NEW BILL EASES STUDENT DEBT - But Maybe College Should be Free

March 31, 2010

A student reading describes the problem of college debt and provisions of the new reform law. A second reading presents arguments comparing college debt to indentured servitude and calling for free college education. Discussion questions and writing and citizenship actions follow.

To the Teacher

Congress recently passed the Student Aid and Fiscal Responsibility Act, which will ease somewhat the growing problem of college debt. But at least one college professor, Jeffrey Williams, thinks the U.S. should have more than reform.
The first student reading below describes the pain college debt can produce and major provisions of the new reform law. The second summarizes and quotes from a Williams article, which likens today's student college debt situation to that of colonial indentured servitude. Williams proposes free public college and university attendance to all qualified students. Discussion questions and an activity that includes writing and citizenship action follow. (For further background, consider this recent essay by Les Leopold:

Student Reading 1: 

College debt: Stories & reform

$23,000: This is the average debt load of college students who graduated in 2008, according to the Project on Student Debt. Two out of every three college students now graduate with debt. "With debt and unemployment at record levels, college graduates may feel stuck between a rock and a hard place," said Lauren Asher, president of a nonprofit advocacy group affiliated with the Project. (, 12/6/09)


Three unpleasant stories

Wall Street Journal reporter Mary Pilon begins with the story of Emmanuel Tellez, who graduated from college in 2008 with $50,000 in debt. His loans were issued by SLM Corp., better known as Sallie Mae, the largest private student lender:
"In December, he was laid off from his $29,000-a-year job in Boston and defaulted. Mr. Tellez says that when he signed up, the loan wasn't explained to him well, though he concedes he missed the fine print."
"Heather Ehmke used to owe $28,000 to Sallie Mae for her student loan. Fourteen years later the loan has increased from $28,000 to more than $90,000. Her monthly payments jumped from $230 to $816. Last month, her petition for undue hardship on the loans was dismissed."
"Michelle Bisutti borrowed $250,000 to pay for medical school. To finish her residency, she deferred loan payments. The result: default charges and compounding interest rates ballooned her debt to $555,000. That includes a $53,870 fee when her loan was turned over to a collection agency. 'Maybe half of it was my fault because I didn't look at the fine print,' Dr. Bisutti said. ''But this is just outrageous now.'"
("The $550,000 Student-Loan Burden,", 2/16/10)


Reform of student aid

But the rock is being nudged, the hard place softened by passage of the Student Aid and Fiscal Responsibility Act (SAFRA). The legislation presents "an historic opportunity," said the Project on Student Debt.
SAFRA will
  • end the government practice of guaranteeing subsidies to private banks and other commercial lenders, middle men who originate and service loans. Instead, the government will lend directly to students, and this public program will be expanded.
  • lower monthly payments, reducing the limit on them from 15% to 10% of a  borrower's discretionary income. (This does not take effect for new loans until after July 1, 2014.)
  • forgive the remaining balance for borrowers who have made regular monthly payments after 20 years of repayment (instead of the 25 years in current law).
  • result in taxpayer savings of $61 billion over 10 years.
  • use $36 billion of these savings to expand need-based Pell grants. These grants, which now provide students with a maximum of $5,500 per year, will rise to $5,900 by 2019. Pell grants help make college possible for low-income students, mostly those whose families have  incomes of $20,000 or less. However, Pell grants cover only about one-third of the average cost of a public university education.
  • Use $10 billion of the savings for government deficit reduction.
(House Committee on Education and Labor,
Private banks and other lenders like Sallie Mae objected strenuously to the elimination of their middle man role: They had made billions in profits from college student loans. Private lenders spent millions lobbying against SAFRA. But even under the new law these lenders will continue to make money by servicing government loans.
Nevertheless Rep. George Miller of California, who chairs the House Education and Labor Committee, described the student loan measure as "'truly historic legislation." The Project on Student Debt praises it as well: "The legislation generates $61 billion in savings by streamlining student loan programs and reinvests the money to make college more affordable and help reduce the federal budget deficit." (, 3/18/10) 
For discussion
1. What questions do students have about the reading? How might they be answered?
2. Why do so many students leave college in debt? To whom currently do they owe principal and interest?
3. Do you understand each of the major points in the SAFRA reform of the college loan system? If not, which do you need more information about and how would you get it?
4. What is your overall assessment of SAFRA?

Student Reading 2: 

College debt "akin to slavery"?

SAFRA will make life somewhat easier financially for college students needing loans. But the fact remains that many of the students who take out these loans will still be carrying the debt at age 40 and beyond.

