In the early aughts, Patricia Walsh found herself in a predicament after she and her husband had two children. Walsh worked as a teacher in Florida, and she knew that on her meager salary, she would never be able to pay for her kids’ college tuition outright. Her children would not have the same opportunities to go to an affordable college like she did when she paid in-state tuition to go to Rutgers decades before. So, Walsh was understandably enticed by a program that the state of Florida was offering: the ability for parents to prepay tuition at state universities for their young children at current prices. This was an offshoot of the widespread 529 tax-advantaged saving programs that allowed parents to stash money away in investment vehicles for a child’s future tuition.
Parents today face something like a moral obligation to believe in the brightness of their children’s future. Because a college education has come to be understood as an economic imperative for success, they are encouraged to consider their children college-bound from an early age, far in advance of any evidence one way or the other. As Caitlin Zaloom explains in her important new book Indebted: How Families Make College Work at Any Cost, “college investment programs like the 529 and prepaid tuition are premised in part on [the] notion that parents should believe; that they should hold children’s potential as sacred.” And if parents must believe in their children, then it follows that they must pay.
But imagine trying to explain the various 529 plans and other byzantine methods of saving for college to a U.S. citizen of the 1950s. They’d have a lot of questions. Why is it necessary to start saving when your child is still a baby? Could it really be that expensive? Can’t they just skip college and get a well-paying job with the union? Why is the government incentivizing you to stow cash in the stock market, anyway? Isn’t that just diverting useful money away from the family and into the mostly useless financial services sector? And why are parents responsible for paying for their kids’ education, doesn’t the government take care of that? Wait, you didn’t repeal Glass-Steagall, did you?
The imperatives of finance, namely that investing today will bring exponential rewards tomorrow, fundamentally changed how families made decisions.
For Walsh, ballooning tuition didn’t leave much time to consider such questions. The average cost of attendance at public, four-year universities has increased more than threefold since 1987, with much of that increase occurring after the year 2000. This has spawned a vast, all-consuming student finance industrial complex, replete with numerous financial products that emerged like rats from a trash heap to help families pay for their children’s education. In addition to 529s, there are direct private and federal parent PLUS loans. The Free Application for Federal Student Aid, or FAFSA, which reaches down into a family’s private life and makes abstract judgments about their financial fitness, has become a routine obligation for all but the wealthiest college-bound students. FAFSA uses something called the Expected Family Contribution—a calculation enumerated in a thirty-six-page document—to dictate to families exactly how much they should spend on their children’s education. And Indebted reveals how FAFSA privileges nuclear families with stable incomes in first marriages—something that’s increasingly rare in the United States.
All of this might be described as the financialization of the family. Zaloom argues that it began in the post-war era when the federal government, hoping to win the Cold War by goosing private ownership, made it a priority to get mortgages in the hands of newly middle-class home-seekers, which was great for consumer spending and even better for banks. Later, after wages began to stagnate in the early 1970s, the 401(k) introduced a new element of financial thinking to the family: retirement would no longer be managed by pension funds, but by individuals, who would now have to choose not only how much money to save for retirement, but when. Would they buy a house in a better neighborhood with better schools, or take their kids on vacation, or prudently save for retirement instead? The imperatives of finance, namely that investing today will bring exponential rewards tomorrow, fundamentally changed how families made decisions.
So did the erosion of federal support for higher education. Lyndon Johnson’s Higher Education Act of 1965 established the Pell Grant for low-income students and expanded funding to colleges, including schools that historically educated black students. But sixteen short years later, the government made it clear it would no longer invest in college education under Ronald Reagan’s austerity regime; deeper cuts were inflicted on student aid than on any other federal program. Zaloom quotes Reagan’s budget director, David Stockman, saying in 1981, “I do not accept the notion that the federal government has an obligation to fund generous grants to anybody that wants to go to college. If people want to go to college bad enough, then there is opportunity and responsibility on their part to finance their way through.” In the bold new neoliberal era, individuals would be financially responsible for developing their own human capital—before they’d even reached adulthood. Never mind all the benefits the country had gleaned from a mobile, prosperous class of university graduates decades before. Personal savings relative to income for this generation reached, by 1975, a very high 17.3 percent. In 2005, that figure bottomed out at a dismal 2.7 percent; today it rests just above eight percent. One generation had gotten to higher ground and was pulling up the ladder behind them. A new generation, with more debt and less savings, was born.
