As tuition has risen over the last several decades in the U.S., student loan debt has ballooned. Despite growing debt loads, federal policy encourages the use of loans for financing higher education, based on the assumption that student debt supports increased postsecondary attainment—and, in turn, improved outcomes for individuals and our economy as a whole. In The Student Debt Crisis, Labor Market Credentialization, and Racial Inequality, Roosevelt Fellow Julie Margetta Morgan and Research Director and Fellow Marshall Steinbaum investigate the individual and societal effects of student loan debt by focusing on trends in student debt and labor market outcomes. Findings include:
- More education has not led to higher earnings over time.
- Student debt is a burden for a growing share of young adults.
- Credentialization better explains these dynamics than the “skills gap.”
- These trends have had particularly negative impacts on Black and brown Americans.
Ultimately, the paper challenges the dominant literature and conventional wisdom that drive the pursuit of higher education, concluding that student debt exacerbates income inequality and threatens the broader economy’s stability. It is crucial to understand these dynamics of student debt, labor markets, and race, as well as how they interact and intersect, in order to inform better public policy that lifts students up, rather than maintain a system that holds them back.
With the Higher Education Act overdue for reauthorization, it is inevitable that policymakers will be rewriting federal higher education policy in the next few years. But new policies based on the same flawed assumptions about the individual and economic benefits of debt-financed education will only continue to fuel credentialization, deepen our country’s student debt crisis, and exacerbate racial and economic inequality.