Best Eric - The student loan mess : how good intentions created a trillion-dollar problem

In 2012, when we decided to write this book, student loans had becomereally for the first time evera hot topic. Protesters in the Occupy Wall Street movement called for forgiving all student loan debt, even as the high unemployment rate encouraged more young people to stay out of the workforce and pursue a college education. There were news reports that total student loan debt had reached a trillion dollars, that Americans now owed more on student loans than on their credit cards. Young people leaving school were finding that their student loan debt made it vastly harder to launch careers, start families, or buy homes. Some critics warned about an expanding student loan bubble that would inevitably pop and drive the economy into another severe recession, while others challenged the established wisdom that going to college was the most promising route to fulfilling the American Dream.

How, you might ask, did we get into this mess?

This book tries to answer that question. But it doesnt concentrate solely on this mess (that is, todays complaints about that trillion-dollar debt, the frustrations of young people trying to deal with massive student loan debt on top of all the other challenges they face, or potential consequences should the bubble burst). Instead, we adopt a broader perspective. Our goal is to understand how we got into this mess. And that turns out to be a really interesting story.

It is a story of good intentions gone awry. (Recall the proverb, more than three hundred years old: The road to hell is paved with good intentions.) Federal student loan programs started as a way to help young Americans get ahead during the Cold War years of the 1950s and 1960s: student loans seemed to offer a solution to what was then considered a social problemtoo many bright kids couldnt afford to go to college, causing America to waste precious brainpower. Well call that the first student loan mess.

The earliest student loan programs were inspired by idealism, but were telling an ironic story. Policies designed to solve social problems dont always work as planned; they can create new, unexpected difficulties. Thus, while we might like to imagine that there is only a single student loan mess, our story is about a series of student loan messes, each a reaction to how people understood and tried to resolve an earlier mess. For example, solving the first student loan mess by creating loan programs that would give every promising young person access to college had an unexpected consequence: too many borrowers failed to repay their student loans, and that problemdeadbeat studentsbecame what well call the second student loan mess. This cyclethe solution to one mess creating the conditions that came to be understood as the next, even bigger messhas repeated itself several times and continues today. So the short answer to our question is that we got into our current student loan mess by trying to solve earlier messes, and our next mess is likely to be shaped by what we do to solve the one were in right now. This is both a surprising story and an important one. We didnt wind up in our current mess by accident; we got there by creating well-intentioned policies without thinking through the likely consequences of our actions. And if we want to avoid setting the stage for an even bigger mess, we ought to ask ourselves what we can learn from the tangled history of student loans.

This book is the product of an intergenerational collaboration: Joel and Eric are father and son. We approach our topic from different Recognizing that the topic interested both of us but appreciating that we saw it from different angles, we decided to join forces.