Indebted students and indentured servants

Professor Jeffrey Williams of Carnegie Mellon likens the loan-debt situation to that of the indentured servitude practiced by the Virginia Company to bring English laborers to Jamestown, Virginia, and other tobacco colonies beginning in 1620.
An "indenture" was an official document binding an immigrant to work without pay for four to seven years. For this labor, the individual got a free ship ride from England to America and did not pay other costs of a brokerage system. A prospective servant might be sold from English merchants to shippers, who sold the person to colonial landowners.
"Between one-half and two-thirds of all white immigrants to the British colonies arrived under indenture," according to the economic historian David W. Galenson—a total of 300,000-400,000 people. Williams writes that indenture was "not an isolated practice but a dominant aspect of labor and life in early America."
Unlike a slave, the individual who became an indentured servant did so of his own free will. But, writes Williams, most historians "agree that indentured servitude was an exploitive system of labor, in many instances a form of bondage akin to slavery. For the bound, it meant long hours of hard work, oftentimes abuse, terms sometimes extended by fiat of the landowner, little regulation or legal recourse for laborers, and the onerous physical circumstances of the new world, in which two-thirds died before fulfilling their terms..." Williams argues, "College student-loan debt has revived the spirit of indenture for a sizable proportion of contemporary Americans..."
Ever-rising costs of tuition and other fees have led to angry demonstrations by university students, such as those by California students in March 2010. In another demonstration on March 23, college students "swarmed Capitol plead for more financial aid." (, 3/24/10)
Students today are facing less dire conditions than indentured servants in colonial times—and at least their debt doesn't bind them to a particular job. But for students like Heather Ehmke and Michelle Bisutti, the monthly loan payments do interfere with choices about what to do in life and which jobs to seek.

Changing the loan-debt system

Calling for "wholesale change" in this modern system of indenture, Williams cites "one of the goals of the planners of the modern US university system after the Second World displace what they saw as an aristocracy that had become entrenched in elite schools."
The 1947 Report of the President's Commission on Education emphasized that "free and universal access to education must be a major goal in American education." The commission warned that "If the ladder of educational opportunity rises high at the doors of some youth and scarcely rises at the doors of others, while at the same time formal education is made a prerequisite to occupational and social advance, then education may become the means, not of eliminating race and class distinctions, but of deepening them.'"
The Commission's goal, Williams writes, "was not only an abstract one of equality, but also to strengthen the United States...Current student debt weakens America, wasting the resource of those impeded from pursuing degrees who otherwise would make excellent doctors or professors or engineers, as well as creating a culture of debt and constraint."
This is why Williams supports University of Pennsylvania professor Adolph Reed's proposal in a Fall 2001 Dissent article, "A G.I. Bill for Everybody." The proposal, Williams writes, advocates "that the federal government pay tuition for all qualified students at public universities, which would cost around fifty billion dollars a year and which could be paid simply by repealing a portion of the Bush tax cuts or shifting a small portion of the military budget... Like free, universal health care, free higher education should be the goal, and it's not impracticable."
Under the original GI Bill, passed in 1944, 7.8 million returning World War II veterans got a college education or technical training. According to a 1988 analysis by the Congressional Subcommittee on Education and Health, for every dollar invested in the GIs' higher education, the government and economy received at least $6.90 in return.
Short of free public higher education for all, Williams suggests that a "next best solution" would be loans with an adjustable rate of payment according to income. This type of loan, says Williams, was first adopted in Australia in 1989 and later by the UK. The idea is supported by the Project on Student Debt. "Such loans represent a pragmatic compromise between free tuition and the current debtor system," writes Williams. "They provide a safety net for those with the most debt but least resources and they stipulate a reasonable scale of payment for those doing better...
"The world we inhabit is a good one if you are in the fortunate third without debt, but not nearly so good if you live under its weight. Student debt produces inequality and overtaxes our talent for short-term, private gain. As a policy, we can and should change it."
("Student Debt and the Spirit of Indenture,", September 2008) 
For discussion
1. What questions do students have about the reading? How might they be answered?
2. According to Williams, in what ways are indebted college students like indentured servants? In what ways are they different?
3. What are some of the effects of leaving college in debt?
4. Why did the 1947 Report of the President's Commission on Education call for change in the nation's university system? Specifically, what kinds of change and why?
5. Why does Williams support the Commission's proposal? How would he have the nation pay for it? Would you support such a proposal? Why or why not?
6. What is Williams' "next best solution"? What merit do you think it has?

Discussion, writing, and citizenship

A key question: Should the federal government pay for free college or university attendance for all qualified students? Why or why not?
Begin an examination of these questions by dividing the class into groups of four to six students for discussion. A group leader might have the task of calling on each person who wishes to speak and ensuring that everybody who wants to offer a view has the chance to do so. Have each group name a reporter to summarize a 15-minute discussion for the rest of the class.
After all groups have reported, ask if students think they have, or might come to, a consensus response to the questions. If so, or if consensus is achieved after further discussion, assign each student to write an essay to their lawmakers in the House and Senate or, if they wish, to President Obama. If consensus is judged to be impossible, assign an essay in which students express their individual views on free college or university attendance or Williams' "next best solution."
After students have written their essays, have them read the essays in groups of four to six. The authors may respond to any questions for clarification. Whether all essays support free college or university attendance or represent a diversity of views does not matter. Have students in each group select the paper they regard as best to be read to the class.
If all papers represent a consensus, have the class choose what it regards as the best. It might then be signed by its writer, followed by the signatures of the other students, and mailed to lawmakers or the president.
If the papers represent individual views, the best, as well as others students wish to send, might be mailed to officials.
This lesson was written for TeachableMoment.Org, a project of Morningside Center for Teaching Social Responsibility. We welcome your comments. Please email them to: