The Life-Altering Differences Between White and Black Debt

[MUSIC PLAYING]

I’m Ezra Klein, and this is “The Ezra Klein Show.”

Hey, it’s Ezra. While I’m on paternity leave, we are turning the show over to an all-star team of guest hosts. This week, Tressie McMillan Cottom takes the helm. Tressie is a research professor at U.N.C. Chapel Hill’s I- School. She’s a contributing writer to New York Times Opinion. She’s got a great newsletter you should sign up for. She’s author of the National Book Award finalist, “Thick and Other Essays.” And she’s just one of the most interesting, fun to talk to people I’ve ever had on the show. So I’m very excited to hear what she does with the mic. Enjoy.

[MUSIC PLAYING]

Student loan debt today is truly at crisis levels. Some 43 million Americans hold $1.7 trillion in debt. That’s trillion with a T. And that debt is often truly devastating for the people who hold it. But here’s the good news. The federal government owns the vast majority of student loan debt.

That means, according to some activists and legal scholars, that President Joe Biden could forgive most of it with the stroke of a pen. The Departments of Education and Justice are currently investigating that possibility. And with the pandemic freeze on student loan repayments coming to an end in January, chances are excellent it will be a priority for the administration.

I’ve spent my academic career studying and writing about higher education, and there is no one whose work on student loan debt and higher education policy I follow more closely than Louise Seamster. Louise is a sociologist at the University of Iowa, whose work focuses on the intersection of debt, education, and inequality.

And I’m not the only one following Louise’s work. Democratic Senator Elizabeth Warren’s $50,000 student loan forgiveness plan was based in part on Seamster’s research. We begin this conversation with the ongoing debate over student loan forgiveness. What is it like to actually live with crushing levels of debt? Is cancellation actually regressive, as much of the common wisdom holds? Isn’t there a better way to finance higher education?

But Louise has also done some really cutting edge work on the processes of debt and wealth creation and the radically different ways in which Black and white families experience them. So this conversation is also about what it means to think in terms of wealth and what a starkly different picture that makes of the economy, society and public policy. I learned so much from Louise in this conversation. And it was a pleasure to get to talk to her on the show.

[MUSIC PLAYING]

Welcome to the show, Louise Seamster. Hi, Louise.

Hi, thanks for having me.

So let’s start here. When we talk about the student loan debt crisis in America, what are we talking about, Louise? Can you give me a high level overview of the current situation around student loan indebtedness, the possibilities of forgiveness, how we talk about it and think about it, the current landscape as you understand it? Really high level is fine here.

OK, it’s funny because every time I write a draft of any paper, I have to go check where is student loan debt at right now and then update my number. So right now, we’re at $1.8 trillion in student debt overall, the great majority of which is federal student loans, so held by the government directly. And one problem is that we’ve been describing it as a crisis for so long, we don’t really have a way to convey that it’s getting worse. So the great majority of that was incurred just in the last 20 years and even just in the last 10.

And so, the longer we sit around talking about this crisis, it’s not just waiting for us to figure it out. And I think to some degree, even though the $1.8 trillion number is really important, it’s capturing a moment in time. It’s not capturing the burden of debt over people’s lives. We actually don’t really have the numbers we need to capture the burden of debt over people’s lives. So what we’re running into is kind of this big disconnect between policymakers and how they’re used to talking about this problem.

The fact that they’re used to talking about this problem when it was a very different shape and scope, and then we’re still applying those same frames to the present day, and then we have how people with student debt are experiencing it, which, by now, until recently, was 45 million Americans had student debt. So that adds up to a whole lot of families, at this point, many of them multigenerational.

Yeah, let’s talk a little bit about that very quickly. I’d like to give one data point that lives with me. That is that between 2000 and 2018, the median student debt for white borrowers nearly doubled from $12,000 to $23,000. For Black borrowers, that number quadrupled, increasing from about $7,000 to $30,000.

You talked about the experience of the student loan debt. Let’s talk about that a little bit. What does it feel like to be carrying $23,000 if you are a white student debt borrower or $30,000 if you are a Black borrower? What do you hear from the experiences of students about what that student loan debt feels like to them?

Yeah, I think teaching it to public institutions now, I see my students making all of their decisions shaped by the weight of student loans, whether that is taking on up to four jobs while they are taking course overloads, struggling to complete any of that work with any quality, I call it a marathon run at a sprint because they’re just trying to outrace this monster of student loans coming up behind them and trying to finish in time.

It is not just, I have taken out this much, and it feels that amount bad. It’s that I feel the weight of this decision and the pressure to make this pay off, and that it needs to be worth it. And so everything they do needs to be worth it. You’ve talked about the consumer model of higher education. And it permeates every part of my classroom, no matter how hard I try. So students are living at home or living far away, where they can afford to live. They’re traveling long distances for their work and for school. They are spending a lot of their time just parking.

