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Cancel the Debt: Why Student Loan Forgiveness would Rebuild the American Middle Class

Our imagination of the American middle class is far more a social construct than an economic fact. The middle-class ethos is often characterized by a steady stream of income, occupational stability, education, and family culture. Self-identifying as middle-class is ‘in vogue’ partially due to cultural markers associated with the middle class, such as the American Dream. Yet reality presents a stark contrast. America’s middle class could not be further from the quintessential American Dream. Today’s middle class is characterized by lack of financial security and job stability as well as a narrowing path to upward mobility. Despite such a reality, student loan debt forgiveness programs prove to serve as a pathway to rectifying the challenges currently facing America’s middle class. 

The middle class is rapidly shrinking, thereby exacerbating income inequality between upper-income and middle-income households. Per the Pew Research Center, there have been fewer middle-income Americans at the end of the decade than there were at the start since 1971 onwards. In 2016, the median middle income was roughly equivalent to what it was in 2000 – approximately $78,000 – while the median upper income was upwards of $187,000, despite effects of the most recent recession. Overall, the rise of income inequality creates an adverse environment for economic growth. Declines in income of middle-income families has reduced overall consumption, decreased investment in education, and increased household debt. In America, “if you cannot afford a home in a respectable school district, a pet, summer vacations and so on, you have not ‘made it,’” writes Matthew Desmond, a professor of sociology at Princeton University. Likewise, in their 2000 book, The Fragile Middle Class, Teresa Sullivan, Elizabeth Warren, and Jay Lawrence Westbrook write how “the middle-class way of life can be maintained for quite a while with smoke and mirrors – and many credit cards.” For much of history, the American middle class has been presented as attainable and coupled with images of picturesque nuclear families who enjoy comfort and stability. However, evidence has debunked this notion, and hard work doesn’t necessarily correlate with debt-free, financially secure livelihoods. 

Saving America’s shrinking middle class will require government assistance. Most Americans believe that the government needs to do more. As Martin Gilens, a political scientist, states, “The American public consistently expresses a desire for more government effort and higher levels of spending for almost every aspect of the welfare state.” Researchers Carmel Martin, Andy Green, and Brendan Duke from the Center for American Progress argue that the middle class can be saved by increasing union strength, increasing public infrastructure spending (which could create jobs and improve productivity), and opening up profit-sharing arrangements to a broad array of workers. 

While such initiatives would certainly be productive, their impact would pale in comparison to student loan debt forgiveness programs. Student loan debt forgiveness serves as the key area where the US government can create significant transformation toward rebuilding the strength of the middle class. The pathway to the middle class is clear cut: receive a college degree, get a job, and buy a house in the suburbs. The intent is for college to act as a doorway toward financial mobility. Middle-class parents feel obligated to send their children to college, but middle-class wages cannot keep up with the increasing costs of higher education. Over the course of the past 20 years, the average in-state cost of public universities in the United States has increased by 212 percent, the average out-of-state cost of public universities has increased by 165 percent, and the average cost of private universities has increased by 144 percent. Consequently, high costs of education propel students into mazes of financial policies and programs run by the government, financial firms, and universities. Student loan programs and financial packages from universities can often be difficult to navigate. As students graduate in debt, they go on to save less for retirement, struggle to afford homes, and often report feeling less satisfied with their careers. Student loans end up compromising the middle-class aspirations they should be supporting. Moreover, student loans have nearly prevented access to the middle class altogether. 

Wholesale student loan cancellation programs provide the country with an opportunity to begin the process of restoring access, solidity, and racial equity to the middle class. During the postwar period, the white middle class grew through attendance at well-funded public institutions and federally-backed loans helping to cover the still relatively low tuition. Over the past 30 years, an increasing number of Black, Latino, and Indigenous students have attempted to join the same student-loan facilitated path to the middle class. At the same time, the government has stopped maintaining the student-loan facilitated path necessary to not only keep a stable middle class, but to also close the racial wealth gap. 

History is a strong indicator that federally-backed programs are efficient in moving Americans up into the middle class. One example of this is the GI Bill. Following World War Two, the federal government created the GI Bill as a way to pay for veterans to attend college and vocational schools. Returning soldiers were able to pursue a higher education without the weight of student loans. Not only did such a program launch veterans into the middle class, but it also improved American democracy as a whole. For example, beneficiaries joined community organizations and committed themselves to politics at multiple levels. A strong democracy including social solidarity and trust in the US government is necessary for the health of federal programs. All in all, if we are to save America’s middle class from shrinking, if we are to close the gaps in racial and class equity, and if we are to transform the notion of the American Dream, student loan forgiveness programs must be included in the government’s welfare initiatives. 

Image via Flickr (GotCredit)