Education has less to do with inequality than you think

President Joe Biden says he is taking a “hard look” at student-debt relief, which probably means that some significant relief is coming. For one thing, Biden promised relief during the 2020 campaign. For another, it’s one progressive priority he can address by executive action, which is important given the extreme difficulty of getting anything through an evenly divided Senate.

How much relief will he offer? I have no idea. How much relief should he offer? I’m for going as big as political realities allow, but I understand that too generous a debt write-off might produce a backlash.

What I think I do know is that much of the backlash to proposals for student-debt relief is based on a false premise: the belief that Americans who have gone to college are, in general, members of the economic elite.

The falsity of this proposition is obvious for those who were exploited by predatory for-profit institutions that encouraged them to go into debt to get more or less worthless credentials. The same applies to those who took on educational debt but never managed to get a degree. About 40% of student-loan borrowers never finish their education.

But even among those who make it through, a college degree is hardly a guarantee of economic success.

America has become a far more unequal society over the past 40 years or so. The nature of rising inequality, however, isn’t as broadly known. I keep encountering people who believe that we’re mainly looking at a widening gap between the college-educated and everyone else.

This story had some truth to it in the 1980s and 1990s, although even then, it didn’t account for the huge income gains at the top of the distribution — the rise of the 1% and even more among the 0.01%. Since 2000, however, most college graduates have actually seen their real incomes stagnate or even decline.

The Economic Policy Institute had a very useful analysis of this data just before the pandemic. Between 1979 and 2000, there was a rough match between growth in one measure of overall inequality — the gap between wages at the 95th percentile and those of the median worker — and its estimate of the average wage premium for college-educated workers. Since 2000, however, wage inequality has continued to rise, while the college premium has barely changed.

Now, Americans at the 95th percentile don’t consider themselves rich, because they aren’t, surely as compared with CEOs, hedge funders and so on. Nonetheless, they have seen substantial gains. On the other hand, the typical college graduate — who is, remember, someone who made it through and received an accredited degree — hasn’t.

So, here’s how I see it: Much of the student debt can be attributed to false promises.

Some of these promises were scams pure and simple. Even those who weren’t outright cheated, however, were pulled in by elite messaging assuring them that a college degree was a ticket to financial success. Many of those who did manage to finish found that the financial rewards were far smaller than they expected, while being saddled with large debts.

Of course, there are many Americans who have suffered from rising inequality. I wouldn’t argue that college debtors are greater victims than, say, truck drivers who have seen their real wages plunge or families stuck in declining rural areas and small towns. And we should be helping all of these people.

Unfortunately, most things we could and should be doing for Americans in need can’t be done in the face of 50 Republican senators, plus Joe Manchin. Student-debt relief, by contrast, is something Biden can do. So he should.