Last Fall, Roosevelt Institute Visiting Fellow, Marshall Steinbaum, an economist trained at the University of Chicago, participated in our 2016-17 Colloquium Series, “The University: Past, Present and Future.” In his presentation, he discussed his ambitious empirical study on student debt burdens, delinquency rates, and their various demographic correlations. More recently, Steinbaum contributed a highly topical piece to the Boston Review aptly titled “Who’s Afraid of Student Debt?”1 In light of this recent publication, which reviews recent scholarly approaches to the student debt crisis, this article will quickly summarize Steinbaum’s findings in his earlier studies, as well as lay out the stakes of his argument in the Boston Review.
Steinbaum, in his previous position as an economist at the Washington Center for Equitable Growth, conducted a study with Kavya Vaghul titled “Mapping Student Debt.”2 “More than 42 million Americans owe a total of $1.3 trillion in student debt,” they found, “making it the second-largest liability on the national balance sheet. A generation ago, student debt was a relative rarity, but for today’s students and recent graduates, it’s a central fact of economic life that we don’t know much about. Mapping Student Debt is changing that.”
Their study uncovered a set of findings, both predictable and paradoxical in nature. First, black and latino students suffer far greater rates of delinquency, as do lower income populations. Second, although lower income demographics are disproportionately burdened, once they controlled for income, race was still a highly determinate factor in debt burden. Lastly, middle class racialized populations suffer the highest debt burdens of all.
Debt burden, then, is not a measure of total debt, but rather one’s ability to repay. Following this finding, middle class latinos and blacks suffered the highest burdens, not on account of overall debt load, but because of the inability to repay once the loan reaches repayment. Likewise, relatively lower loan balances for poorer demographics were most likely to go into delinquency, because these balances were a product of unfinished degree programs at for-profit universities or other programs for part-time students, who face additional work and family burdens. Without ever achieving their degree credentials these populations face two related burdens: first, an absence of higher earning potential that often accrues to those with higher degrees; and, following this fact, little motivation to repay a loan stemming from a degree that was never completed.
These factors tell us that race and class are still important factors in understanding student loan burdens. These factors are far more indicative of a crisis than those relatively fewer cases where seemingly large loan balances are held. These more astronomical loan balances — those in the six figures — are often (though not always) held by those with higher earning potential, as well as those from higher income backgrounds. While a $250,000 debt load seems insurmountable, a practicing physician, corporate attorney, or MBA graduate stands a better chance at paying down this balance than does a for-profit college dropout with a $10,000 balance, who is likely to be employed in the precarious service sector or other lower wage industry.
Likewise, given the relatively lower levels in family wealth (as a measure of income, assets, investments, home ownership, etc.) of Latino and African-American students across the American context, these individuals face far more unforeseen and unmeasurable difficulties
once they emerge from college than their white counterparts. As a critical marker of inequality in the United States, race must factor in alongside income as a crucial explanatory factor in rates of delinquency.
Competing assessments of our higher education funding model have recently emerged that counter the “crisis” narrative of the national student loan sector. These studies, which Steinbaum outlines in his Boston Review piece, argue that the national student loan burden is not only manageable, but that taking on high levels of debt is still a worthwhile investment in one’s economic future. The system, they argue, is not in crisis, because having an advanced degree still “pays off” in terms of life-long earning potential, despite higher debt burdens. But these studies rely on the aggregated income improvements of a college degree as their primary determinants. Steinbaum’s earlier findings — based on the empirically-grounded metric of ability to repay, rather than simple income factors — demonstrate two important counter arguments. First, the “colorblind" model of analyzing student debt burden obscures more than it reveals in terms of understanding the viability of national student debt loads. Second, factors other than income, such as degree attainment (and the for-profit model of education that often does not foster this attainment) are invisible in these purely income-based studies. Following these criticisms, Steinbaum argues that we need a multi-factored analysis of the student loan market, which would produce a far more bleak assessment of the student loan market and our overall model of funding for higher education.
Additionally, the scholars who emphasize the continued viability of these higher debt burdens argue that the “skills gap” accounts for the inability of poor and prejudicially racialized groups to repay. In short, this narrative argues that well-paying jobs are available, but the skills required to fill them are often not held by graduates. In this account, economic policy is deemed to be highly functional; individuals, however, are merely lagging behind, or otherwise unable to successfully adjust to these conditions. Steinbaum’s view of economic policy runs precisely opposite to this narrative. It is economic policy, he argues, that drives individual’s employment and income outcomes rather than the converse.
Due to these in-built inequalities along racial lines, Steinbaum goes so far as to argue that we need a Brown v. The Board of Education-style intervention in the realm of higher education. In essence, debt burdens, when factored in terms of ability to repay, are separate and unequal along racial lines. Along with a federal relief program grounded in reversing the racially-specific injuries of student debt burdens, he argues that we need to focus on government policies to increase jobs and other welfare state programs. Simply put, the model of higher education that places the burdens of economic adjustment on poor and racialized individuals is both highly inequitable as well as incapable of properly solving the underlying economic policy failures that are too often explained away by the “skills gap narrative.”
Along with reproducing racial and other forms of generational inequality, the student loan crisis produces tremendous drag on our nation’s economy. Rather than buying homes or investing in retirement savings, millennials — particularly those who are subject to prejudicial racialization and who are from working class backgrounds — are saddled with unmanageable debts, often before they ever enter the world of work as productive citizens. Steinbaum concludes that policies of economic adjustment must be assessed and adjusted by policy makers, rather than forcing our nation’s youth — and disproportionately, our Latino and Black youth — to bear the burden of a broken or unresponsive policy environment.
Steinbaum’s findings are in line with our other speakers in the Cultural Studies Colloquium Series, who have approached this systemic failure in complementary ways. Higher education has unique challenges, though Steinbaum, along with our other speakers, demonstrates that the consequences and causes of the dilemmas faced by groups within academia have broad resonances in society, at large.
Adam Proctor, Doctoral Student in Cultural Studies
November 03, 2017