How Student Debt is Sabotaging America

Reagan's policy of starving education & cranking up student debt has made US banks piles of money, but stopped generations of young people from starting businesses, having families & buying homes

Image by Enrique Meseguer from Pixabay

Ronald Reagan knew that an educated populace was more progressive and more Democratic, and he was determined to stop the explosion of college educated Americans caused by both the 1944 GI Bill and free tuition at the University of California.

Forty years later, student debt has crippled two generations of young Americans: over 44 million people carry the burden, totaling a $1.5 trillion drag on our economy that benefits nobody except the banks earning interest on the debt.

But that doesn’t begin to describe the damage student debt has done to America since Reagan, in his first year as governor of California, ended free tuition at the University of California and cut state aid to that college system by 20 percent across-the-board.

After having destroyed low income Californians’ ability to get an education in the 1970s, he then took his anti-education program national as president in 1980. 

When asked why he’d taken a meat-axe to higher education and was pricing college out of the reach of most Americans, he said that college students were “too liberal” and America “should not subsidize intellectual curiosity.”

After all, college educated people are more likely to vote for Democrats: Joe Biden, for example, won fully 60 percent of the college educated vote in 2020.  In the minds of Republicans, colleges just produce progressives and protestors. What Limbaugh used to call “the pointy-headed liberals of academia.”

Four days before the Kent State Massacre of May 5, 1970, Governor Reagan called students protesting the Vietnam war across America “brats,” “freaks” and “cowardly fascists,” adding, as The New York Times noted at the time, “If it takes a bloodbath, let’s get it over with. No more appeasement!”

Before Reagan became president, states paid 65 percent of the costs of colleges and federal aid covered another 15 or so percent, leaving students to cover the remaining 20 percent. Today the numbers are pretty much reversed.

As soon as he became president, Reagan went after federal aid to students with fervor.  Devin Fergus documented for The Washington Post how, as a result, student debt first became a widespread thing across the United States during the early 80s:

“No federal program suffered deeper cuts than student aid. Spending on higher education was slashed by some 25 percent between 1980 and 1985. ... Students eligible for grant assistance freshmen year had to take out student loans to cover their second year.”

It became a mantra for conservatives, particularly in Reagan’s cabinet. Let the kids pay for their own damn “liberal” educations.

Reagan’s Director of the Office of Management and Budget, David Stockman, told a reporter in 1981:

“I don’t accept the notion that the federal government has an obligation to fund generous grants to anybody that wants to go to college.  It seems to me that if people want to go to college bad enough then there is opportunity and responsibility on their part to finance their way through the best way they can. … I would suggest that we could probably cut it a lot more.”

After all, cutting taxes for the rich was Reagan’s first and main priority, a position the GOP holds to this day. Cutting education could “reduce the cost of government.” His first Education Secretary, Terrel Bell, wrote in his memoir:

“Stockman and all the true believers identified all the drag and drain on the economy with the ‘tax-eaters’: people on welfare, those drawing unemployment insurance, students on loans and grants, the elderly bleeding the public purse with Medicare, the poor exploiting Medicaid.”

Reagan’s next Education Secretary, William Bennett, was even more blunt about how America should deal with the “problem” of uneducated people who can’t afford college, particularly if they were African American:

“I do know that it’s true that if you wanted to reduce crime,” Bennett said, “you could -- if that were your sole purpose, you could abort every black baby in this country, and your crime rate would go down.”

These various perspectives became an article of faith across the GOP. Reagan’s OMB Director David Stockman told Congress that students were “tax eaters … [and] a drain and drag on the American economy.” Student aid, he said, “isn’t a proper obligation of the taxpayer.”

This was where, when, and how today’s student debt crisis was kicked off in 1981. 

Before Reagan, though, America had a different perspective. 

Both my father and my wife Louise’s father served in the military during World War II and both went to college on the GI Bill.  My dad dropped out after two years and went to work in a steel plant because mom got pregnant with me; Louise’s dad, Bob Goussy, who’d grown up dirt poor, went all the way for his law degree and ended up an Assistant Attorney General for the State of Michigan.

They were two among almost 8 million young men and women who not only got free tuition from the 1944 GI Bill but also received a stipend to pay for room, board, and books.  And the result — the return on our government’s investment in those 8 million educations — was substantial. 

The best book on that time and subject is Edward Humes’ Over Here: How the GI Bill Transformed the American Dream, summarized by Mary Paulsell for the Columbia Daily Tribune:

“[That] groundbreaking legislation gave our nation 14 Nobel Prize winners, three Supreme Court justices, three presidents, 12 senators, 24 Pulitzer Prize winners, 238,000 teachers, 91,000 scientists, 67,000 doctors, 450,000 engineers, 240,000 accountants, 17,000 journalists, 22,000 dentists and millions of lawyers, nurses, artists, actors, writers, pilots and entrepreneurs.”

When people have an education, they not only raise the competence and vitality of a nation; they also earn more money, which stimulates the economy.  Because they earn more, they pay more in taxes, which helps pay back the government for the cost of that education. 

In 1952 dollars, the GI Bill’s educational benefit cost the nation $7 billion.  The increased economic output over the next 40 years that could be traced directly to that educational cost was $35.6 billion, and the extra taxes received from those higher-wage-earners was $12.8 billion.

In other words, the US government invested $7 billion and got a $48.4 billion return on that investment, about a $7 return for every $1 invested. 

In addition, that educated workforce made it possible for America to lead the world in innovation, R&D, and new business development for three generations.   We invented the transistor, the integrated circuit, the internet, new generations of miracle drugs, sent men to the moon and reshaped science.

Presidents Thomas Jefferson and Abraham Lincoln knew this simple concept that was so hard for Reagan and generations of Republicans since to understand: when you invest in your young people, you’re investing in your nation.

Jefferson founded the University of Virginia as a 100% tuition-free school; it was one of his three proudest achievements, ranking higher on the epitaph he wrote for his own tombstone than his having been both president and vice president.

Lincoln was equally proud of the free and low-tuition colleges he started. As the state of North Dakota notes:

“Lincoln signed the Morrill Act on July 2, 1862, giving each state a minimum of 90,000 acres of land to sell, to establish colleges of engineering, agriculture, and military science. … Proceeds from the sale of these lands were to be invested in a perpetual endowment fund which would provide support for colleges of agriculture and mechanical arts in each of the states.”

Fully 76 free or very-low-tuition state colleges were started because of Lincoln’s effort and since have educated millions of Americans including my mom, who graduated from land-grant Michigan State University in the 1940s, having easily paid her minimal tuition working as a summer lifeguard. 

Every other developed country in the world knows this, too: student debt is a rare or even nonexistent thing in most western democracies. Not only is college free or close to free around much of the world; many countries even offer a stipend for monthly expenses like our GI Bill did back in the day. 

Thousands of American students are currently studying in Germany at the moment, for example, for free. Hundreds of thousands of American students are also getting free college educations right now in Iceland, Denmark, Norway, Finland, Sweden, Slovenia, and the Czech Republic, among others.

Republican policies of starving education and cranking up student debt have made US banks a lot of money, but they’ve cut America’s scientific leadership in the world and stopped two generations of young people from starting businesses, having families, and buying homes. 

The damage to working class and poor Americans, both economic and human, is devastating. It’s a double challenge for minorities.

There’s a lot of talk about President Biden slightly reducing America’s student debt burden. We need to go away beyond that.

Congress should not only zero-out existing student debt across our nation, but revive the post-war government support for education that Reagan and successive Republican administrations cut.

Only then will America, like every other developed country in the world, again be a place where anybody who wants to go to college can do so.