0:00

Aaron, let me read you an old New York Times article from 1988

0:02

that is going to make you

0:04

lose your mind. Is it

0:07

about how George H.W. Bush got 426

0:10

electoral votes in the election that year? Because

0:12

I hate that fact. What was wrong

0:14

with us? We had just had Reagan.

0:17

No, it's a different article. The

0:19

headline is, quote, college officials defend

0:21

sharply rising tuition. Sounds

0:23

familiar. It quotes college presidents from

0:26

all sorts of universities, big and small,

0:28

elite and community colleges, apologetically explaining why

0:30

tuition is going up by five or

0:33

even 10%. So you're

0:35

sure this isn't from last year? It

0:38

even has the deputy undersecretary of

0:40

education accusing colleges of, quote, picking

0:42

out by charging what he considered

0:44

exorbitantly high tuitions. This is like

0:47

a national outrage. I

0:49

see what you're doing here. You're going to

0:51

tell me that the cost of college in

0:53

1988, this big tuition jump that it everyone

0:55

up in arms was still some tiny fraction

0:57

of what we pay today. Oh, it's going to

0:59

make you so mad. Okay, fine. Get

1:01

it over with. $6,725

1:04

per year, which in today's dollars would be about $17,000

1:06

a year, including room and

1:11

board. If people were angry at the 1988 equivalent

1:13

of $17,000, could you imagine how mad they would

1:18

have been if they'd known what their kids were going

1:21

to pay? Yeah, the average tuition

1:23

now is more than double. It's over

1:25

$36,000 per year. And

1:28

if you look at just private colleges, it's even higher at about

1:30

$55,000 a year. For

1:32

comparison, in 1988, a Rolls Royce cost $39,000. Oh

1:37

my God. If that keeps up by

1:39

the time my daughter goes to college, it's going

1:41

to be cheaper to just buy her Bentley and

1:43

wish her the best. I'm

1:48

Erin Ryan. And I'm Max Fisher. of

1:51

the world. We're talking about one big consequence of those

1:53

out of control. There's

2:01

now more than $1.7 trillion

2:04

worth of student loan debt on the books. President

2:06

Biden took another big swing this week at erasing a bunch

2:09

of that debt. By freeing millions of

2:11

Americans from this crushing debt of student debt, it

2:13

means they can finally get on with their lives

2:15

instead of being put on hold. His

2:18

new plan would be on top of the $144 billion

2:21

in student debt that he's already canceled. Not

2:24

counting his plan that got blocked by the Supreme

2:26

Court last year that would have forgiven another $430

2:28

billion in student debt. The

2:33

student debt crisis has become

2:35

this monster with its tentacles wrapped around

2:38

the U.S. economy. It's making

2:40

it harder for people to buy homes or afford things like

2:42

health care, child care. More and

2:44

more people are defaulting on student loans too,

2:46

which entails all sorts of hardships and costs

2:48

that can take years to climb out from.

2:51

Healthcare, child care, luxury. It

2:53

was not always like this. Even in

2:55

years like 1988 when that jump in tuition

2:57

happened, yes, people had to take out loans

3:00

to pay for college, but they were typically

3:02

much easier to pay back. Defaults

3:04

were rarer. Student debt was, for

3:06

most of the history of student debt, just

3:08

not as big of a deal as it is today. So

3:11

our question this week, how did student

3:13

loans go from something that most people

3:15

agreed were a big net positive for

3:17

borrowers and for the country into a

3:19

crisis burdening the whole U.S. economy? The

3:22

story we want to tell you is about

3:24

the confluence of a bunch of different forces

3:26

that transformed student loans from a source of

3:29

upward mobility for millions of Americans into

3:31

something that's now dragging them down

3:33

instead. So the earliest

3:36

student loans started in 1958. I

3:39

was actually surprised how recent that was. Before

3:41

then, college was just simply out of

3:43

reach for the overwhelming majority of Americans.

3:45

Something like six or seven percent of

3:47

Americans even had college degrees. College,

3:49

of course, was extremely cheap by today's standards.

