President Biden’s student loan forgiveness plan, which offers $10,000 to $20,000 in debt relief to millions of Americans, has grabbed headlines and sparked fierce debate over its fairness. it goes quite far and even if the plan is legal.

The intensity of the fight comes from the fact that going to college is central to the American dream. At the same time, paying for college has become an American nightmare. Dealing with this paradox has made Biden’s plan unsatisfactory for very little, due to the lack of consensus on the subject.

Between 1955 and 1972, tuition remained relatively affordable for middle-income families, but scholarships—whether from colleges, state governments, or federal programs—were limited. When colleges offered financial aid, it usually took the form of small loans and work-study options. California was exemplary in that citizens of the state paid no tuition at public institutions in the state. Other states had merit scholarships for a small number of outstanding college students. At the same time, in some low-tax states, public college tuition was about the same as private college tuition.

Only about one-third of high school graduates went on to post-secondary education. Around 1965, a typical private college charged about $1,500 for tuition (about $14,244 in 2022 dollars). But there were exceptions. Rice University, for example, charged no tuition, even though its student body came mostly from prosperous families. Berea College in Kentucky used a zero-tuition policy, which remains in place, to attract area students from low-income families.

In 1972, changes to federal student financial aid completely changed everything. A bipartisan majority in Congress has enacted new programs aimed at making college a viable option for more students from low-income families. The Basic Educational Opportunity Grant Program (later renamed Pell Grants) was the largest initiative. It relied on need-based grants to partially cover tuition and living expenses. Lawmakers also aimed to entice more banks to participate in the Guaranteed Student Loans (GSL) program established in 1965, which had remained relatively small due to their reluctance to participate.

The programs revolutionized the way applicants and colleges approached admissions and affordability because they treated students like consumers. Congress hoped to give prospective students from underserved constituencies the leverage and resources—along with adequate academic counseling and assistance with completing forms—to consider college options and make informed choices. This meant giving them federal scholarships and loans directly, which students could use to go to the institution of their choice. Lawmakers chose this structure despite lobbying by higher education associations for federal funds to go directly to institutions.

The new laws created a college market that forced colleges to compete for applicants. Giving students choice was hugely popular, making student financial aid programs the second largest category of federal spending on higher education, behind only sponsored research grants to universities. But by not fully paying for college, the financial aid policies of 1972 left students and parents struggling with how to balance a combination of federal grants and loans with institutional scholarships and a family contribution to pay school fees.

Another factor contributed to the transformation of the landscape. With the end of the military draft – which had driven some young American men to college for student deferrals – and the surge of the “baby boom” in college applications, universities now had to redouble their efforts. to attract graduate students who could afford college. expenses. Admissions offices used their university’s resources combined with federal grants and loans to develop financial aid programs to entice students to enroll, knowing that it was now a high stakes business.

The new competition and financial aid policies emerged during a period (1970-1985) that Berkeley economist Earl Cheit called “the new depression of higher education” – during which educational institutions have been rocked by falling revenues, dwindling applications and double-digit “stagflation”. Most institutions had not raised tuition substantially, leaving many struggling to pay their bills. Many colleges have resorted to postponing campus maintenance and freezing hiring. Even elite universities like Yale reported budget shortfalls during this period.

In schools that lacked academic prestige and large endowments, presidents quickly recognized that enrolling students with federal financial aid was a good way to keep their doors open. But to succeed, such a strategy required winning the battle of recruiting students of modest means.

Increased federal loans have expanded access to higher education but done little to make it more affordable. Instead, as Elizabeth Tandy Shermer argued, “government-backed loans left generations drowning in college debt.” Why? Partly because of a crucial change made by Congress in 1978.

That year, lawmakers passed the Aid for Middle-Income Students Act. MISAA provided relatively large loans at low interest rates. Importantly, there was no financial need test and no income limit to participate. Congress approved this program because it appeased students from wealthy families who did not qualify for means-tested programs like the Pell Grants. Banks loved MISAA because the federal government guaranteed loan repayment.

The popularity of MISAA has set a precedent for loans – rather than grants – as a convenient student aid option. In 1985, college costs and prices accelerated, a trend that has continued to gain momentum until today. Colleges, both public and private, have adopted a “high price plus high cost plus high financial aid” model as the dominant strategy.

Colleges increased costs by spending on new services and facilities on campus, which college officials said were demanded by students and their parents using their new power as consumers. Career centers, counseling services, climbing walls and luxury dormitories combined with new administrative spending to increase institutional budgets. Colleges and universities have become adept at justifying any cost increases in response to student demands for additional on-campus services.

And, as the economist Duke Charles Clotfelder has analyzed, in 1985 about 30 colleges and universities had the combination of prestige and resources to engage in “buying the best,” whether faculty and famous presidents or outstanding students. This set a new pattern that many colleges tried to emulate in the quest for high grades and rankings. The colleges passed the costs on to the students. In 2002, Cornell economist Ronald Ehrenberg documented how tuition fees generally rose and rarely fell – a trend that has continued to this day.

In 2005, private lenders aggressively marketed student loans as a “buy now, pay later” way to meet unexpected college expenses. This situation was only exacerbated when students at public universities relied on loans to pay for unprecedented increases in tuition fees created by declining state subsidies for higher education. Falling state tax revenues combined with a change in the portrayal of the university as a private good rather than a public good reinforced this major shift. Pell grant recipients have found that annual renewal amounts have not kept pace with rising prices.

Rising enrollments and loan debt were also fueled by for-profit colleges and their students, who took on larger loans and ended up with high default rates. Also, from 2006, the government for the first time allowed graduate students in advanced professional degree programs such as medicine, law, and business to access many loan programs.

The average student debt for a college graduate in 2020 was around $35,000. Reimbursement is possible if a graduate lands a professional position. But the disconnect between higher education and the economy since 2010 has made that uncertain for many recent college graduates. According to President Biden, with student loan debt, “the burden is so heavy that even if you graduate, you may not have access to the middle-class life that a college degree once provided.”

Today, 45 million student borrowers have $1.6 trillion in student debt. This staggering number has the potential to change how American families think about going to college and our investment in higher education. Forty years ago, governors and presidents of state universities proclaimed that investing in higher education was good for the state economy: “To get a good job, you need a good education. As a result, a college degree was increasingly seen as a necessary passport for students entering the workforce.

But this path seems less certain today. It is often possible for students to get a “good job” without a university degree. And, at the same time, a college degree does not guarantee a sufficient salary to cover a graduate’s debt. These new complexities mean that Americans may have to rethink the purpose of going to college. Only when we answer this question can we design consistent and appropriate student support programs to make higher education affordable.