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Newsletter | April 10, 2024

Despite Populist Appeals to the Unfair Impact of Student Debt, Biden Still Won’t Name a Villain

Corporate CrackdownEducation

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On Monday, President Biden presented a new student loan debt relief plan at Madison Area Technical College in Wisconsin, as surrogates (Vice President Harris and Education Secretary Cardona) simultaneously spoke about the plan in other battleground states. The plan would leverage Department of Education authority to waive student loan debt under some circumstances, after the Supreme Court struck down the Biden administration’s first effort to cancel some student loan debt as overstepping executive authority. 

The administration states that the plan would “provide debt relief to over 30 million Americans when combined with actions the Biden-Harris Administration has already taken to cancel student debt over the past three years.” 

Specific planks of the plan would offer relief to five categories of student debt holders: those who “owe more than they did at the start of repayment” due to runaway interest; those who are eligible for loan forgiveness programs but have not yet applied for them; those who first entered loan repayment a long time ago (20 years ago for undergraduate programs or 25 years ago for graduate programs); those who enrolled in “low-financial-value programs” such as those at for-profit colleges and other institutions misrepresenting the value of their programs; and borrowers experiencing hardship paying back their loans, including those at high risk of defaulting. 

In Madison, Biden spoke emotively about the harmful impact and injustice of student debt, saying that “too many people feel the strain and stress [of] crushing, crushing debt,” and noting that for some, “[e]ven when they work hard and pay their student loans, their debt increases and not diminishes.” But despite these rhetorical appeals to the emotional and material impacts of student debt, Biden offered no observations or theories about the cause of mounting and disproportionate student debt. 

A Conflict Without a Villain?

Bident did not, for instance, point out the ways in which many financial institutions and investors profit from student loan debt. Historically, SLABS—or securities packages made up of packaged student loans—have been seen as a “bulletproof asset class” based on the difficulty of declaring bankruptcy due to student loan debt, and the federal government guarantees for 97-100% of the value of a loan if debtors default. 

Sallie Mae, along with Bank of America, Wells Fargo, and many of the largest banks in the US, make profits trading packages of student loans, with the total amount of student debt in the US totaling over $1.7 trillion today. The fact that these large corporations, whose chief executives are compensated in the millions every year, are not being named as part of the cycle of student loan indebtedness is a missed opportunity.

Further, Biden could call out private loan companies, which own 7.3% of outstanding student loans. He could specifically name the for-profit colleges still misleading students into paying for an education that will not help them achieve gainful employment, particularly as his new debt forgiveness plan includes relief specifically targeted at borrowers who enrolled in “low-financial-value programs” like those at profit-seeking educational institutions. Vice President Harris could tout her past success as California’s Attorney General in investigating the now-defunct for-profit college chain Corinthian Colleges. In 2022, partly based on the Vice President’s investigation, the Department of Education approved $5.8 billion in loan discharges for over 560,000 borrowers who attended Corinthian, after finding that Corinthian “engaged in widespread and pervasive misrepresentations related to a borrower’s employment prospects, including guarantees they would find a job.” Harris could also call for more accountability for the people profiting from such schemes in the future. In the Corinthian example, CEO Jack Massimino paid only “$80,000 to settle a Securities and Exchange Commission case about the college [despite having] made millions of dollars” while holding the role. 

Connecting the Populist Dots

Many commentators have pointed out the motivations behind Biden’s student loan debt plan announcement: highlighting progress on the more populist elements of his 2020 campaign promises in a bid to win back voters in crucial swing states, like Wisconsin, Arizona, and Pennsylvania, particularly amidst deep voter concern with Biden’s support for Israel. In last week’s Wisconsin primary, over 47,000 Democratic primary voters wrote in “uninstructed” rather than voting for Biden, surpassing the approximately 20,682-vote margin by which Biden beat Trump in 2020, joining voters in states like Michigan, where over 100,000 voters wrote in “uncommitted” (close to the margin in Biden’s 154,000-vote 2020 victory). 

In the face of voters’ doubts and concerns, Biden needs a clear platform demonstrating that he’s on people’s side. Biden must be caught fighting to take steps to defend them from corporations who want to rip them off–and it doesn’t hurt if some of those corporations (shady for-profit colleges) bear a close resemblance to his own considerable exploits as a grifter (remember Trump University?). 

To strengthen his populist message, Biden should be more explicit about which villains he is taking a stand against, and point out the way his administration plans to protect voters from predatory corporations gaming the economic system. Recent polling demonstrates how popular this kind of messaging can be. A majority of Americans believe corporate greed is driving inflation, and two in three democrats and independents agree “corporations being greedy and raising prices to make record profits.” As recently as February of this year, 85% of Americans agreed that “corporations being greedy and raising prices to make record profits” was a cause of inflation, and 79% of Americans (including 63% of 2020 Trump voters) supported raising taxes on the wealthy.

Against this backdrop, Biden should be taking every opportunity to connect the economic issues he’s addressing—in this case, mounting student loan debt—to the nefarious actions of greedy corporations and executives, including calling out financial institutions, corporations, and the people running them by name. As we have argued in our corporate crackdown work for years, this kind of public accountability is not only merited, but politically savvy, in that it’s more likely to generate a news cycle than the kind of villain-free, generalized statements Biden is more prone to. 

For instance, the White House ran a Super Bowl ad criticizing “shrinkflation” and showing an image that include brand-name items like Oreos and Doritos, but with a voiceover of Biden saying, “I’m calling on companies to put a stop to this. Let’s make sure businesses are doing the right thing.” In other words, he was complaining without naming names. Even in instances where Biden has addressed issues very clearly caused by the actions of a certain corporation—like when he visited East Palestine, OH, to address the impact of the Norfolk Southern train derailment—he has not spoken in harsh terms about the actions of specific executives and decision-makers taking home hefty salaries while skirting safety precautions in their business models. 

Biden is facing an uphill battle to convince voters he is on their side, and willing to stand with them in the face of shameless corporate price gouging, wage theft, and environmental abuses. Addressing student loan debt is a strong start, but acting as though student loans exist as an act of God—rather than being encouraged by financial services and for-profit college industries that are incentivized to fuel the cycle of indebtedness so they can turn a profit— is not as compelling as naming names and calling out corporate abuses. 

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Want more? Check out some of the pieces that we have published or contributed research or thoughts to in the last week:

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Maybe Financial Regulators Shouldn’t See The Best In Everyone


RELEASE: Judge Willett’s Citigroup Stock Holdings Are Obvious Conflict Of Interest

The Staying Power of Crypto’s Political Machine

New Questions on How a Key Agency Shared Inflation Data

Attitude with Arnie Arnesen 4.2.24

Fed Chair Under Fire for Blocking Climate Risk Financial Rules

Google’s ‘woke’ AI image chatbot still isn’t fixed — and critics blame CEO Sundar Pichai: ‘Should be at incredible risk’

Corporate CrackdownEducation

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