3:52

A few thousand dollars per year in 2024

3:54

dollars. Still, how was an

3:56

18-year-old supposed to come up with that? In

4:00

1958, Congress passed the National Defense

4:03

Education Act, which authorized the

4:05

first student loans. And

4:07

this being 1958, the goal was, you

4:09

guessed it, to defeat the Commies. The

4:11

idea wasn't to meaningfully broaden access

4:14

to higher education. It was to train scientists

4:16

to design more rockets and stuff like that

4:18

to win the Cold War. Studying

4:20

this scene, you may ask, just

4:23

how important is it that these

4:25

young people become teachers, scientists, administrators?

4:27

Here's one answer. Sputnik is a product of higher education.

4:31

Of instructors who teach much of

4:33

the physics and mathematics in high

4:35

school that we teach in college.

4:38

How important? Our

4:42

survival may depend on degrees and

4:44

graduates. We are not now equipped

4:47

to produce. Our survival. Our

4:49

survival might depend. You

4:52

know what did produce Sputnik, though? Communism,

4:55

interestingly enough. Which

4:57

had a lot of public education. Which had a lot

5:00

of public education. So these loans did

5:02

not work like student loans today. Congress gave

5:04

money directly to the colleges and the schools

5:06

then lent that money out to students to

5:09

help them cover tuition. But Americans clamored

5:11

to sign up. It turns out a lot

5:13

of people really wanted to go to college.

5:15

But the program didn't provide nearly enough loans

5:17

to meet demand. Congress faced all

5:19

this demand to make student loans more widely

5:21

available. And that is precisely what President

5:23

Lyndon Johnson did in 1965 with the Higher Education

5:27

Act which for the first time allowed any

5:29

qualified student to take out a loan to

5:31

pay for college. Here's Johnson at

5:33

his alma mater, Texas State University, where

5:36

he held the signing ceremony for that

5:38

bill. For the individual, education

5:41

is the path to achievement and

5:43

fulfillment. And for

5:45

the nation, it is a

5:47

path to society that is not only free

5:49

but civilized. And

5:52

for the world, it is the path to peace. For

5:55

it is education that places reason

5:58

over force. cats.

6:01

So this is kind of the start of

6:03

the student loan era. From here on out,

6:05

rather than taking out a loan from whatever

6:07

college you were attending, you took the loan

6:10

out from a bank. The federal government said

6:12

the term's a loan and it guaranteed that

6:14

loan in case you defaulted. Student

6:16

loans have changed in a few ways since then,

6:18

but the basic idea is still the same. And

6:20

that idea behind student loans was, we should say,

6:22

a pretty good one. The thinking was

6:25

that student loans would benefit the country overall

6:27

by creating a lot of highly skilled professionals

6:29

who would drive economic growth. And

6:31

most of all, they would benefit individual

6:33

students because people who go to college

6:35

typically live longer, they're less likely to

6:37

be unemployed, and they tend to make

6:39

substantially more money so that those student

6:41

loans should more than pay for themselves.

6:43

And this is still true today. Like today,

6:46

according to one estimate, someone with a bachelor's degree makes

6:48

on average $27,000 more per year than someone with just

6:50

a high school

6:53

diploma. That means a lifetime boost

6:55

worth hundreds of thousands of dollars depending on

6:58

things like when you retire and of course

7:00

what you studied. Right. And the average debt

7:02

burden today for a bachelor's degree is $29,000, which is a

7:06

lot, but it seems like that should at least in

7:08

theory still be a good deal. Like everybody wins, right?

7:11

For a long time, this did work pretty

7:13

well. Rates of college enrollment went up and

7:15

up, the economy boomed in part thanks to

7:17

a growing base of highly educated professionals. And

7:19

the students who'd taken out those loans were generally

7:22

better off for it. It wasn't until

7:24

a few decades into this in the

7:26

2000s that the system started to break.

7:28

But a few things happened between 1965 and

7:31

the 2000s that you need to know about

7:33

to understand how things went wrong. The

7:35

first thing is the federal government set the

7:37

program up with no limits on how many

7:40

loans got issued or to who. But usually

7:42

to get a loan like for a house

7:44

or credit card, you have to

7:46

prove that you're able to pay the loan back,

7:48

but not with student loans. The banks are just

7:50

taking it on faith that these borrowers will eventually

7:52

get a good enough job to repay. I'm

7:55

getting flashbacks to the housing bubble and

7:57

all those mortgages that got pushed onto

7:59

people. who couldn't afford them, which of course

8:01

both helped drive up the cost of housing

8:04

and also set up millions of

8:06

homeowners for default. Right. So

8:08

that doesn't happen with student loans at

8:10

first. The scheme of handing out five-figure

8:12

loans to any 18-year-old with an acceptance

8:14

letter, it actually works for a while.

