of course, as all these new lawyers and doctors and MBAs and masters of fine arts enter the workforce in the 2010s, those job markets get oversaturated. 


Max Fisher: A lot of people find they’re right back where they started. Unable to find work, only now instead of owing 30,000 they owe 130,000, and every month that they can’t pay, the balance on the interest goes up. 


Erin Ryan: So, Max, you said there were two big reasons that the financial crisis pushed up college prices even further. One was the boost in enrollment as people waited out the job market. And what was the other? 


Max Fisher: State legislatures faced their own budget crunches, so a lot of them slashed funding for public schools. 


Erin Ryan: States had once provided, on average, nearly 80% of the money needed to fund public schools. That started to drop in the ’90s and 2000s, usually in response to budget crises. After 2008, it plummeted to about 64%, and the overwhelming majority of college students in this country remember go to public colleges and universities. 


Max Fisher: At the same time, states are also capping tuition at these colleges because they don’t want voters to blame them for rising prices. And the result was that public colleges gave out way less financial assistance. They needed full tuition from everyone, which shifted more and more of the financial burden from wealthier students to poorer ones. 


Erin Ryan: Which meant that a lot of people who are more financially precarious were forced to take out bigger student loans. 


Max Fisher: By the mid 2010s, the student debt burden became unbearable for many Americans. This loan that was supposed to be their ticket to prosperity and security instead became a pit that many Americans have been trying to claw out of ever since. 


Erin Ryan: By 2014, a staggering 34% of student loan debt was in deferment, forbearance, or default. One in three. 


Max Fisher: And a lot of these loans are from the federal government. And you really don’t want to be in debt to Uncle Sam. The government has the power to garnish wages, withhold tax refunds, even seize your Social Security checks. 


Erin Ryan: As someone who has been there, let me just say it sucks. 


Max Fisher: It doesn’t sound fun. 


Erin Ryan: Defaulting on a student loan is really, really expensive. Not only does the interest keep accruing, but you can get hit with collection costs worth up to 18.5% of what you already owe. And remember, like cold sores or Democratic fundraising emails, you can’t get rid of them. 


Max Fisher: By the time the pandemic hit, all of this debt had become not just life ruining for individual families, but a burden on the overall economy. 


Erin Ryan: When the federal government paused student loan payments during the pandemic, the homeownership rate among Americans aged 18 to 35 shot up. 


Max Fisher: Student loan payments resumed last year, but already half of households making under $50,000 a year are not able to pay those loans back, according to one study. And even higher income people are struggling. Most households making over $100,000 a year expect to miss at least one student loan payment. 


Erin Ryan: All of this depresses the economy, because so many people are shoveling their money into paying down loan interest, rather than doing something more economy stimulating with it. There’s even a pretty compelling theory that student loan debt is driving down the birth rate. 


Max Fisher: Erin is talking about the birth rate again. 


Erin Ryan: I’m obsessed. Anyway, there have been a few serious attempts to fix all this. 


Max Fisher: Like Bill Clinton’s plan to take away the student loan business from banks and consolidate it with the federal government, which the Obama administration actually did pull off in 2010. 


[clip of Barack Obama] In a 21st century economy, a higher education is the single best investment that you can make in yourselves and your future. And we’ve got to make sure that investment pays off. 


Erin Ryan: For people already burdened by a lot of student debt, this doesn’t solve the problem. But it did remove that profit seeking incentive from the equation going forward. 


Max Fisher: Still, all that preexisting debt kept growing. 


Erin Ryan: And when the pandemic hit in 2020, it became a crisis again, with lots of families struggling to find work but still burdened by student debt. 


Max Fisher: Trump paused student loan payments, which Biden extended into 2023. But Biden had come into office with a mandate from Democratic voters to find a more permanent solution. 


Erin Ryan: A lot of that debt is now held by the federal government, thanks to those changes under Clinton and Obama. 