“During the 1990s,” Zaloom explains, “banks and the federal government came to agree that debt was the way students should fund college education.” As costs for college continued to rise, like rent and insulin prices, many of us could guess why—greed—but there was no good, singular explanation for the phenomenon, and this made it difficult to combat. Meanwhile, banks got richer and, like bodybuilders, swelled to an upsettingly large size. Student loans did such brisk business that, like mortgages, they were chopped and bundled into securities and traded around the world. In 2005, the U.S. government also made it nearly impossible to discharge private or federal student loans in bankruptcy, further ensuring profits for financial firms, who were freed from the responsibility of considering borrowers’ ability to repay. When the financial crisis of 2008 finally swept back the curtain on big banks’ recklessness, the federal government took over a substantial portion of student lending. But as we know, nothing really changed: the massive pool of college-related debt remains managed by a fundamentally unchanged financial sector.
For Patricia Walsh, the financialization of the family meant taking advantage of a bizarre program that was essentially a stock option on her children’s future. For her daughter Maya, it paid off in the traditional sense. Maya was a good student who won awards, took a job during college, and graduated without much debt. Walsh’s son was different story. He went to school but, after years of middling performance, eventually stopped signing up for classes. Reflecting on her son’s academic career, Walsh admits that it was obvious even in high school that he wasn’t interested in academics.
An added setback was that while her son was a teenager, Walsh’s husband walked out on the family, leaving them with $400,000 in debt. She emptied her retirement account to pay it off, revealing another aspect of student finance that often goes unexamined: saving for the future doesn’t create stability, it requires it. Of families expecting to pay for college (or already paying for it), less than ten percent use 529 plans or other college savings accounts, and the people who do take advantage of these tax-advantaged programs had twenty-five times the median assets of those who didn’t, as of 2012. But parents who don’t use 529 plans—often because they can’t afford to—nonetheless receive the same message: you ought to save for your child’s future education somehow. Their livelihood depends on it.
This emphasis on personal responsibility provides cover for a regressive political project, one that extracts wealth from the most vulnerable families and privileges those with the least to lose.
The Obama administration, smelling something was off with these plans, tried to abolish 529s, but bipartisan crusaders and staunch defenders of upper-class privilege Nancy Pelosi and John Boehner rode in to stay the execution. Trump, meanwhile, has expanded 529s and made their funds usable at private institutions. The assets invested in these programs are somewhere in the region of $250 billion dollars, generating hefty fees for the financial services industry and sucking out more than $2 billion in potential tax revenue in 2014 alone.
The idea that it is prudent to save for your children’s education sounds reasonable in the abstract. But this emphasis on personal responsibility provides cover for a regressive political project, one that extracts wealth from the most vulnerable families and privileges those with the least to lose. As Zaloom writes, “the moral mandate to plan distributes virtue to those who possess stability––particularly those with wealth––and denies it to those who don’t.” In this way, the plans redistribute not only wealth, but moral standing, upward. The arrangement of the student finance industry implies not only that families can and should shoulder the cost of college, but also that the more they fit the industry’s mold of an ideal family (one that looks suspiciously white and wealthy), the better off they’ll be. The growth of the student finance industrial complex is the perfect complement to an exclusionary, socially conservative technocracy.
In a series of useful comparisons, Zaloom demonstrates that the moral logic of financing college is unique to the United States. The Swedish government explicitly acknowledges that a student’s tuition will be their burden alone; not a family’s. And because it is ludicrous to expect someone in their late teens to have the funds to pay for school, they ensure college is affordable and tightly manage the debt that students do incur, primarily from living expenses. While Swedish students still graduate with an average of $21,000 in debt, according to the New York Times, their loan terms are generously long, interest rates very low, and graduates pay much less than Americans while they are starting their careers. In Germany, college is free for most, and only about 20 percent of students graduate with debt, according to Zaloom. And while the German government does expect families to pitch in for college, student debt there is tied to income, carries no interest, and is forgiven after twenty years. In other words, college elsewhere is not seen as an opportunity to exploit familial bonds for the benefit of a sprawling financial services industry that originates and owns their loans.
Zaloom cites the political theorist Nancy Fraser, who has said that our economic system “free rides” on the labor and time a family puts into their children and “accords them no monetized value.” It’s powerful analysis, if in this case not entirely accurate; the student finance industry recognizes that value and turns it into cost. That’s the essence of the financialized family, which has its love exploited for profit.