8:17

Congress helped to pump a bunch more hot air into this bubble in

8:19

1972 when it created a government-backed

8:22

corporation called Sallie Mae, which

8:24

is so innocent sounding.

8:26

It doesn't sound, it's baked goods. She's

8:28

going to make me a pie. No,

8:31

she's going to break your thumb. Yeah.

8:34

So what you were hearing in our voices is that if you

8:36

were born anywhere between 1950 and

8:38

1990 and you took out a student loan,

8:40

odds are that your bills came from Sallie

8:42

Mae. When Congress had first created student

8:45

loans, it had given itself the job of

8:47

managing things like the interest rate. But

8:49

by 1972, it wanted to get out of that

8:51

business. I don't blame them. And Sallie Mae

8:53

was formed to buy up student loans

8:56

from banks and administer those loans. But

8:58

this makes banks even less interested in whether

9:00

the loans it's handing out will get repaid

9:02

because that's not their problem

9:04

anymore. It's Sallie Mae's problem. Sallie Mae

9:06

is also a for-profit company. So its

9:08

incentive is to broaden the number of

9:11

loans as much as possible and to

9:13

make each loan for as much money

9:15

as possible. In the 1980s, something

9:17

else pushed up the cost of college.

9:19

The U.S. shifted from a manufacturing economy

9:21

to a services economy. That meant

9:24

fewer and fewer jobs making things like steel or

9:26

cars. More and more jobs

9:28

in banking, software development, or healthcare. You

9:30

know, soft boy work. Or

9:33

podcasting. Yes. You know what the

9:35

trouble is, Brucie? We

9:39

used to make shit in this country. Billed

9:41

shit. Now

9:44

we should put our hand in the next guy's pocket. I've

9:47

seen so many clips from The Wire that now I don't

9:49

even feel like I need to watch it. I

9:52

know. So that is fictional

9:54

dockworker Frank Zabotka from, as you mentioned,

9:56

TV show The Wire. And He

9:58

is right that this economic... I'm except is

10:01

bad for blue collar workers like him without

10:03

college degrees. but it's very very good for

10:05

people who do have a college degree and

10:07

can work in these new fields. People

10:10

catch onto the idea that college

10:12

is no longer optional. This poll

10:14

kind of blew my mind. In Nineteen

10:16

Seventy Eight, According to Gallup, only thirty

10:18

five percent of Americans said a college

10:20

education was very important. I need to eighty

10:22

five. that number had shut up to

10:24

sixty five percent. And you don't need

10:26

an economics degree to know that when demand

10:28

as up for something. The. Price goes up

10:31

to. Remember that news report from the

10:33

start of the show about to wish and

10:35

jumping five percent and single year that starts

10:37

to become typical. Still, the whole

10:39

economic arrangement behind student loans held. Yeah,

10:41

the loans are getting more expensive, but

10:44

the average American college graduate with also

10:46

making more money. Through so local

10:48

news segment from Nineteen Eighty Seven

10:50

interviewing students at the University of

10:52

New Hampshire about rising tuition and

10:54

speaking of numbers have just said

10:56

that what it costs to go

10:59

to college this year and that

11:01

the by a dog and on

11:03

and in that and locally available.

11:08

Or that the I agree

11:11

with a. Dog

11:14

these people are speaking in the

11:16

voices of those unencumbered with ever

11:18

having to pay. They've never had

11:20

to pay bills the for their

11:22

like talking about adult stuff. To

11:25

body. And he sweet summer children wait

11:27

until Sallie Mae's Bill said arriving in

11:29

the mail. Enter Bill Clinton who tried

11:31

to take the soon learn business away

11:33

from private banks including Sallie Mae and

11:35

just put it and hands and federal

11:37

governments. He figured that a heated removed the

11:40

profit incentive from the student loan business than

11:42

the price of those loans might not go

11:44

up by so much. But.

