It wasn’t always like this

Until the 1990s, student debt was such a small percentage of consumer debt that it wasn’t even really tracked by the federal government. And in the first year, the government spent $24 billion on federal student loans, compared to more than $100 billion a year from 2009 to 2013, those years considered the peak of student loans.

In 1965, the federal government created grants designed to make college free for working-class families and easily affordable for the middle class. Now called the Pell Grant, in the 1970s the program covered the majority of college fees for low-income students, with state grants usually covering the rest. The problem – we quickly moved to a student loan-funded system once black and Latino students began enrolling in higher education in the late 1970s and 1980s.

Now, in 2022, Pell grants cover less than 33% of the cost of college attendance, and state investments in higher education have fallen from 39% to 19%. The 60% of black students and nearly 50% of Latino students eligible for Pell grants must now cover the cost of college through student loans.

Paradoxically, this situation, intended to help low-income students afford college, means that students of color pay more for higher education than their white classmates. Their level of financial need has forced them to rely more on student loans, so they not only have to pay the cost of attendance, but also the interest for years after graduation.

Worse still, historically excluded students are often relegated to the least funded institutions due to discriminatory admissions practices and lack of affordability, giving them fewer opportunities for support to stay in school and ultimately get their degree. As a result, students of color incur heavy debts but do not complete the degree which seems to be the route to mobility.

This racial disparity is compounded when for-profit colleges enter the equation. For-profit educational institutions are often the most expensive and least successful institutions of higher education. But they are convenient because they target communities of color. Students who live in a predominantly Latino ZIP code are 70% more likely to have a for-profit institution near them than students in a predominantly White ZIP code. If it’s a predominantly black ZIP code, for-profit businesses are 110% more likely to be nearby.

Once graduate students come out with a degree, their financial power remains crippled by debt. Households in debt from student loans have almost no ability to build wealth, as graduate wages stagnate and household student debt balances increase rather than decrease over time. According to a 2021 report by André Perry, Ph.D., 51% of student borrowers had no wealth. And 52% of black households with student loans have zero or negative wealth – although only 25% of black households without student debt are in this precarious financial situation.

Too often, students who have been forced into college for upward mobility and who have taken out loans to pay find themselves unable to make the payments. When this happens, the federal government pays private law firms, debt collection agencies, and loan servicers to try to collect the money. These industries all engage in predatory, and sometimes illegal, practices to rack up profits from the people the government claims to be trying to help.

A new way to spend

One of the most expensive free college offers for undergraduate education pays not only tuition, but also fees, books, and living expenses. It only totals $95 billion a year. In contrast, Biden’s proposed property tax cut (SALT cap) costs $95 billion per year, and the 2017 Trump tax cut costs $180 billion per year. In the past two years alone, the Paycheck Protection Program has cost more than $800 billion. That’s well over $1 trillion in proposed or enacted federal spending policies that all go disproportionately to wealthy households and businesses.

For low-income students, we only provide $26 billion a year in Pell grants, and for the majority of new students, we load them with $84 billion in student loans a year. For the rich, we are ready to spend trillions; for poor and working-class people who want an education, we condemn them to lifelong debt.

Money for free college is available. The federal government spends it every year to provide tax cuts and forgivable loans to wealthy households and businesses. Instead, there is an opportunity to prioritize ordinary people and communities of color who will benefit from free college. This benefit is why so many advocates argue that higher education should be a public good, especially one that is economically and racially inclusive.

Jalil Mustaffa Bishop is an assistant professor at Villanova University, co-founder of the Equity Research Cooperative, a nonprofit organization focused on radically transforming research, grantmaking, and dreams of freedom, and directs the National Black Student Debt Project.