What America’s student loan debacle can teach us about neoliberalism.

Neoliberalism created a debt colossus we keep kicking down the road. Here’s what it says about neoliberalism.

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Last week, the Biden administration extended its pandemic era deferment on student loans again. This marks the sixth time since March 2020, that the student loan payment pause has been extended, this time to August 31, 2022. 

This is mixed news. For millions of debt holders, it’s a welcomed relief. But it’s also a punt.  Borrowers don’t know if payments will be required come August. The administration could, of course, extend the pause again. But endless extensions carry their own challenges. And even if borrowers don’t have to pay until August, it’s not all that far away, which puts a real cramp in their finances, anyway.

Then there’s inflation. To account for rising prices, economists believe that the average family should budget an additional $5,200. Considering that the average student debt payment is  $4,716 annually, inflation is making debt repayment even harder. Kicking the can down the road is only sustainable for so long. At some point, you run out of road. 

But America’s ballooning student loan crisis is emblematic of neoliberal policy failure more generally–both in how it was created and in the failures of programs intended to solve it. 

First there’s the fact of the loan crisis’s very existence: Student loans, themselves, are a problem that shouldn’t exist. In a country that achieved its success on being the destination to build your skills, the notion that you have to take out tens of thousands of dollars in loans to do so should be an anathema. Indeed, it used to be. Part of what powered that “American Dream” was easy access to skillbuilding through a system of well-funded land grants and public universities. The University of Michigan, my alma mater, used to be the “uncommon education for the common man.” Increasingly, that common person is finding herself priced out. 

A 2019 report from the Center on Budget and Policy Priorities found that funding for universities was down by 13% over the previous ten years. Meanwhile, tuition is up 25%. 

Why is tuition up nearly twice the gap in funding? Because the loss of public funding has set off an arms race to compete for high-income students to cover it. And that means investments in ancillary services like recreation centers or dining halls. 

Cut government funding. Allow the market to fill in. That’s neoliberalism in a nutshell. And the consequences are carried by students that can’t afford ballooning tuition and are forced to take on massive student loans.

Today’s average student loan debt is nearly  $33,000 — up from $5,400 in 1989. That’s a collective $1.5 trillion in debt, outstripping every other form of debt except  mortgage debt. 

Here’s the worst part. Nearly 40% of student borrowers, including 54% of Black student borrowers, didn’t even finish their higher education degree. Therefore, they haven’t realized the higher earnings those loans were supposed to offer.

So does neoliberalism deal with the debt that neoliberalism has imposed? 

Neoliberalism eschews universal approaches to public policy, opting instead to define problems in their narrowest possible terms. Rather than asking “how do we stop forcing people to take on debt to build their talent?” Or even “How do we wipe out this unnecessary debt?” Neoliberalism frames the problem in its particularities: “How do we ease the debt burden for the lowest-income borrowers?” 

There’s a tradeoff between comprehensiveness and complexity. Programs that are comprehensive have far fewer rules and regulations. They are both easier to understand for beneficiaries, and easier to administer for bureaucrats. Fewer people fall through the holes in the safety net when there are fewer holes in the safety net. 

Consider the Affordable Care Act, an important piece of admittedly neoliberal policy to address the problems in our healthcare system. Rather than a simple, blanket reform — such as providing every single American with portable, affordable health insurance, it created a patchwork system of fixes, all interconnected to solve a few of the system’s problems. The complexity made it easy for political opponents to pan and hard for everyday people to understand. Its complexity made it easy to chip away — just as the fall of the individual mandate did. And millions of Americans fell through the cracks in its labyrinth. Indeed, when President Obama joined President Biden in the White House last week to celebrate it, Biden also signed an executive order to address a “family glitch” that left nearly 5 million Americans out. Not to mention the millions of low-income Americans in states that have yet to expand Medicaid.  

So what’s neoliberalism’s answer to its tightly framed question, “How do we ease the debt burden for the lowest-income borrowers?” It’s called “income-driven repayment,” a Kafkaesque loan repayment system that was the subject of scathing NPR analysis. The program was supposed to lower monthly payments on the path to wiping out debt entirely after 20-25 years  for the 9 million borrowers on its rolls. But of the 4.4 million who have been making their payments for 20 years or more, a paltry 32 have had their debt wiped. That’s 0.0007%. 

You know why? Because neoliberalism gunna neoliberalism. The program’s administration was privatized, sold off to a shambolic corporation called ACS Education Services which failed to collect complete data about borrowers, including how many payments they’d made. When the government pulled the ACS contract, it moved their incomplete data to a host of other contractors, who then lost even more. Meanwhile, millions of Americans are stuck without the relief they’ve been promised.

Here’s the rub. The central crux of neoliberalism is that it accepts the inequities in our society as normal and justified. That logic permeates the way it frames and tries to address problems — many of which it causes. And it rejects universal approaches to policy solutions as “one size fits all.” It leaves people who’ve never experienced the consequences of poverty trying to architect solutions to problems they’ve never lived. 

The solutions are elegant on paper, and impractical in real life. And who suffers? The people whom the ideology has relegated to poverty in the first place.