11:46

The banks lobbied to resist

11:48

this, and Congress watered down

11:50

Clinton's reforms. The Federal government did

11:52

start issuing student loans directly, but the

11:55

banks were still issuing them to. This

11:57

is the next public private student loans.

12:00

Then we had to navigate if you're

12:02

around me and that Max's ages held

12:04

Reagan or were twenty five. Yes,

12:06

that's right, I can we for the new Billie

12:08

Elisheva. We were past the peach Mango of Bar.

12:10

I don't I don't even notice anything.

12:13

Yes, this is Managing student loans started

12:15

to become a real nightmare because the

12:17

amount you had to borrow was continuing

12:19

to rise faster than the wages you

12:21

could expect to. Earn And thanks

12:23

to this mixed public private system,

12:26

you had to navigate a morass

12:28

of multiple loans. This is also

12:30

bad because it gives lenders very little incentive

12:32

to care about default risk. They just want

12:34

to issue as many soon learns as possible

12:36

so it can sell them off. All

12:38

of which fuels the rise of a

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15:11

up and and he made an impact on. Max.

15:20

Imagine that your city business.

15:22

And fixing it's. Okay, I guess you

15:24

see the fire hose of money, billions and

15:26

billions of dollars a student loans being turned

15:29

out and you want a piece. Ah, so

15:31

I start a for profit college for

15:33

us to train for a career goal,

15:35

Everest and get on the road to

15:37

a rewarding career and a better life.

15:39

One hundred eight, seven, Five Nine Nine

15:41

Eight. Average for Life. You know, the

15:43

real Mount Everest is covered in human poop.

15:47

people die on it all the time

15:49

so i guess it is a good

15:51

name for a for profit and arrested

15:53

in a sea of seen ads for

15:55

these in the subway corinthian colleges icici

15:57

technical institute maybe even trump university it

15:59

typically part-time classes may be taken

16:01

online, geared toward people who feel stuck

16:03

in low-wage hourly work and who want

16:06

to break into a professional career. These

16:08

exist basically to generate and capture

16:10

student loans. The quality of

16:12

education they offer is often not very

16:14

good, so dropout rates are high. And

16:17

because they're targeting people who are lower income, default

16:19

rates are much higher too. Again,

16:21

the hallmarks of a bubble market. But we

16:23

should pause here to say that even with this

16:25

rise in the number of people who want to

16:27

go to college and the rise of banks lending

16:30

them money to do it, there is still kind

16:32

of a mystery as to why the cost of

16:34

college is rising so much faster than the rest

16:36

of the economy. Right, like car ownership went

16:39

way up in the 20th century and a

16:41

lot of banks gave out loans to finance

16:43

this. But the cost of cars didn't spike

16:45

like the cost of college did. And in

16:47

fact the cost of a car has come

16:49

down as automakers competed with each other on

16:52

price. So clearly there's something strange

16:54

going on here with the cost of college.

16:56

Very strange. And there are a couple

16:58

of different theories for this. Lay them

17:01

on me. The first says that the

17:03

cost of running a college like really

17:05

actually has gone up by a lot

17:07

partly because of the cost of highly

17:09

skilled labor has risen. The thinking is

17:11

that starting in the 80s the demand

17:13

for college professors and researchers went up

17:15

faster than the supply. But let's

17:17

not discount administrative bloat. In California

17:19

for example the average college administrator

17:21

makes north of 195k. The average

17:25

tenured professor gets paid only $72,000 per year. And a

17:28

2023 report from the

17:32

Progressive Policy Institute found that

17:34

there are now three times as many

17:36

administrators and staffers as there

17:38

are teaching faculty at top schools. Like

17:41

Max do you know anyone who collected

17:43

the university based on its robust administrative

17:45

team? I don't although in fairness

17:47

most students go to colleges that are non-selective

17:50

so they're just kind of going with what's

17:52

available to them. And those staffers you mentioned

17:55

Are often the lowest paid workers at a college,

17:57

so you know it's not like they're money-cropping for

17:59

your. Jewish and bucks kind of like a

18:01

restaurant who's costs go up. his service become more

18:04

expensive to hire. Colleges are heavily

18:06

dependent on labor. And as

18:08

the cost of living has gone up

18:10

in the country, even the cheapest labor

18:12

has gotten more expensive. And there's another

18:14

big theory that says the colleges have

18:16

basically limitless spending needs because they're always

18:18

more gaps to fill in human knowledge.

