Anya Kamenetz is the author of Generation Debt, now out with Riverhead Books. More of her work can be found at AnyaKamenetz.com.
In the U.S., after years of runaway growth, student loan debt is finally emerging into the national spotlight. Republican cuts to federal student aid meant interest rates spiked to 6.8 percent on July 1 of this year. Democratic leaders have vowed to cut that rate in half if they win Congress in the fall. Hillary Clinton, the likely presidential candidate, spoke out this spring during her round of commencement addresses in favor of a “Borrowers'
Bill of Rights” that would reduce the burden on students and end unfair practices in the student lending industry. Additionally, on June 27 the specially-convened bipartisan Federal Commission on the Future of Higher Education released a draft report calling for a complete overhaul of the federal financial aid system, reducing debt burdens and “significantly” increasing need-based aid.
This renewed focus is good news. If we want to reduce inequality and rebuild the middle class in this country, we need federal investment in higher education.
Debt-based college financing works directly against the ability of people of modest means to improve their lot in life through the traditional avenue of greater education. Compared to college graduates without student loan debt, the two-thirds who graduate with debt are putting off buying houses, starting families and saving for retirement; in other words, lagging in joining the middle class.
Restoring the promise of social mobility through higher education deserves pride of place on the progressive agenda. However, at the same time, it's important to acknowledge that "More college!" is not the only answer to economic progress and individual advancement. That bears repeating: College is not the only answer.
In the U.S., the percentage of college graduates in the workforce—just under one-third—exactly tracks the percentage of jobs in the economy over the next decade that are projected to require a bachelor's degree . If we doubled the percentage of college-degree holders without adding more jobs that require degrees we'd only create a new class of overqualified, underemployed Americans with lots of debt. Or to quote economist James K. Galbraith: "Promoters of schooling as a cure for inequality are arguing, in effect, that fixing their initial placement of disadvantaged people or groups will have, by itself, an effect on the equality of pay in the society that results. This is a serious fallacy."
This is not to denigrate the intrinsic value of a liberal education, but when progressives talk about opportunity, we shouldn't look with tunnel vision at college. We have to answer the harder question of how to improve the average job in this economy. Should we simply raise the floor by increasing the minimum wage and providing health care coverage for the uninsured? Should we require employers to create more highly skilled jobs and train workers for them? Should we encourage the development of more worker-owned firms where profits are shared, not funneled to the CEO's paycheck? Should we create incentives and tax benefits to attract well-paying jobs from overseas? Should we give a hand to the beleaguered union movement in improving the pay and benefits of the legions of hands-on service workers whose jobs cannot be off-shored?
All of these approaches have their pros and cons. But in the absence of any kind of intervention, the comparative disadvantage of non-college-educated workers will continue to grow, and the average family will be worse off.
College grads aged 25 to 34 currently earn about 37 percent more than high school graduates. That gap has opened up over the past generation not so much because college grads are earning more, but because high school grads are earning less, about one-third less when adjusted for inflation. Last month, Senate Republicans invoked a special rule to defeat the ninth straight attempt to raise the minimum wage above $5.15 an hour. This decision brings the wage to its lowest buying power in 51 years. Senate Democrats, in a rare show of guts, are now threatening to block Congress's own pay hike unless the proposed 40 percent minimum wage increase goes through.
Leveling the playing field for students of all income brackets to get to—and through—college and to build their futures after college without excessive burdens of debt is a necessary factor in building a meritocratic society. But it is not sufficient. Any vision for economic transformation of our nation as a whole has to include slaying the dragon of economic inequality by improving the quality of all jobs. We can't afford to let life in America become a lottery.