Yeah, circling the campus. Right.

That’s what they’re doing, instead of hanging out. They’re not talking to people. They’re not meeting people. And then they are taking on — the minimum lately is five classes, and then they’ll take on six or even more courses on top.

I have students taking seven courses sometimes a semester, so that’s what we mean by this overload. There’s also this acceleration of the college experience. So in my experience, Louise, I’ve got students for whom the debt feels like a clock, right?

Yeah.

They’re racing against this clock in the back of their mind. And everything is telling them to get it done as quickly as they possibly can, the idea being the less time you spend in college, the less debt you’re taking on. And what that looks like today is as the students sort of fit in another minor, another major, another concentration, another certificate — I’ve got students doing multiple certificates and programs, all to protect themselves from the payoff of that eventual debt, right? Yeah.

Yes, and it’s really shifted what it feels like to be an instructor or a student because, like you said, they’re racing the clock. They’re trying to graduate on time or early. And yet, all of these factors make it much less likely that they will graduate on time or even at all.

Right, or certainly well, to graduate well.

Yes. Oh, my gosh.

So we both changed the bottom of the distribution of the college experience, but we’ve also flattened what success looks like. Now the debt, of course, follows you after you graduate or whether you stop out, drop out, or graduate. You still have the student loan debt. Students cannot discharge the debt in bankruptcy. They have no leverage for renegotiating the terms of the student loan debt. So when we say this follows you, we mean this follows you. What does it look like after our students graduate?

We’ve got conversations about whether or not students, once they graduate — so no longer students now, so college graduates, people carrying the student loan debt — delaying home ownership, delaying the start of families, choosing a career or a workplace, based on their ability to repay or to enter into different types of repayment programs. What do we know about how student loan debt affects the way that every debt holder then approaches the major decisions of their life?

I think it’s important to start that conversation by noting that 40 percent of people carrying student debt did not graduate from college. So we shouldn’t imagine that this population is all college graduates. Plenty of people, close to half, are contending with this without any bump in their earnings that is supposed to be the whole benefit. And, you know, it’s kind of hard to even summarize the effect over people’s lives, but the scope of individual levels of student debt — and this is for most people. It’s worse for sure for Black households, but it is difficult for most people to repay their debt.

And it is shaping people’s life decisions, even when it is possible to repay that debt. As you’re saying, it’s shaping when people think they can beat their what we call life course moments, like getting married or having kids, or do it at all. I was just talking with folks last week who were talking about how young people now expect to be in debt. And they can’t really conceive of life outside of it, but they’re less likely to be imagining having kids. So this is like becoming the one life course beat you can actually hit.

And we can talk about this later, but I think it’s partly why I used to be surprised that some of the students I talked to are confused by my push for student debt cancellation. I thought they would 100 percent be on board, but sometimes they look at me, and they say things like, well, would my college degree be worth the same amount? Or they say, I should have to work and suffer, basically, to pay for college. And my co-author, Raph Charron-Chénier, has been writing about how debt is how we are conveying citizenship status these days. It’s not through taxes so much anymore. It’s by taking on debt that you’re conveying you’re being a good citizen.

Right, you’re participating in the body politic by being indebted. That’s profound to me. That is very different than a participation based on the divinity of human rights argument. Yeah, this is a fundamental question about what it means to exist before the state and to be a citizen, instead of it just being, I’m a citizen by virtue of being present and participating. And because of my relationship with the state, I deserve certain rights. Now it’s, I earn those rights through taking on the debt of participating in public life. That’s fascinating to me.

It’s a big shift, and it’s really more conceptual because we could just call it taxes, if you feel like you need to pay a debt to society for having this social good. We could make higher education free, and then view our tax afterwards on your earnings and pay it forward. But to call it a debt is creating a completely different structure and a completely different relationship between you and the state, one in which the state does not owe you anything, but you owe the state.

And if you mess up, you get in trouble more and more and get deeper and deeper into this net that tightens around you. And I think that’s something else I want to talk about, when we talk about the lifelong burden of debt, is that we talk about how, for instance, a quarter of people have defaulted on their loans 12 years out, but half of Black borrowers. I think a lot of people hear default, and they think of foreclosure.

But even once you default, you cannot leave this debt behind. It just all comes due immediately. You lose eligibility for some of the programs that can mitigate the impact of that debt on you, so it gets harder for you to repay. So you’re just getting punished. And they’re still collecting any which way they can, whether that’s garnishing your wages or your tax benefits or your social welfare benefits or even your Social Security. So this is really designed to be kind of this lifelong debt trap, or if not designed as such, it is functioning as such. And as a sociologist, I need to pay a lot of attention to how it is functioning and not just what it was intended to do.

So then when we talk about student loan debt cancellation, it’s the public policy mechanism that it seems to be most readily available to us to get at these really complex social functions. So let’s talk about cancellation a little bit. Listen, it’s become increasingly clear that Congress probably isn’t going to act on the issue. [LAUGHS] I think we’re understating it. Congress hates this issue. I don’t think regular citizens know how much Congress hates the issue of student loan debt.

As someone who’s been in many of those rooms, as you have, over the years, they are very resistant to the idea of talking about higher education. They would really rather not. And the student loan debt cancellation conversation has become a bit of a congressional albatross, I think. There’s nothing on student loan debt forgiveness in the current reconciliation package, for example.

And this from what we have hoped would be one of the more progressive administrations in recent memory, but in recent years and months, some activists and legal scholars have argued that Joe Biden could unilaterally cancel the vast majority of student loan debt through executive action. The administration has currently asked its own departments of education and justice to figure out whether that’s the case. We could talk about whether or not they’re really trying to figure that out.

So can you walk me through this argument? When activists say, student loan debt activists in particular say, this is an executive action issue, what do they mean when they say the president could cancel student loan debt through executive authority?

So a Yale law student, Luke Herrine, wrote up a memo, I believe back in 2019, having researched executive authority, and found that, because a ‘90s era revision to the student loan structure changed the way this money was allocated in the first place, that it gave total power to the executive office to change the terms of or waive any debts incurred through the federal government. And since this Obama era shift from the government backing student loans that were issued by private agencies, or semi-private, sometimes, to direct loans where the federal government is itself issuing the loans and because most loans have been issued in the last 10 years —

That means most of them are owned by the federal government, right?

Yeah, this is my understanding, that that is then the basis on which the executive branch of the government could just renegotiate it. Also, folks who have been advocating for this have pointed out that it’s not just an abstract possibility, but that this power has been invoked multiple times. You probably know more about this than I do, in terms of canceling debt incurred through predatory for-profit colleges that were found to be fraudulent.

And so it’s the exact same authority, and it’s a matter of choice to say, OK, these for-profits were outright frauds. You’ve got nothing for your money. Your debt’s forgiven. The executive office is picking and choosing who gets the debt canceled. So this is just saying that actually applies to everybody. We need more accounting for the outcomes and not just assuming that college pays off for everybody, especially if you didn’t graduate, but also if you’ve been holding debt for 20 plus years.

As we now know, over 4 million people have been, that there’s a lot of different ways to measure the burden of debt and to reassess whether it’s worth it for people to keep holding it or whether they have paid their debt in a way that’s meaningful to us or whether this debt was even justified in the first place when we could think about it as in comparison to publicly financing higher education in the first place. Some people have described cancellation as more of a retroactive financing of higher ed by the government. And I like thinking of it that way.

There’s not that many times where we, as a collective, go back and say not only we did this wrong, and we’re sorry, but we actually have the power to fix it and do a restorative harm reduction. And that is how I envision cancellation. But I do think that the fact that the Department of Education has been so quiet after they were supposed to take a couple of weeks to look into this question, I’m very curious to know what’s going on in that office or whether it’s sitting on a desk or whether it’s finished, and they don’t like the answer they came up with, but —

Yeah, I suspect they may not like the answer they came up with. I have also read the legal memo, which, listen, legal memos are the way that you exert pressure on policy implementation. So it was an extremely smart move by student loan debt activists to settle the question of where is the power in this structure to do the policy.

What the memo argues is, there’s no question about with whom the buck stops, we might say. That the buck stops with President Joe Biden, who could, through executive action, use something we call the settlement and compromise provision that says that the president can renegotiate the terms of federally owned student loan debt up to $1 million per individual student debt holder, which is effectively everybody in the federal student loan program. And to your point that we have used that power before, when institutions like for-profit colleges have been found to be predatory and negligent.

So the question is, what is the difference between earning that debt at Strayer or the University of Phoenix, as opposed to the Ohio State University or your local college — not to pick on Ohio State. I have no idea why that’s the one that popped out of my mouth. My apologies to the Ohio State. I’m definitely going to hear about that. But you make this excellent point that instead of thinking about more rewards and punishment, let’s think about who we owe.

So this is a really important part where you talk about restoration, which is that the problem of student loan indebtedness was created through public policy oversight and arguably a set of decisions made about how the program would work. Basically, we created this problem. We created the student loan debt. We, the public, own the debt. And we created some pretty nasty terms for the debt, right? So what would restoration look like for you? And what’s the way for us to think about the debt differently?

I really want to think about debt cancellation in the context of rethinking of what higher education is for, how it is paid for, and why we care about it. I’ve been approached several times with this gotcha look on people’s faces when they say, but if we canceled student debt this one time, what would happen next year? And I’m like, for me, this pushes open a really important debate we can’t keep kicking down the road about how we’re paying for higher education. Of course, I don’t think we should just start the clock again on accrual of student debt.

