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Biden and student debt forgiveness

2022-09-11 | USA
Biden and student debt forgiveness

On August 24, Biden announces a plan to forgive student debt for "borrowers who need it most." 87% of the aid we are told will go to students earning less than $75,000 a year and the remaining 13% will go to borrowers earning up to $125,000 a year, thus reducing the wealth gap between minorities and whites. While there are many Democrats who applaud these measures, there are just as many for whom they would fall short. At the same time, Republicans talk about the elitism of the plan, claiming that the plan is basically a bailout for rich kids that working people will have to finance through taxes.

With the mid-term November elections in mind, both parties are using the issue to attract voters. But how will this plan affect the lives of working people? Is it a way to curb the inflation that is eating away at our wages? Or, will it, on the contrary, increase our expenses?

The origin of a snowball

US University in the 1950s

In the late 1950s and early 1960s US universities, in the midst of a military-space race with Russia, turned to linguistics and STEM careers.

US student loans begin their history in 1840, when Harvard University created a loan system just for its students. The model was first adopted by the federal government in 1944, when student loans were first offered and subsidized for war veterans.

The first major expansion of federal student loans was initiated under the National Defense Education Act (National Defense Education Act, 1958). The goal was to increase the available pool of mathematicians, scientists, and foreign language scholars to meet Cold War demands. It was the first response to the Russian Sputniks.

Under this law, the government subsidized the interest on the loans while the student was pursuing his or her degree and during a certain grace period. A percentage of the debt could be cancelled if the student ended up becoming a university professor or teacher. However, no one who did not sign an oath of loyalty to the United States could receive a loan.

The Lyndon B. Johnson administration in 1965 enacted the Higher Education Act. It established a work-study program, a scholarship program, and a federal student loan and insurance program that it also offered to students at vocational schools.

At the time, because of the influence of the Chicago school, federal spending on education and student loans were calculated as a [loss](https://books.google.es/books? id=N2PyDwAAQBAJ&pg=PA393&dq=federal+family+education+loan+banks++friedman&hl=en&sa=X&ved=2ahUKEwjmxaTutPb5AhUEgv0HHVwvA0sQ6AF6BAgGGEAI#v=onepage&q=federal%20family%20education%20loan%20banks%20%20%20friedman&f=false) even though the loans would be repaid later. The Johnson administration, fearing the effect these calculations might have on speculative markets on Treasury bond interest rates, decided to hide the expense by having banks issue the loans to students.

This system continued for quite some time. And over the years, the banks demanded that the interest rates on student loans be raised.

So in 1972 Sallie Mae was founded. Sallie Mae was a government-sponsored enterprise which financed the banks by buying student loans from them and in turn granted them commercial loans while using student loans as collateral. It was the response of the Nixon administration to the growing demands of the banks in the face of rising inflation...something that the 1973 oil price hike did not make easy.

Workers seek out university education for their children

Recourse to military conscription as a way to pay tuition costs multiplied during the Obama years among young workers.

The recession of the 1970s, along with the recession of the 1980s, hit the manufacturing sector hardest. It was during these years that a large number of working-class families began to consider college as a way out of poverty and Sallie Mae grew much larger than its boosters would have liked.

Student debt and college costs skyrocketed. More and more students turned to student loans, because with inflation, scholarships covered a smaller percentage of their college expenses, which included food, housing and transportation costs .

The last free public universities ended up charging tuition during the 1990s, which excluded a large part of the petty bourgeoisie and the vast majority of workers from university education.

To correct the risk of an unpayable credit bubble, the Middle Income Student Assistance Act was passed in 1992. The act expanded the loan eligibility limits so that more students from the petit bourgeoisie could receive them. But at the same time, it cut funding for Pell Grants, i.e., the possibilities of the children of the working class and poorer petty bourgeoisie to access university education.

The government also decided to offer for the first time federal unsubsidized loans to dependent students, i.e., those who do not work and live on their parents' dime. Unsubsidized loans are those in which the government does not pay the interest during the course of the degree and which are therefore granted to wealthier students. Also eliminated in that decade was the maximum amount a parent could borrow for their children under the Parent PLUS program. The Parent Plus program is a program that offers unsubsidized loans to wealthy parents of dependent students. En esa lógica, las políticas de Bush, y más tarde de Obama, tuvieron como objetivo que los estudiantes pidieran cada vez más préstamos no subvencionados como forma de mantener las tasas de estudios superiores sin generar costes mayores al estado.

In that logic, Bush's, and later Obama's, policies were aimed at making students take out more and more unsubsidized loans as a way of maintaining higher education fees without generating higher costs to the state.

The result of all these policies was to facilitate access to college for students from petty bourgeois families while containing in a sort of virtual quota the number of working class children who could go to college. Access to university education therefore remained a way for the petty bourgeoisie to differentiate itself from workers. At the same time, these policies increased the amount of money going to both investors and the government.