18:20

so there is a constant upward pressure

18:22

on the price for college in a

18:24

way that just isn't true of other

18:26

industries. In. Other words: ecologists can

18:28

charge more. They always will because there's

18:31

always another grant proposal to fund a

18:33

lab setting. Cancer cells in mice or

18:35

something. There's a quote about this

18:37

from the economist Charles Clarke shelters

18:40

he said quotes: The operational objective

18:42

of the research university is simply

18:44

to be the best expenditures and

18:46

salaries. Facilities and amenities are crucial

18:48

to this competition, and therein lies

18:50

the source of an ongoing unsatisfied

18:52

demand on the part of universities

18:54

for bore revenue. I actually

18:56

prefer the way that former Harvard

18:58

President Derek Buck put this university

19:00

share one characteristic with compulsive gamblers

19:02

and exiled worse, his sister's never

19:05

enough money to satisfy their doesn't

19:07

There's. Part of the evidence that this

19:09

might actually be a real thing is

19:11

something called the Bennett hypothesis name for

19:13

a former education secretary. Basically when the

19:15

government has brought about to wishing assistance

19:17

programs meant to subsidize the price of

19:19

college. In other words, when Uncle Sam tries to

19:22

pick up part of the Jewish and Tab through grants.

19:24

What happens is that the price of college simply

19:26

goes up by that amount. So.

19:28

In this theory, if the government issues

19:30

me a voucher for five dollars off

19:32

a large Domino's pizza. Dominoes,

19:34

It's just gonna raise their prices five dollars. It

19:37

would be like if your voucher suddenly

19:39

resulted in all pizzas becoming not as

19:41

five dollars more expensive to buy it's

19:43

but five dollars more expensive to make

19:45

of. So it's It's a weird phenomenon,

19:47

but the exception of this rule is

19:49

need based aid, which does not have

19:51

this effect. The. basically all other to

19:53

wish and assistance programs do which is just more

19:55

evidence for the cost of running the college can

19:57

go up and up in a way that is

20:00

true of other goods or services. We should

20:02

say that student loan industry is helpful here

20:04

because it is always ready to offload those

20:06

rising costs onto a new generation of 18-year-olds.

20:08

All of which

20:11

leads us up to the moment when, well,

20:13

the bubble doesn't burst exactly, but the

20:16

whole student loan system that had

20:18

been growing and growing finally teeters

20:20

over into disaster. The 2008

20:22

financial crisis. There are fears the

20:24

sell-off will continue on Wall Street. Now

20:27

it's official we are in a recession. A few

20:30

things happened that quickly took student loans

20:32

from something that were growing but manageable

20:35

into something that was unmanageable. The

20:37

most obvious is that millions of Americans suddenly

20:39

became out of work or simply had to

20:41

cut back, but they are still

20:43

stuck with these big student loan payments. You

20:45

took out that student loan on an assumption

20:47

that your wages would go up thanks to

20:49

your degree, but after 2008, a

20:52

lot of people's wages did not go up by as

20:54

much as they'd expected if they could get work at

20:56

all. And student debt is not

20:58

like credit cards where you can cut back on

21:00

personal expenses to get those monthly bills down. It's

21:02

not like a house or apartment where you can

21:04

move out or sell it for someplace smaller. You're

21:07

stuck. And there was another reason

21:09

that student loans became more burdensome than other forms

21:11

of debt after the financial crisis. It's

21:14

really, really hard to discharge a student loan

21:16

thanks to amendments to the Higher Education Act

21:18

passed in 1976. Lawmakers

21:21

worried that doctors and lawyers were

21:23

graduating and might immediately declare bankruptcy

21:25

to avoid paying back those federal

21:28

student loans. This lawmaking student loans extra

21:30

sticky was strengthened in 1990 and again in 1998. And in

21:32

2005, for-profit companies convinced Congress

21:38

to treat private student loans the same

21:40

way. And this creates a

21:42

perfect storm heading into the financial crisis.