This should be an acknowledgment that we did this wrong, and we did this in a way intentionally designed to discipline and punish people into debt structure. My friend Danielle Purifoy said that we know that we don’t value higher education in this country because we make you pay for it. If it were free, that would be a sign that we valued it. And plenty of other countries still have free or practically free higher education funded at the level of the institution the way we do for K-12 schools and think that’s very normal, to have public schools be free and you attend or do not, that we could do this with colleges.

And so that is a rethinking of our relationship to education itself as a social good, where it’s not simply benefiting you in terms of this cash difference across your lifetime of earnings that you do or don’t get, but that it benefits everybody to have a more educated populace, to have people understand things, to have people able to, for instance, pursue vocations of being a public school K-12 teacher without having $100,000 in debt at the end of it and a $40,000 salary.

The advice currently for getting out of student debt is, oh, you should have made better choices and become an engineer. And in five years, it’ll be something else. But that’s individually adaptive and societally stupid, because we need teachers. We can’t just have everybody be an engineer. And yet that’s the serious advice in many areas of this conversation. It’s just like people need to make better choices. And yet we’re making stupid choices, and we’re paying — the forgone debt balance that would be canceled is being eaten up in so many other costs to us in having this be the current system.

Mm-hmm, so what are those costs, Louise?

You said it’s hard to graduate successfully or to graduate well. I feel like this system, it’s hard to live well in. This has become our singular mechanism for people to achieve any type of financial stability or mobility. And I don’t think even mobility is within reach for most people. They’re just hoping for stability. And in doing so, by putting everything on this one spot on the roulette table, we have neglected everything else and also done a bad job with this policy.

And so I think this is kind of one of those lynchpins that allows us to disinvest in the idea of who we owe what, here in society. And I think that’s also why so many people don’t want to touch it, is they know that this opens up the conversation about, well, what else would we have to fix if we acknowledged this wasn’t working?

That’s a really great point. So that if we remediate student loan indebtedness, that this would reopen a conversation that, what, 40 years of disinvestment in the social safety net has made normal and natural. Because one of the arguments that you have made, that I make, that many others make who think about the social function of student loan debt and how we finance higher education in this country talk about, is that this is part of an overarching movement of disinvestment in public goods and in the idea of citizenship and, frankly, society, right?

So this is like how you ended up with a 401(k) instead of a pension. This is like instead of getting secured low interest debts from the Federal Housing Administration, you now go out into the private mortgage market, right? So it’s this shift over and over again of who is responsible for a good quality of life. When we talk about student loan debt cancellation, that’s also how we frame it. We frame it in these terms, that, well, we could cancel the student loan debt if it would provide an economic stimulus. If you’re going to trade your student loan debt for a mortgage, then maybe, maybe we should think about it, right?

But what I hear from you is that another way to think about cancellation is that it is, one, a policy correction for a policy moral hazard. This was our bad. We did this. But also, that we would be opening up a conversation about these moral hazards in all of these other areas of life.

When you talk about that in your work, you talk about, well, one way to think about that is not just that it’s going to give people more income if we canceled the debt, but it’ll start to solve some larger problems created by wealth inequality. So talk about what happens if we think about instead of income, we think about how wealth created the student loan debt problem and why that’s the response to how student loan debt cancellation is not a good stimulus.

So I actually got into looking at student debt because I was trying to understand how half of Black wealth could have been lost in five years over the Great Recession. I was finishing up my Ph.D., and I just kept seeing that statistic and screaming, why aren’t people trying to explain this? It can’t all be just the loss of the assets through foreclosure crisis. And then I remembered that I had been trained to answer questions like that. And I needed to try and do it myself.

That was your job.

Yeah. So I had this feeling of, we look at the racial wealth gap in which white households at the median have $10 in wealth for every $1 in wealth that a Black household has. We kind of expect that to change slowly, even though it’s actually not changing. So we have this expectation that it might be slowly getting better. It might take a long time to close the gap, but that these things are kind of residual from the history of racial discrimination.

Right, right, and at some point, we’ll work our way out of the wealth gap.

Yeah, we’re on this track. It will magically take us to equality just with time passing. But debt can change your situation quickly. Wealth accrues more slowly. But you can take on debt that can lower your net worth, which is your wealth minus your debts, very swiftly. And what we found was not only did Black families disproportionately lose their homes and their equity within the Great Recession, but also, this was the start of them taking on large amounts of debt to compensate for the very high, at one point, I think 18 percent, unemployment rate among Black Americans during the recession.

And so we saw Black families of multiple generations pushed into higher education to try and create more credentials and more credentials to compensate for this labor market discrimination. And yet, income hardly recovered to its pre-recession point. And that is all by way of setting up the picture for where we are now by which this wealth gap means that even if you take on the same amount of debt, say you have $20,000 in debt, if you are a white 25-year-old and you’re the median white 25-year-old, your family has over $100,000 in wealth that you can cash in, in so many ways.

