You can read the op-ed version of this essay in The Progressive
The Student Debt Jubilee
In the year 2400 B.C. King Enmetena of Lagash announced a jubilee, dissolving all previous debt arrangements within his city-state. The Sumerian word ama-gi was inscribed to document the event, which colloquially meant ‘freedom’, but translated literally to “return to mother”. This direct translation makes sense in context: the people of Lagash, like many ancient Sumerian city-states, were plagued by extreme debt, oftentimes requiring families to offer their children to their creditors as a form of debt peonage. Thus the jubilee, through wiping the obligations of all, brought both reunification of families as well as freedom from subjugation.
These instances of universal redemption became quite common during this epoch, manifesting heavily in Judaism as is referenced in the Book of Leviticus. The Old Testament attests that every seven years the Jubilee shall occur, a time in which all debts will be forgiven, and those held in peonage freed. This practice, first imagined by the governments of the time, was seen as necessary due to the immense strain and societal devastation brought upon through usury. Rulers understood that the cost of having a populace of debilitated debtors was more morally precarious than the potentiality that these borrowers might be freed of obligation.
This practice extended beyond Mesopotamia, with iterations in both Greek and Roman life, whenever it appeared that the fundamentals of social life might collapse. Today, the United States is no stranger to the jubilee either; when it seemed as if the fate of global capitalism itself was collapsing, taking down many beloved institutions (and individuals) in its fall, the Obama Administration coughed up $498 billion dollars of taxpayer money to save hundreds of banks deemed, as we all know, ‘too big to fail’.
Who, then, must repay their debts? If it is just basic moral logic that one must always repay their debts, then why is the history of societies, both old and new, riddled with jubilee events deemed morally responsible by leaders or religions? The late David Graeber explored this idea in great detail in his book Debt: The First 5,000 Years, noting that modern debt relationships seldom arise between individuals who are able to enter ‘freely’ into them the way many neoliberal thinkers have comfortably assumed. Graeber takes this logic one step further in maintaining that debt functions not only as a necessity for individuals to survive in capitalist nations, but as a necessity for the nations to function themselves; such is the essence of capitalism’s dependency on infinite growth. Perhaps either example allows us to attain a clearer picture of the reasons jubilee events are so often necessary in those societies simultaneously plagued by and fully reliant on credit.
Have we met our moment? In other words, is it time to fundamentally rethink the moral logic of something as prodigious as student debt? And it certainly is prodigious: student debt follows mortgage debt as the second largest debt bloc in the United States, sitting at a staggering $1.67 trillion spread among some 45 million borrowers, with $1.54 trillion of these dollars (or 92%) owed to the federal government. The government, by the Congressional Budget Office’s account, turns billion dollar profits each year off of these debtors; a whopping $135 billion between 2005-2015, to be exact. One might question the considerations of a government that profits off of students attaining an education that some 65% of jobs require, especially given the additional social benefit of having an educated citizenry. In other words, it is a bit jarring to see the state enter into credit arrangements with subjects who have little to no choice in the aggregate.
Or is the government turning a profit at all? Detractors would be quick to tell you that according to the best-practice private sector standard of assessing loan profits, the fair-value method, the US government actually loses money most years through student lending, having suffered an $88 billion dollar loss in the aforementioned decade. Why the vast discrepancy in accounting? Well, it’s quite complicated, but essentially the fair-value theorists argue that the CBO’s numbers don’t accurately reflect the nature of the macro-economy in general; recessions, pandemics, changes in technology, and so on, may have a large impact on employment and therefore defaults among debtors. Historically there have been high rates of defaults among students, with most taking longer than 10 years to repay their loans, and the vast majority of them halting their payments completely due to the COVID-19 pandemic. This riskiness is exactly why federal interest rates on student loans sit at 4.5%-7.5%, notably higher than the average for a 30-year fixed mortgage (3.77%), a 60-month car loan (4.46%), or- most importantly- the current 10-Year Treasury Lending Rate of 1.1% (i.e. the government theoretically profits off of this difference between this borrowing rate and their lending rate). According to fair-value advocates, the true market-equilibrium student loan interest rate should sit somewhere between 12%-18% given the risks involved. Basically, students are a poor investment.