21:44

All these people declaring bankruptcy can get

21:46

out from under auto loans, home loans,

21:48

bad credit card debt, but they can't

21:50

escape their student loans. And Not paying

21:52

down these student loans, even if it was

21:55

just for a few years, meant that the

21:57

interest kept compounding on itself. Even People who

21:59

dutifully pay their student loans learn for years

22:01

consider. Balances balloon to more than the amount

22:04

that they'd initially borrowed. So in two

22:06

thousand and nine, the total amount of

22:08

money that Americans owed on student loans

22:10

exceeded what they owed on card loans

22:12

for the first time. Two years later,

22:14

that student debt burden outgrew even Total

22:16

Consumer credit. that which includes credit cards.

22:18

And even as prices for pretty much

22:20

everything were falling across the economy, the

22:22

price of college was like the one

22:25

thing that kept increasing. Which. Was

22:27

very weird. It would be like if

22:29

after the housing bubble burst, home prices

22:31

instead of dropping just kept going up.

22:33

There were two big reasons for that. First is

22:35

that the worst the economy got, the more

22:37

the demand for a college education actually went up.

22:40

V couldn't get a job me might as

22:42

well go back to school race. And for

22:44

those who don't remember the Great Recession

22:46

or maybe don't want to remember unemployment

22:48

state high for a really long time.

22:50

For every year that stretched on more

22:52

people into school between just two thousand

22:54

and five and twenty fourteen, the amount

22:56

of overall student debt nearly tripled from

22:58

three hundred sixty three billion to one

23:00

point two trillion dollars. And a lot

23:03

of those students are funneling into for

23:05

profit colleges are community colleges which again

23:07

tend to have higher drop out rates.

23:09

A lot of people end up with the worst of

23:11

all worlds where they have a high debt burden from

23:13

the student loan. that's but out the full earnings. But

23:16

as you get from finishing your degree. Like.

23:18

This guy who was profiles on Pbs

23:20

Newshour. I just feel like I

23:22

devoted. Years of my life

23:24

and thousands of dollars. Into

23:27

developing specialized skill. That.

23:30

And I use. And there's also a big big

23:32

rise and student debt at the other end of

23:34

the spectrum among people who go to grad schools.

23:37

Yeah, millions of Americans who already have

23:39

a bachelor's degree, but as of Two

23:41

Thousand Eight suddenly can't find work, go

23:43

further into debt by getting a graduate

23:45

degree to between two thousand and Twenty

23:48

eighteen. The number of people aged twenty

23:50

five and up who earn a graduate

23:52

degree doubles. A big proportion of

23:54

these new grad students are women and people

23:56

of color Because research has shown that holding

23:58

a graduate degree. One way to

24:01

overcome the gender or race pay gaps.

24:03

In this is all great news for private

24:05

lenders because the amount of debt you can

24:07

take on to get a bachelor's degree is

24:09

capped by the loss, but it's not count

24:11

for graduate degrees. Today the average

24:13

set for law school is a

24:15

hundred and forty five thousand dollars.

24:17

An for med school it's two

24:20

hundred and one thousand dollars. So

24:22

for any one individual borrower, this

24:24

might be a risk worth taking.

24:26

Professional degree holders do on average

24:28

make a lot more than bachelor

24:30

degree holders. But because you have so

24:32

many people taking out these loans all at

24:35

once, the aggregate effect is to add something

24:37

like a trillion dollars in debt to the

24:39

autonomy and of chorus As all these new

24:41

lawyers and doctors and. And. Be a

24:43

zen. Masters of fine arts enter the

24:46

workforce in the twenties hands so it's

24:48

job market's get over saturated. A

24:50

lot of people find the right back where

24:52

they started unable to find work. Only now

24:54

instead of owing thirty thousand they have a

24:57

hundred and thirty thousand. and every month that

24:59

they can't pay the balance on the interest

25:01

goes up. So max you said,

25:03

there were two big reasons that the financial

25:05

crisis post college prices even further on was

25:07

the boots and enrollment as people waited else

25:10

job market and what was the other. State

25:12

legislatures face their own budget crunches,

25:15

so a lot of them slashed

25:17

funding for public schools. Say.