You are using that debt to leverage more wealth, but you have wealth behind you to make that happen. You can’t start from 0 and go into $20,000 in debt and have the same results. And this is not acknowledged, because it is an uncomfortable fact that you cannot simply financial literacy your way into a way to make $20,000 in debt into magical wealth. It’s not magic beans. It turns out that the way this worked, and the way this has been working for people in prior generations when people who were going to college were more white and more male and more wealthy, that that is partly why college paid off.

Just to enumerate some of the ways that this wealth matters in repaying your debt: your family can give you a down payment. So you can still buy a house and lower your cost of housing so that you can focus on your student loans. Maybe your parents even have an extra house for you to live in for free so you can focus on paying off your loans. You’re more likely to be inheriting money or have transfers from older generations if you are white, even if they haven’t died.

So, gifts, buying you a car, keeping you on your phone plan, all of these things are much more likely for white young people, whereas Black and Latinx young people are much more likely to be paying money up the generation. So they’re helping support their parents and grandparents and other family members. So that is because of the differences in intergenerational wealth.

And so, it’s not just that you’re starting out negative $20,000 in the hole if you’re a Black borrower, but you are now the person who made it. You got the college degree. You might have a salary that equals the white borrower. But it is going in a very different set of directions than the white borrower who is still in a form of dependency, economically speaking, on their family.

This is something that I really could talk about all day, and it’s going to be really hard not to. So, because you hit on something about the emotions of that. Listen, I’m one of these people. I send money out to cousins, aunts. I don’t have any children, but I pay childcare costs. I’m paying for my niece to get her music lessons and/or horseback riding lessons. Yeah, don’t cry for me, Argentina, but I send money up and down the chain. I subsidize my parent’s healthcare costs as they get older.

So what I look like on paper income wise is very different when you start talking about wealth and where we draw sort of the meaning of those income differences. I want to talk about that a little bit. Because one of the reasons why it’s so difficult, I think, to talk to that median white household family member, student loan debt holder is because everything you just talked about, about wealth doesn’t feel like wealth to the people who are experiencing it, right?

Yes, yeah.

Because when we talk about wealth, we talk about the show “Billions,” right? And we’re talking about we want to talk about wealth in terms of a B or even an M, right? Big amounts of money, massive inheritance, sudden influxes of cash. What you were talking about, though, is the wealth of moderate middle class white families, that it isn’t that they hand you a half million dollars, it’s the $10,000. We’re talking about relatively small amounts of cash transfers. But that’s wealth, too, right, is what you’re saying.

Yeah, I think that’s really important and why I can feel like we’re talking past each other, or why I think a lot of white folks feel uncomfortable when I talk about white debt as being advantageous. And by that, I mean things like a prime mortgage, where you get low interest rates. And you’re white. You bought into a white neighborhood. Your house is increasing in value. You’re accruing equity. That is debt that will pay off.

I think you’ve hit on something that doesn’t mean people feel wealthy, even though they possess wealth, and that they do associate it with, where’s my Lamborghini then, or why do I feel so stretched? You feel so stretched because of the disinvestment in the social safety net that we were just talking about. Because your health insurance premium is going up 10 percent every year, and you’re looking at the sticker price on college tuition, and your kid’s 12 years old. And all of these things that we agreed we wouldn’t invest in collectively because of fear that “undeserving,” quote unquote, people might get them means you don’t get them either.

And that was a bargain that as people like Heather McGhee have been pointing out lately, that white people have made historically, whether it came to the opportunity for Medicare for All, opening up Social Security, robustly protecting it, public higher education — all of these things were hashed out as debates within a context of white racism, where there was a perception that we don’t want Black folks to have these things. And so, we will give it up for ourselves as well.

And so that is why having white wealth doesn’t make you feel secure, because you’re not economically secure. You’re just better off than a lot of folks who don’t even have what you have. And I think a lot of people confuse their lack of stability with needing more wealth, when we have alternative ways of organizing resources that actually probably cost less ultimately, although I don’t think that’s the primary reason we should care about that, but that they can’t buy into the idea that we could just get something for free.

[MUSIC PLAYING]

So we’ve been talking about resistance to the social safety net more broadly, especially by white Americans. And I want to talk about the resistance to student loan debt forgiveness in particular. Because there are a lot of white student debt holders out there whom student loan debt forgiveness would really help. But there’s obviously resistance to widespread forgiveness.

One of the most common arguments against it is that student loan debt cancellation would be regressive, that the majority of benefits would go to the highest earners. So it’s not a great way to help people who are really in need. I’m wondering what you think about that argument. Is student loan forgiveness regressive?

Well, I do get this question a lot. And this morning, walking here, I was thinking, the student loan system is regressive. It currently benefits wealthy families. It currently costs more, the fewer resources you have, for this same return or less. That is the definition of a regressive system. So the study that was celebrated in the news because it finally seemed to be kind of providing the numbers to back what had, up until that point, been more of a claim, was comparing student debt cancellation to the current system that maybe expanded a little bit, where anybody who was struggling with their payments could be enrolled in our current repayment assistance program, which is supposed to forgive your loans at the end of it.

