Indentured Students: How Government-Guaranteed Loans Left Generations Drowning in College Debt

by Elizabeth Tandy Shermer

Overview

The untold history of how America’s student-loan program turned the pursuit of higher education into a pathway to poverty.

It didn’t always take thirty years to pay off the cost of a bachelor’s degree. Elizabeth Tandy Shermer untangles the history that brought us here and discovers that the story of skyrocketing college debt is not merely one of good intentions gone wrong. In fact, the federal student loan program was never supposed to make college affordable.

The earliest federal proposals for college affordability sought to replace tuition with taxpayer funding of institutions. But Southern whites feared that lower costs would undermine segregation, Catholic colleges objected to state support of secular institutions, professors worried that federal dollars would come with regulations hindering academic freedom, and elite-university presidents recoiled at the idea of mass higher education. Cold War congressional fights eventually made access more important than affordability. Rather than freeing colleges from their dependence on tuition, the government created a loan instrument that made college accessible in the short term but even costlier in the long term by charging an interest penalty only to needy students. In the mid-1960s, as bankers wavered over the prospect of uncollected debt, Congress backstopped the loans, provoking runaway inflation in college tuition and resulting in immense lender profits.

Today 45 million Americans owe more than $1.5 trillion in college debt, with the burdens falling disproportionately on borrowers of color, particularly women. Reformers, meanwhile, have been frustrated by colleges and lenders too rich and powerful to contain. Indentured Students makes clear that these are not unforeseen consequences. The federal student loan system is working as designed.

Product Details

ISBN-13:	9780674251489
Publisher:	Harvard University Press
Publication date:	08/03/2021
Pages:	400
Sales rank:	497,737
Product dimensions:	6.00(w) x 9.20(h) x 1.50(d)

About the Author

Elizabeth Tandy Shermer has written about labor, politics, and education for the Washington Post, HuffPost, and Dissent. Author of Sunbelt Capitalism: Phoenix and the Transformation of American Politics, she is Associate Professor of History at Loyola University Chicago.

Table of Contents

Introduction: Drowning in Debt 1

1 Honorably Financing College 15

2 Will Work for School 33

3 A Bill of Rights for Only Some GIs 76

4 The Fizzled Response to Sputnik 117

5 Federally Guaranteed Students 163

6 Reauthorizing the Loan Industry 202

7 Bankers Lose Their Sweetheart Deal 242

Epilogue: A Brave New World of Indentured Students 288

Appendix 1 Revenue Sources for Higher Education Institutions by Academic Year, 1909-1910 to 1989-1990 303

Appendix 2 Median Household Income by Race and Hispanic Origin, 1967 to 2018 304

Appendix 3 Consumer Debt since 1945 305

Notes 307

Acknowledgments 367

Index 371

Editorial Reviews

06/21/2021

The roots of the student debt crisis are explored in this comprehensive study by Loyola University history professor Shermer (Sunbelt Capitalism). She traces the history of college tuition financing from the 1862 passage of the Land-Grant College Act, which provided federal funding for at least one college in every state, through debates over the GI Bill, which offered free college tuition to veterans returning from WWII. The Johnson administration’s Higher Education Act of 1965 introduced federal guarantees for student loans bankrolled by private lenders, which were initially required to be paid back in 10 years, but neoliberal policies in the decades that followed slashed federal funding for higher education, resulting in tuition hikes and, in turn, more and more expensive student loans. Shermer astutely analyzes the myriad forces, including political pressure to protect states’ rights, professors’ concerns about government interference, and the rise of for-profit institutions such as the University of Phoenix, that have contributed to the state of affairs as of 2020, when 45 million Americans owed a collective $1.6 trillion in student debt, and argues that some form of free college is necessary to solve the problem. Though dense and scholarly, this well-researched history provides crucial context for understanding a thorny social problem. (Aug.)

Publishers Weekly

With vivid clarity, Shermer shows how unsustainable the debt-driven financing of US higher education financing has become. Illuminating how bad policy saddled millions with crushing debts, she helps us envision liberation from the savage inequalities of the system on which higher education now depends. Indentured Students is essential reading for anyone concerned about the intertwined futures of education and democracy.

Joseph A. McCartin

[Has] important contributions to make on the present debate about what to do with existing student loan debt, while even leaving room for more discussion of what should be done to help students on higher education institutions moving forward…Shermer’s book is a sustained indictment of the entire edifice.

Chicago Tribune - John Warner

This impressive, important book unravels the roots of the student debt crisis. Shermer traces the federal government’s involvement in higher education financing from its halting nineteenth-century origins right up to the present. No one has offered so comprehensive and wide-ranging an account of the tangled development of federal policy, financial practices, and higher education in the United States.

Bruce J. Schulman

Crafting an effective new approach to financing higher education requires grappling with the past. Policymakers, scholars, and anyone who has experienced the burden of paying for college and paying off loans will benefit from this important book.

Sara Goldrick-Rab

Valuable…Patiently reconstructs the evolution of our student lending system.

Wall Street Journal

We look back on the New Deal as a heyday of progressive policymaking. Shermer pulls back the veil to show how political maneuvering sowed the seeds of the student debt crisis. Moreover, she documents in exquisite detail how the racialization of student debt was not an accident, it was inevitable. Empirically rich and clearly written, Indentured Students not only unearths the foundations of a national emergency crippling generations and stalling economic mobility but also provides lessons for the fight against it.

Anthony Abraham Jack

The roots of today’s student debt crisis run deep, and Indentured Students is the first work to uncover them. Works like this that successfully combine original and sophisticated scholarship, moral urgency, and political relevance rarely come along. Shermer has written a brilliant gem of a book.

Jonathan Levy

Indentured Students is a superb history of the financing of higher education for students in the United States who are not rich and privileged. Shermer details the politics, policies, values, motivations, and compromises from the New Deal forward concerning college affordability. This book is essential for understanding the history of higher education and today’s student debt crisis.

William A. Herbert

09/01/2021

Fittingly dedicated to "the 45 million of us, and counting, who together owe more than $1.7 trillion," this fascinating work delves into the thorny history of loans and aid to post-secondary students in the United States. Shermer (history, Loyola Univ. of Chicago) compellingly argues that mounting student debt, resulting from government-backed loans, has put home ownership, marriage, parenthood, and retirement out of reach for many Americans and often for their loan cosigners; indeed, the term "indentured" in the book's title is not meant to be hyperbole. Shermer considers the racial wealth gap and gender-based salary inequities and writes that many borrowers were not fully aware of the long-term implications of incurring heavy student loan debt. She also puts into context federal programs and legislation, including the Land-Grant College Act, New Deal work-study programs, the GI Bill, the Higher Education Act, the National Defense Education Act, Pell grants, and lending from the Student Loan Marketing Association (Sallie Mae). The book's appendixes offer data on the revenue sources of U.S. post-secondary institutions from the academic years 1909–10 through 1989–90; median household income by race and Hispanic origin (1967–2018); and consumer debt since 1945. VERDICT Readers curious about how students went from working their way through college to facing an untenable situation fostered by "creative financing" will appreciate this thorough volume.—Elizabeth Connor, Daniel Lib., The Citadel, Military Coll. of South Carolina, Charleston

Library Journal