top of page

Why Student Debt Is So High


By Thomas Neuburger

I recently wrote a piece about Biden and student debt (See "Biden Signs Off on Restarting Student Debt. Why?") There I made the point that the road to the debt ceiling deal was entirely avoidable; thus it was a road that national Democrats wanted to take. I also speculated on why this was.

But the student debt part of the discussion deserves its own discussion.

Consider the chart at the top, which shows the rate of student debt growth as a percentage of non-mortgage consumer debt. The rate is astounding.

Now consider this, the rate of increase of the cost of higher education from the New York Times:

Source: New York Times (

The share of this burden is not evenly split. As the Times points out, millennials carry an unequal share. (Note that those under 30 appear to be giving up on college.)

How big is the student debt burden? According to Forbes (paywalled article) as of May, 2023 the student debt picture looks like this (emphasis mine):

  • $1.75 trillion in total student loan debt (including federal and private loans)

  • $28,950 owed per borrower on average

  • About 92% of all student debt are federal student loans; the remaining amount is private student loans

  • 55% of students from public four-year institutions had student loans

  • 57% of students from private nonprofit four-year institutions took on education debt

Nearly two trillion dollars is the student debt burden today, up from a tenth of that in the mid-2000s.

Neoliberal Government at Work

Why is the national student debt burden so high? In answer, I offer you this, a comment posted by “lincoln” at the excellent economics site Naked Capitalism (emphasis in the original):

If we ever want to properly fix the U.S. student debt crisis, then we need to understand exactly how it was created. Students borrow money to pay universities, which are the main beneficiary of the $1.7 trillion in outstanding student debt. How much students borrow has ballooned exponentially over the last 15 years. This was during a period of record low borrowing costs (see Fed ZIRP – Zero Interest Rate Policy), and a drop in college enrollment. Our federal government loans trillions of dollars to a universities students, so these students can pay whatever education related costs the university decides is reasonable. And this cost is non-negotiable. The trillions in federal student loans that universities get is in addition to their exemption from all federal and state income taxes, their exemption from paying property taxes on university land, and their right to issue tax exempt bonds to fund construction, renovation, and operational costs. This does not include the $50 billion per year the U.S. government pays to universities in federal contracts and research grants. These institutions are eligible for almost every government subsidy and tax loophole imaginable. If nothing is done to reign in and reduce how much universities charge their students, then future student debt is just going to keep ballooning. Forgiving student debt won’t fix this problem, it can only delay a much needed reckoning. ... The ballooning of this debt that started a student loan crisis did not slowly develop over the course of decades. Most of it occurred after the 2008 Great Financial Crisis. Mainstream media has been extremely hesitant to point this out, as well as that universities are the most responsible for creating and perpetuating our student debt crisis.

His bottom line and mine: When government sells education as the answer to government-caused wealth inequality, and makes trillions in student loans available to the industry that supplies it, government is helping the industry fleece its customers.

The student loan program is a transfer of wealth to institutions from the working class. How surprising is that in these neoliberal times?

bottom of page