They have never, to my knowledge, come back and said, oh, we are seeing with this data that nobody is making it through this program 20 to 25 years later and getting their loans forgiven out of it. And “nobody” might sound like an exaggeration, but folks at the National Consumer Law Center inquired at the Department of Education how many people — this program started in ‘94. How many people have come through the other end? 32, 32 people have —

Now you’re not saying 32 percent. You’re saying 32 —

32 people.

— people since we’ve had — and we now have numerous student loan forgiveness programs. In the news, you hear people talk about public student loan forgiveness. But we also have income-based repayment programs, graduated repayment programs. For anybody who’s ever gotten that form when you have a student loan debt, where you’re supposed to check your repayment option, those have multiplied over the years, is what you’re saying.

So you’re talking about you’ve got these buckets of ways where we have argued, listen, if you come out or if you make decisions that might be socially responsible, in the case of public student loan forgiveness, but won’t pay off significantly economically, we’ve got a program for you. Or we say, listen, your income grows over time. That’s just what’s happened historically. We got lots of questions about how predictive that historical data might be. But we say that’s what’s happened historically.

So we’re going to give you a graduated income repayment plan, right? And so you’ve got all of these options. When we look at those programs, at how successful they have been at actually discharging debt for the people who follow the rules, enroll in them, keep all of the paperwork, do all of the things, at the end of it, we’re talking about 32 people for whom that program has worked.

Right, this sounds like getting into the weeds, but it’s really important because if that program is not delivering the main benefit to the people signing up for the program, that is a problem not only for them, but also because the studies saying student debt cancellation is regressive are counting on the counterfactual being this program that doesn’t actually work. The government is calculating the cost of student loan as a system and the cost of cancellation based on this program actually working when it doesn’t actually work.

And so we have this whole narrative about, well, I paid my loans. Why can’t you? And it’s like, people are paying on their loans. They’re just not paying their loans down because they’re throwing their money into a black hole. And if the one big system that we have as a mechanism to kind of make that easier for people — and it takes until you’re deep into middle age to even have a hope of paying off and we’re also finding that people are not making it through all of the administrative hurdles to get through that system — you cannot have it both ways. You can’t say, oh, we don’t have to manage the student loan crisis because we have this other system, and then also not make that system work for the millions of people who are in it.

And yet, that’s what people are trying to do. And that’s why I’m having a hard time now taking more seriously the “student debt cancellation is regressive” argument because it’s founded on this basis of smoke and mirrors, where it is constantly redirecting, and yet they’re not taking account for the fact that their programs, their alternatives, are not actually real.

So, in addition to those failures, you and others have made the point that the problem here is that part of the smoke and mirrors, why it works, the redirection works, is because we focus so narrowly on income as a measure of economic prosperity. What happens to the distributional picture of student loan indebtedness when we look at wealth, instead of income? Is it still regressive when we look at wealth instead of income?

No.

Done. Got it.

No, the answer is no. [LAUGHTER]

So there’s still an income gap between Black and white borrowers. But it’s not very large. We know there is a racial wealth gap that’s much larger than the income gap. What is less known is that education, higher education, which is supposed to be the mechanism by which Black Americans are supposed to try and close that wealth gap on their own, is actually widening the wealth gap. So if the racial wealth gap —

Wait a minute. So going to college — I just want to make sure that we understand this. So if you are a Black American and you go to college as everyone tells you that we all have to do for a, quote unquote, “good life,” and you know the racial wealth gap is out there and we say, well, we’ve got something for that. If you go to college, you make good decisions, you get a good paying job, you can close the racial wealth gap, or at least, your part of it, right? Your family’s part of it, experience of it. What you’re saying is that what we know now from the macro numbers is that going to college actually exacerbates the racial wealth gap.

Unfortunately, yes. So much of this is hard to talk about because it goes against the dogma that people are afraid, like, oh, Black Americans won’t go to college if they hear all these numbers. But I want to talk about it so we could make it better. It doesn’t have to be the way it is. The fact that the great, great majority of Black Americans have to finance their college education with debt, and that they don’t have the wealth behind it to make the debt manageable, means that that 10 to 1 racial wealth gap for the median household expands to 20 to 1 wealth gap for Black and white households who carry student debt.

So this is why every time I talk about this, somebody in the audience says, I am white and I have a lot of debt. And it’s difficult. And I empathize with you. Millions of people are in this position, but we have to also always foreground the impact on Black Americans, because that is a 20 to 1 wealth gap that has expanded the chasm between Black and white families because they assumed college debt.