And for what? Well, if most jobs require at least some college, ostensibly most high schoolers will need to go to college. If many students are unable to pay back these loans because of poor wages, then interest rates will rise, sending the whole entanglement in a downward spiral as the typical market forces are unable to account for the steady demand for educated, albeit underpaid, labor.The stagnation of wages ever-present in our quagmire, born out of decades of corporate-backed neoliberal policy making, paired with the exponentially rising costs of attaining a degree, has created a situation where it is risky for a generation to seek the education they need to survive in a 21st century economy. But risky for whom, exactly? The debt obligation seems to only fall tangibly on the student borrowers. Whether you use either accounting mechanism, the graduates are already losing, and stand to lose more.
So what do we make of the government in this situation? Corrupt profiteer making unspeakable revenue off of the backs of suffering students who are only trying to survive, all the while contributing incalculable value to society via their edification? Or a supportive victim of their debtors, offering below-market interest rates despite taking massive losses to help people access the education they need? The former position seems to more adequately fit the narrative. After all, what reason do we have to believe that, as it stands, the government doesn’t at least intend to collect every last dollar owed to them? Consider that, since 2001,the state has collected over $1.1 billion dollars from cuts in the social security pensions of elderly student loan defaulters. Further, the debt incurred by the government from students who can’t make their payments is by and large a reflection of their own failed policy initiatives (or lack thereof), both inflating the cost of public higher education and failing to provide conditions for a decent standard of living via an adequate minimum wage, universal healthcare (Americans spend $3.5 trillion on medical care annually), and various other social programs. To put it another way, if the US actually wanted to create an environment where they could lend money to their future workforce at the rate they borrow it from the Treasury, they would do their best to guarantee a sufficient standard of living for all Americans, and prosecute those who spend their time thinking up complex financial instruments that threaten to destroy the livelihoods of tens of millions of other Americans. Without this, their theoretical debt is a hollow cry, with convenient amnesia for the fact that they possess all of the other powers of the state.
But they don’t enact such policies, among other reasons, because there are minor real-world consequences for government lenders whose borrowers are unable to scrape by. Thus, it matters little whether or not your accounting system proposes the federal government is making or losing billions of dollars year to year off of the back of student debtors. The problem lies in the widespread inability to pay debts despite attaining a degree deemed necessary. The US government doesn’t bear the brunt of a missed payment, or the stress involved with the necessary lifestyle choices to make these payments; the state, after all, is the administrator of the jubilee. An $88 billion dollar loss over 10 years means little to a government that can borrow with ease from their own Treasury (at 3% less interest than they lend with), or from their creditors and tributaries in foreign lands high and far who have laid their faith in the hegemony of US military power, or from their taxpayers of which the college-educated constituents contribute some $381,000 more in taxes than they receive in benefits over their lifetimes. Their padding is a bit more forgiving than that of the college graduate.
In essence, the government may as well have already granted themselves the jubilee. Whether they have made billions off of the needs (and in my opinion, rights) of US citizens, or lost billions, they are well cushioned by an infrastructure that all but ensures they will get their money’s worth- and then some- eventually. The student-loan debtor cannot say the same. It is time for a jubilee of student loans, a total debt forgiveness, accompanied by debt-free tuition to public universities. We do not owe the government tribute for seeking the means for survival in modern society. In fact, we are owed the opportunity to seek these means, especially in an environment where so little is otherwise guaranteed for us at the forefront. Like the Sumerians, we will come to realize that the pillars of a functioning society demand it; after all, what else do you call a group of people so indispensable that the government hounds them for what little money they may have for decades of their life, if not, ‘too big to fail’?