Max Fisher: The challenge is proving that Biden has the legal authority to cancel it. 


Erin Ryan: He’s done this partly by expanding loan forgiveness programs that already exist. One forgives student loans for people who’ve worked a certain number of years in public service. Another forgives loans taken out to go to any college that defrauded students. This is a big one with for profit schools. 


Max Fisher: Those together have wiped out $144 billion in student debt, or about 9% of the total. It’s a lot, but not enough to fix the problem. 


Erin Ryan: His bigger plan was to cancel up to $20,000 in debt for any borrower making less than $125,000 per year as an individual, or $250,000 per year as a household. This would have canceled $430 billion in outstanding student debt. Another quarter of the total. I can’t believe that’s only a quarter of the total. 


Max Fisher: I know, I know, and the Supreme Court canceled even that which has left Biden looking for other ways to remove the debt. 


Erin Ryan: His newest plan would potentially help up to 30 million out of the remaining 43 million people holding student debt. 


Max Fisher: The plan is designed to avoid another Supreme Court challenge, which has made it pretty complicated, so it’s not totally clear how much this will add up to. 


Erin Ryan: Biden has made another big change. Remember those rules that made it really hard to discharge student loans if you got into financial trouble? Biden rolled a lot of those back. 


Max Fisher: And this is huge. People who need to declare bankruptcy can now get rid of student loans much more easily than they could in the past. 


Erin Ryan: This doesn’t fix the student debt problem, but it does at least help people under the most extreme financial duress to escape that cycle of endlessly compounding student loan interest. 


Max Fisher: So, Erin, I think where I’m kind of left at the end of all of this is that I still think student loans are a good idea today, for the same reason that they were a good idea in 1965. Like they still enable many more people to get an education that will, for most people, bring benefits that vastly outweigh the costs. But those first student loans were designed for a very different world, and we’ve learned a lot in the 60 years since. And we have made some changes too. But a $1.7 trillion debt pile is enough of its problem in its own right that wherever it came from, we are all better off if it had shrunk way, way down. 


Erin Ryan: Yeah, what really gets me about all this is that public education should be free first of all, for everybody. I know. 


Max Fisher: Sure. 


Erin Ryan: I know. Paint me red and call me a communist. But what really gets me about this is that this puts so much pressure on 17 and 18 year olds who are already under a lot of pressure to, like, choose a major, choose where they’re going to college, make all these life altering decisions. When you add a life crushing amount of debt to those decisions, it really raises the stakes in a way that I don’t think teenagers are equipped to handle, nor should they be. 


Max Fisher: So to close this out, let’s listen to one of the world’s most famous former college administrators touting the benefits of his short lived, for profit college. 


[clip of Donald Trump] We’re going to have professors and adjunct professors that are absolutely terrific, terrific people, terrific brains successful. We are going to have the best of the best. And honestly, if you don’t learn from them, if you don’t learn from me, if you don’t learn from the people that we’re going to be putting forward, and these are all people that are hand-picked by me, then you’re just not going to make it in terms of the world of success. I think the biggest step toward success is going to be, sign up at Trump University. [music break]


Max Fisher: How We Got Here is written and hosted by me, Max Fisher, and by Erin Ryan. 


Erin Ryan: It’s produced by Austin Fisher. Emma Illick-Frank is our associate producer. 


Max Fisher: Evan Sutton mixes and edits the show. 


Erin Ryan: Jordan Cantor sound engineers the show. Audio support from Kyle Seglin, Charlotte Landes and Vasilis Fotopoulos.


Max Fisher: Production support from Adriene Hill, Leo Duran, Erica Morrison, Raven Yamamoto, and Natalie Bettendorf. 


Erin Ryan: And a special thank you to What a Day’s talented hosts Tre’vell Anderson, Priyanka Aribindi, Josie Duffy Rice, and Juanita Tolliver for welcoming us to the family. [music break]