And, when you’re talking about would student debt cancellation be regressive, what we found in our most recent research is that if you canceled $50,000 of student debt, that would shift that ratio from 20 to 1 to 3 to 1. So that would look more how you would expect the wealth structure to look if higher education paid off.

And Darrick Hamilton and others have argued recently, there’s a report, umbrellas don’t make it rain, that we’ve got the causal order flipped on all this, that we say education leads to wealth. It does not, on its own, lead to wealth. They say it’s more often that wealth leads to education. Wealth leads to homeownership. And it makes sense because wealth is inherited. It’s not, for the most part, built from nothing and starting in adulthood. It’s coming from behind you, not in front of you. And again, this is something we don’t want to talk about because it doesn’t fit our rags to riches orientation.

And I think it’s important to point out, when you take wealth into account, student debt cancellation isn’t just progressive for Black Americans, right? It’s progressive for everyone. There’s a recent paper from the Roosevelt Institute that found that even if you take a relatively conservative estimate of household wealth, and by that, I mean an estimate that excludes household debts like student debt and it just focuses on the assets, even if you take that conservative measure, the entire distributional impact of debt cancellation flips from regressive to progressive, right?

The folks in the bottom half of the wealth distribution received the vast majority of the benefits in that model. And the individuals at the top 10 percent received the least. And the paper also finds that debt cancellation gets more progressive at higher levels. So $10,000 of forgiveness is the one number that Biden says he’s willing to consider. His reasoning is that $10,000 is targeted at those who need forgiveness the most. And that may be true when you are looking at income.

But again, when you look at wealth, this paper finds that $50,000 student debt cancellation grants almost no additional transfer to people in the top 10 percent. But what it would do is offer two to three times as much relief to those in the bottom half of the wealth distribution. So the entire narrative about student debt forgiveness just flips completely when you look at wealth, instead of income. So let me ask the next question this way, Louise. Why is wealth a better metric of economic well-being than income?

So wealth is a more powerful measurement than income because we can still measure it, but it is capturing much more than just your labor power in the market. It is capturing your whole family’s well-being. It is capturing the past, because it shows what your family has been able to accrue, which is dependent, in large part, on whether you were able to get a mortgage at the right time during the 20th century, when most of our programs were oriented towards white Americans. And we built the middle class as a primarily white middle class.

So it shows your access to past resources, and it also shows your access to future resources and your family. So it’s a story both about what was going on with your grandparents and what’s going to happen to your grandkids if you have them, if you don’t have too much debt. And so, income is a measure. We use it often for proxying for class in social science.

But the people who started pointing our attention to wealth showed that that hidden fault line since the civil rights movement of racism, where systemic racism really shows up, is in wealth, in showing that you can go to college. You’re not going to have people explicitly say, I will not hire you. You can theoretically move anywhere you wish. But wealth shows the endurance of systemic racism both from the past and from the present day.

And so, it’s kind of simple in a way because it’s one number you can use to kind of take the temperature of racism in America. And until that wealth gap actually starts to shrink, and it will only do that through active investment, but here, it’s just stopping doing a thing. It’s not a new policy. It’s not a giant wealth transfer. It’s just debt cancellation.

And that universal debt cancellation will still produce a disproportionate effect on benefiting Black Americans because I am increasingly convinced, unless you explicitly design a policy in America for racial equity and then look at the outcomes, you are going to design a policy that will reproduce and exacerbate racial inequality because of the context that it’s happening in. And so that’s why we have to look at these measurements and see not just what do we want it to do or what do we think it could do, but how does higher education fit into the story of a family’s lifetime. And wealth really tells that story better.

You know what I think is powerful? I think it’s powerful to say, I care about what made me, and I care about what’s going to make my grandkids possible. And because of that, I want us to talk about wealth. And I think that’s brilliant.

OK, so one of the things that I’ve heard you talk about that I want to make sure we hit on, Louise, is this idea that, OK, I accept everything about student loan debt forgiveness being progressive, about the racial wealth gap. I believe in it. I can buy this argument. But if we forgive it this time, if we forgive it this time, the student loan debt, people are going to run amok. It sets up the scenario where we will forgive everybody’s bad decisions. It sets up basically a moral hazard.

And some of the worst actors are going to be universities and colleges, who played a part in increasing cost of tuition and cost of attendance for students, particularly in the really risky and high cost for-profit college sector, where this is extremely rampant and very evident. But all colleges and universities have been part of the system of rising tuition costs, right?

Right.

Shifting the cost of attendance to the students and their families. So if we forgive it, are some of the bad actors just going to be incentivized to continue to act badly? How do you respond to that issue if we forgive it all?

Again, I would say, compared to what? So, compared to the present day, universities are incentivized to act badly because they can capture student tuition through debt. So that is enabling all kinds of inequality. And I’m somewhat agnostic on that hypothesis, that all the increase in tuition is attributable to student loans, which is kind of sometimes used as a conservative talking point to say, oh, and therefore we should throw out student loan system, and with it, any chance of financing higher ed at all.

