Reading list: once upon a time in student debt

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Intergenerational Equity, Student Loan Debt, and Taxing Rich Dead People
Victoria J. Haneman Creighton University - School of Law

Once upon a time, there was a generation of indentured servants called Millennials. They were beautiful and mysterious and clever and feckless, in the way that all young people can sometimes be. The Millennials had dreams of future careers in which they were near-mystical, all-powerful protectors of the planet, brunching on avocado toast, driving in electric cars, and eradicating golf courses from the earth. Droves of Millennials applied to universities, believing that a diploma was a barrier for entry to advance the careers of which they dreamt. Most were confronted with a conundrum: borrow to subsidize the dream career, with decades of (potentially unaffordable) payments when they were finally employed. The Generation Who Stole the World, commonly referred to as the Baby Boomers, had decided that unlimited access to debt was the most economically sound approach by which to offer equal opportunity in higher education — and the delectable irony of this tale is that the availability of debt caused (or at the very least, accompanied) the skyrocketing of costs. A vicious cycle resulted in an entire generation of educated Millennials having mortgaged their futures, and visibly sagging under the weight of the chains of their debt.

This hyperbolic tale leans into stereotypes for dramatic effect, but is also strikingly accurate in its rendering of higher education financing in the United States. The Boomer gerontocracy inherited the benefits of New Deal policies, with substantial public investment into infrastructure and education, but then gradually shifted the financing of higher education away from grants and towards student loan debt. Millennials have taken on 300% more student loan debt than their parents, with those borrowers between the ages of 25 and 34 each having an average of $42,000 in student loan debt. Student loan debt has more than doubled since 2009 and can no longer be ignored: according to projections in this Article, assuming the same steady rate of growth from 2004 to 2019, outstanding student loan debt will exceed $13.5 trillion within the next twenty years, far outpacing the projected growth of the Gross Domestic Product (GDP) of the United States.

There is a glaring gap in academic literature with regard to the choice to primarily lean upon student loan indebtedness to finance higher education, the unsustainability of such an approach, and the intergenerational equity of shifting debt from this generation to the next. Those crafting public policy have implicitly shirked away from notions of intergenerational sustainability in its management of higher education financing — with the (perhaps unintentional) result that higher education financing is operating on Ponzi principles. Forward-looking higher-education policy must be rooted in notions of intergenerational equity: a society is intergenerationally just when each generation does its best to contribute its fair share towards succeeding generations, avoiding serious harm to future generations, with a consciousness of the needs that may exist in the future. This Article fills a gap by considering the way in which debt is used (and potentially abused) as a common pool resource and that the management of a common pool resource arguably carries with it intergenerational equity obligations. The first in a two part series, this Article proposes a way forward with a creative solution — the repurposing of the gratuitous tax system such that the revenues are earmarked and dedicated to the retooling of higher education finance in the United States.