25:19

It's had once provided On average nearly eighty

25:21

percent of the money needed to Sons Public

25:23

Schools. That. Started to drop in

25:25

the nineties into thousands, usually in response

25:28

to budget crises. After Two Thousand Eight,

25:30

it plummeted to about sixty four percent,

25:32

and the overwhelming majority of college students

25:35

in this country remember go to public

25:37

colleges and universities at the same time.

25:39

States are also capping to wishing of

25:42

these calls as because they don't want

25:44

voters to blame them for raising prices.

25:46

The result was the public colleges gave

25:48

out way less financial assistance they needed.

25:50

Full tuition from everyone would shifted more

25:53

and more of the financial burden from

25:55

wealthy or students to poorer ones. which

25:57

meant that a lot of people who are more

25:59

financially precarious were forced to take out

26:01

bigger student loans. By the mid

26:03

2010s, the student debt burden became unbearable for

26:06

many Americans. This loan that was supposed

26:08

to be their ticket to prosperity and

26:10

security instead became a pit that many

26:12

Americans have been trying to claw out

26:14

of ever since. By 2014, a

26:16

staggering 34% of student

26:18

loan debt was in deferment, forbearance,

26:21

or default. One in

26:23

three. And a lot of

26:25

these loans are from the federal government, and

26:27

you really don't want to be in debt

26:29

to Uncle Sam. The government has the power

26:31

to garnish wages, withhold tax refunds, even seize

26:33

your social security checks. As someone who

26:35

has been there, let me just say, it sucks.

26:37

That doesn't sound fun. Defaulting on a

26:40

student loan is really, really expensive. Not only does

26:42

the interest keep accruing, but you can get hit

26:44

with collection costs worth up to 18.5% of what

26:46

you already owe. And

26:50

remember, like cold sores or

26:52

Democratic fundraising emails, you can't get

26:54

rid of them. By the time

26:56

the pandemic hit, all of this debt

26:58

had become not just life ruining for

27:00

individual families, but a burden on the

27:02

overall economy. When the federal government paused

27:04

student loan payments during the pandemic, the home ownership

27:07

rate among Americans aged 18 to 35 shot up.

27:11

Student loan payments resumed last year, but already

27:13

half of households making under $50,000 a

27:16

year are not able to pay those

27:18

loans back, according to one study. And

27:20

even higher income people are struggling. Most

27:22

households making over $100,000 a

27:24

year expect to miss at least one student

27:26

loan payment. All of this

27:29

depresses the economy because so many people

27:31

are shoveling their money into paying down

27:33

loan interest rather than doing something more

27:35

economy stimulating with it. There's even a

27:37

pretty compelling theory that student loan debt

27:39

is driving down the birth rate. Aaron

27:41

is talking about the birth rate. I'm upset.