I think that when I try and tease apart the strings that are connecting one party to another in the system, universities play a big role. States also play a big role. So they have something to answer for as well, in that between the federal government, the loan servicers, the states, the public universities, also these private universities or hedge funds masquerading as universities that we have going on, that they all get a piece out of what individual, increasingly low income people of color are paying up the system in this trickle up economics that we have right now.

I think that restructuring financing so that it’s no longer coming from the people at the bottom will be better, and that we would have to have something come alongside it. So that they cannot keep preying on people the way they’re doing. And the more I look into this, the more I look into the way that public institutions have pre- promised away student tuition through borrowing so they’re passing bonds, using the tuition as the revenue for the bonds because they can spend it on more things like buildings.

So, what we’re saying, when you say, so something has to happen alongside the student loan debt forgiveness, what you’re saying is that, yeah, we’ve got to solve that problem, too. But it isn’t an either, or. You don’t cancel student loan debt and then not address what’s happening with public financing. You’re saying, you have to do both. Is there an example of that working?

So we often look to the E.U., for example, or Nordic countries, of places where they get this right. Where they finance higher education through meaningful taxation, don’t have the student loan debt crisis that we have, and yet still produce competitive labor market incentives. Is that the way forward? And why don’t we kind of have that option here? And why aren’t we talking about that option here?

Because I think people made a devil’s bargain about how higher education would be paid for between 60 and 70 years ago. Maybe just 50. There’s accounts of the debates about the Higher Education Act in 1965, which was the start-up of the era of relying on student loans and individual funding, rather than robustly funding public infrastructure. We don’t even have to go to the E.U. We did it here before that.

Good point.

We had robust public funding at the state and federal level for state institutions. That’s why they’re called public universities.

[LAUGHTER]

I know we’re losing sight of that. But in that debate, there was discussion about the benefits of encouraging personal responsibility through having people incur loans, rather than just paying for people directly. And that has continued. There’s been kind of this undercurrent, which is not really known about, of various politicians making statements to the effect of, if people are indebted, they’re not going to be out protesting the Vietnam War or for civil rights.

Ah, so the debt was a disciplining response to the student protest movements of the late ‘60s and the early ‘70s. So the summer of ‘68, for example, then the Black Power movement protests, many of which originated out of colleges and universities. So we see student loan debt as not just a conservative response, by the way. We saw this from both sides of the aisle. But one way is to make the students feel the responsibility of paying for college, that that would discipline out all of that civil protest. Wow.

And debt is really effective at that because debt is shameful. And being a debtor might be an individual form of duty as citizenship, but it’s not something you feel proud of or that you want to talk about or that you want to reject. And so it’s very effective at dividing people up, giving them only one or two paths forward in their life. So all of that narrative about, you picked the wrong career, you should have done — don’t do anything artistic. Definitely do not learn history. There’s absolutely no value to people knowing our history. March forward. Take three jobs. Work till you die. Move where you have to for your job.

That is how debt disciplines you for the rest of your life, by giving you only a few options. And the promise of making public higher ed free, the promise of kind of getting away from debt in general, and what I try and make my students do over and over is imagine your life without debt. What I imagine about this is much more than about higher education, but opening up a world where you did have the freedom to just kind of daydream. What do I want to do next? Where do I want to live? What do I want to do with my time?

They don’t want us to be able to hold out for higher wages. We’re seeing that right now more than ever. People in power don’t want us to be able to renegotiate the terms of our work and our non-work. And I think that the history of how this evolved is intensely enmeshed with that feeling about, we have to make sure people only think about their productivity and not about other things that they might want from the government, from each other, a sense of mutual responsibility, none of that. So it’s actually not too hard to find other alternatives. But there’s a lot of money invested in making us feel like this is the only alternative.

Perfect. Thank you, Louise. Listen, we like to ask everyone on the show for three book recommendations. You got three books for our listeners to check out?

Yes. So, of course, in addition to your work, “Lower Ed,” the three books that I would recommend are Mehrsa Baradaran’s book “Color of Money,” Alexis Harris’s book “Pound of Flesh,” and Heather McGhee’s “The Sum of Us.” They’re all talking about inequality in a way that lets you see people doing things that result in these outcomes, and not just kind of talking abstractly about inequality. And they’ve really helped me think differently about who we owe and what we owe to people.

Probably the most powerful question for all of us these days. Thank you so much, Louise, for being here today and sharing your brilliance and your brilliant work on student loan debt as an actual social problem, and not just a public policy fix.

And thanks to you, Tressie, for all your work on this area.

[MUSIC PLAYING]

“The Ezra Klein Show” is a production of “New York Times Opinion.” It is produced by Jeff Geld, Roge Karma and Annie Galvin; fact-checked by Michelle Harris; original music by Isaac Jones and mixing by Jeff Geld.