Obama also set up a system, Pay as you Earn, whereby students could pay less per month over a longer period of time... while interest continues accrue over time. The law established that only after 20 years, the debts of these students could be forgiven. That is, it could only be a respite for students with long and expensive careers, such as architecture, medicine or law, mostly associated in the U.S. with the more affluent sectors of the petty bourgeoisie and the corporate bourgeoisie. For working class students there remained the option of paying their educational expenses through the Army.

Nothing changed in 2010 when Obama decided to abolish the old system in which institutions like Sallie Mae or banks acted as intermediaries between students and the government. What he did was simply eliminate the government subsidies they were receiving when they were already being privatized. After all, unsubsidized loans were by that point the bulk of the loans issued by the government.

Meanwhile, university costs never stopped increasing.

The plan of Biden

University students in the US

Students at Hunter College, in the heart of Manhattan, the most expensive area of New York, demonstrate to demand the abolition of tuition and forgiveness of student debt.

The people with the largest college debts are undoubtedly the petty bourgeoisie who carried out long and expensive careers at Ivy League universities and relied heavily on unsubsidized loans. They form a particularly important sector in the Democratic party that is most mobilized by its identitarianist policies (feminism, racialism, etc.).

Before making the decision, however, Biden was concerned about how workers would perceive the plan...that they would interpret it as a subsidy for rich kids. Biden insists, however, that the plan will benefit workers most of all.

But either he does not know how much a young worker earns in the U.S. or he redefined the concept according to his rhetorical needs. The plan allocates 87% of its budget to those earning less than $75,000 a year and any indebted student earning individually less than $125,000 a year is eligible for Biden's plan.

In other words, most of the aid does not go to what he calls the neediest, but to the petty bourgeoisie. It is estimated that 20.52% of the aid will go to households earning around $141,000 a year and 36% will go to those earning around $82,000. Only 14.32% will go to households - either those of the students themselves if they work or their families if they are dependent on them - earning around 28,000 per year.

Moreover, the plan does not touch one iota of the entrenched classism of the scholarship and credit system. Biden's promise to cancel debts after ten years in reality only applies to those who take out smaller loans and are usually only planning to attend community college. Furthermore they will have to pay taxes on the debts forgiven. Under this repayment plan, Biden promises the government will lower monthly costs even more than Obama did while it subsidizes interest payment...a cost that will be balanced out by both the taxes on the forgiven debt and by increasing the interest rate on federal student loans overall. University costs furthermore continue to increase even further thus preserving the exclusivity of higher university education beyond community college. This slip is not innocent. What the Democrats intended was not just to give economic aid to the sectors of the petty bourgeoisie closest to them and to meet the so-called labor shortage by facilitating the entrance of workers into community college...a strategy which goes as far back as Obama. It is designed above all to appeal to the morality of the petty-bourgeoisie, to maintain their distinction from workers, reaffirm their respectability and assauge their fears of proletarianization.

Another issue is the relationship between the plan and taxes. What the Democrats say is that the money saved by the cuts made through the Inflation Reduction Act will be used to fund Biden's student loan plan...a savings in costs that is due in large part in the elimination of COVID benefits. These include unemployment benefits, free COVID sick care for the uninsured, assistance rent, child tax credit and SNAP benefits, at the state level, and soon at the federal level. Many people will also lose Medicaid coverage.

In other words, the plan is to start collecting student debt once more while softening the blow on the university educated petty bourgeoisie while cutting general expenditures for the exploitation of workers that are as basic as health care. All for the sake of increasing war-oriented spending like arming Ukraine or the CHIPS and Science Act, which also promises to invest in promoting STEM education among racial minorities and petty bourgeois women in general in order to compete in the technological and trade war with China.

Do we need the university?

Students in France protesting against precarity

University students who pay for their degree by working demonstrate against precariousness in 2019 in Paris, France.

The University is a piece of a system that, as a whole, is increasingly antagonistic to human development. Although it presumes to co-opt a few individuals from the working class, its place in the division of social labor cannot be more alien and adverse to us.

For the bourgeoisie, education is a matter of the State, its main objective is to manufacture nationals and train children and young people in skills useful to production - according to their social position. For the workers, on the other hand, it is not a national problem. It is a question of necessity. A need to gain tools to resist a runaway steamroller that de-skills and destroys us in the immediate future, and therefore also for our own emancipation.

Su necesidad de escuela y la nuestra, 14/10/2020

As a class we do not need to be given access to the university, we need access to knowledge, which is very different. As a familiar strategy of resistance among workers it is the social product of the impoverishment suffered. But the truth is that, as in Europe, it works less and less: the probability that a university degree will serve a worker -or the children of workers- as a shield against the precarization and de-skilling of work is increasingly improbable, even in the creative trades and health careers.

If we are to think of strategies of resistance in this field, as in all others, the search for individual solutions is even less worthwhile than placing one's hopes in the Democrats. All useful resistance requires collective organization and will only come to life from the clear and uncompromising perspective of the satisfaction of universal human needs. That is to say, in confrontation not only with the student credit system and with the educational system in general, but with the anti-human and anti-historical system in which we live.