27:44

Anyway, there have been a few serious attempts

27:46

to fix all this. Like Bill Clinton's plan

27:48

to take away the student loan business

27:50

from banks and consolidate it with the

27:53

federal government, which the Obama administration actually

27:55

did pull off in 2010. In

27:57

a 21st century economy. A

28:00

higher education is the single best investment

28:02

that you can make in yourselves and

28:04

your future. And we've got to

28:06

make sure that investment pays off. For

28:09

people already burdened by a lot of student

28:11

debt, this doesn't solve the problem. But it

28:13

did remove that profit-seeking incentive from the equation

28:15

going forward. Still, all that

28:17

pre-existing debt kept growing. And

28:20

when the pandemic hit in 2020, it became

28:22

a crisis again, with lots of families struggling

28:24

to find work, but still burdened by student

28:26

debt. Trump paused student loan

28:28

payments, which Biden extended into 2023. But

28:32

Biden come into office where they mandate

28:34

from Democratic voters to find a more

28:36

permanent solution. A lot of that debt is

28:38

now held by the federal government thanks to those changes

28:40

under Clinton and Obama. The challenge

28:42

is proving that Biden has the legal authority

28:44

to cancel it. He's done this partly

28:47

by expanding loan forgiveness programs that already

28:49

exist. One forgives student loans for

28:51

people who've worked a certain number of years

28:53

in public service. Another forgives loans

28:55

taken out to go to any college that

28:57

defrauded students. This is a big one with

29:00

for-profit schools. Those together have wiped out

29:02

$144 billion in student debt, or

29:05

about 9% of the total. It's a

29:07

lot, but not enough to fix the problem. His

29:10

bigger plan was to cancel up to $20,000 in debt for

29:13

any borrower making less than $125,000 per year as

29:16

an individual, or $250,000 per year as a household. This

29:20

would have canceled $430 billion in

29:23

outstanding student debt. Another quarter of the

29:25

total. I can't believe that's only a

29:27

quarter of the total. I know, I

29:29

know. And the Supreme Court canceled even that,

29:31

which has left Biden looking for other ways

29:33

to remove the debt. His newest plan

29:36

would potentially help up to 30 million out

29:38

of the remaining 43 million people holding student

29:40

debt. The plan is designed to avoid another

29:42

Supreme Court challenge, which has made it pretty complicated.

29:44

So it's not totally clear how much this will

29:46

add up to. Biden has made

29:48

another big change. Remember those rules that made

29:50

it really hard to discharge student loans if

29:53

you got into financial trouble? Biden

29:55

rolled a lot of those back. And this is

29:58

huge. People who need to declare bankruptcy. can

30:00

now get rid of student loans much more easily than they

30:02

could in the past. This doesn't fix

30:04

the student debt problem, but it does

30:06

at least help people under the most

30:08

extreme financial duress to escape that cycle

30:11

of endlessly compounding student loan interest. So,

30:14

Erin, I think where I'm kind of left at the

30:16

end of all of this is that I

30:19

still think student loans are a good idea today for

30:21

the same reason that they were a good idea in

30:23

1965. Like, they still

30:25

enable many more people to get an

30:27

education that will, for most people, bring

30:29

benefits that vastly outweigh the costs. But

30:31

those first student loans were designed for

30:34

a very different world. And we've

30:36

learned a lot in the 60 years since, and

30:38

we have made some changes too. But

30:40

a $1.7 trillion debt

30:43

pile is enough of its problem

30:45

in its own right that wherever it came from,

30:47

we are all better off if it is shrunk

30:49

way, way down. Yeah, what

30:51

really gets me about all this is that

30:54

public education should be free, first of all,

30:56

for everybody. I know. Sure. I

30:58

know. Paint me red and call me a communist. But

31:00

what really gets me about this is that this

31:03

puts so much pressure on 17 and

31:05

18-year-olds who are already under a lot

31:07

of pressure to like choose a major,

31:10

choose where they're going to college, make

31:12

all these life-altering decisions. When you add

31:14

a life-crushing

31:16

amount of debt to those decisions, it really

31:19

raises the stakes in a way that I

31:21

don't think teenagers are equipped to

31:23

handle, nor should they be. So

31:25

to close this out, let's listen

31:27

to one of the world's most

31:29

famous former college administrators touting the

31:32

benefits of his short-lived for-profit college.

31:35

We're going to have professors and adjunct

31:37

professors that are absolutely terrific,

31:40

terrific people, terrific brains, successful.

31:42

We are going to have

31:44

the best of the best.

31:47

And honestly, if you don't

31:49

learn from them, if you don't learn from

31:51

me, if you don't learn from the people

31:53

that we're going to be putting forward, and

31:55

these are all people that are handpicked by me,

31:58

then you're just not going to make it. in terms of

32:00

the world of success. I think the

32:03

biggest step towards success is

32:05

going to be sign up from the university.

32:13

How We Got Here is written and hosted by

32:15

me, Max Fisher, and by Erin Ryan. It's produced

32:17

by Austin Fisher, and Iliq Frank is

32:19

our associate producer. Evan Senton mixes

32:22

and edits the show. Jordan Cantor sound

32:24

engineers the show, audio support from

32:26

Kyle Puggland, Charlotte Landis, and Vassilis

32:28

Fatopoulos. Production support from

32:30

Adrian Hill, Leo Duran, Erica Morrison,

32:32

Raven Yamamoto, and Natalie Venter. And

32:35

a special thank you to what a day's

32:37

talented host, Truval Anderson, Priyanka Aravindi, Jessie

32:39

Dethi-Rice, and Juanita Tolliver for welcoming

32:42

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