Many of the 44 million borrowers who together owe more than $1.4 trillion in student loans are breathing sighs of relief that the student loan interest deduction survived the Republican tax overhaul. But to borrow one of President Trump’s favorite descriptors, it’s sad that they can’t expect more from their government. Instead of real help affording college or managing student loan repayment, they just get tax breaks.
It wasn’t always this way. For a brief moment in the middle of the 20th century, Americans’ collegiate aspirations forced lawmakers to reconsider their long-standing reluctance to directly fund postsecondary schooling and really make higher education affordable. But this moment didn’t last long. Congress’s growing preference to offer students and parents loans, as well as a rising tax revolt, helped conservative Republicans quash those efforts and left us with a system built on bipartisan promises of unprecedented accessibility that have, in reality, kept millions in debt for decades.
A century ago, a college education was beyond the reach of most Americans. Donors, philanthropists and state legislatures throughout the 19th and early 20th centuries rarely provided enough money to put most colleges on solid financial footing. Instead, schools relied on tuition. But most people couldn’t afford to miss work while also paying for fees, books and living expenses. Americans especially couldn’t imagine footing those bills during the Great Depression, which resulted in low enrollments that left hundreds of universities teetering on the brink of bankruptcy.
Federal officials never considered bailing out struggling colleges. But they could not ignore the many Americans clamoring for more schooling in the early 1930s. Citizens’ eagerness and aptitude convinced New Dealers that the country’s recovery required a more educated populace that could help propel the nation forward as a world power.
Yet tradition placed significant constraints on how policymakers could fund the academy and educate the country. Schooling, especially for postsecondary students, had largely been left to instructors, local governments and state legislators. Plus, many faculty feared federal funding would come with unwanted control. So the Roosevelt administration embraced hybrid solutions, whereby money flowed indirectly to universities through student assistance.
The 1944 GI Bill included one of the most celebrated indirect funding mechanisms. Policymakers provided a carrot to encourage schools to enroll former soldiers by setting the tuition reimbursement far higher than even Harvard charged, in order to encourage schools to raise fees. Lawmakers hoped that these higher rates for everyone (but only covered by the federal government for veterans) would bankroll the campus expansions needed to accommodate both the tidal wave of GIs applying as well as the increasing demand from civilians who rightly understood higher education to be essential for their futures.
The GI Bill certainly helped many veterans, but it also made higher education less affordable for everyday citizens whose mounting requests for aid sparked much more direct investment in higher education after World War II — but only at the state level.
Subsequent postwar expenditures paid for much-needed state college expansions and intentionally kept campus fees down. Contrary to today’s skepticism about public options, state schools actually gave citizens more choices at a time when the majority of postsecondary institutions were private and relied on tuition.
Spiraling fees, citizens’ demands and Cold War imperatives eventually forced federal officials to offer more student assistance and eventually some direct financial aid to public and private schools. Initially, only a handful of federal bureaucracies, such as the National Institutes of Health and National Science Foundation, offered student fellowships and research grants. Only after the Soviets’ 1957 launch of the Sputnik satellite did Congress pass the 1958 National Defense Education Act, which offered only targeted support for college math, science, engineering and foreign language programs as well as loans for undergraduates promising to study those subjects.
The federal government did not offer truly robust federal financial aid or guaranteed student assistance until 1965, when President Lyndon Johnson proudly signed the landmark Higher Education Act (HEA). He promised its many programs and earmarks would ensure “the path of knowledge is open to all that have the determination to walk it” at a moment when “education is no longer a luxury” but “a necessity.”
That law did a lot to continue higher education’s storied postwar expansion. Between 1954 and 1974, growing federal support helped multiply the number of community colleges, enabling almost every state to develop at least one new public research university and triple the student body, which included a growing number of women and minorities.
Yet a lot of that growth still came indirectly through NDEA student assistance and HEA loans, scholarships and work-study opportunities, which lawmakers had been much more eager to offer than the institutional support really needed to hold fees down. Indeed, both Congress and the White House had hoped HEA’s lending program would jump-start a student-loan industry, which seemed a cheaper way for the federal government to finance university expansion.
Increasing earmarks for schools and students had also coincided with rising out of-pocket costs and escalating demands for less spending and taxing, including for education. In the early 1950s, only a few staunchly conservative Republicans, such as Sen. Barry Goldwater (R-Ariz.) had advocated for tuition tax credits that would theoretically be enough to hold tuition down, encourage enrollment and fund expansion. Initially, the GOP scoffed at such ideas. The Eisenhower administration felt that such deductions were a surefire way to keep everyone but the wealthy out of college.
But by 1964, the political winds shifted. With Goldwater as the GOP presidential nominee, the party platform promised to substitute parental tax credits for direct spending on campus facilities, loans and scholarships. Democrats such as Connecticut senator and former Yale ex officio trustee Abraham Ribicoff had also warmed to deductions that would benefit wealthy constituents. His proposal to provide institutional support and student assistance and offer tax credits almost succeeded: Forty-three other senators also supported this defeated proposal.
HEA’s passage hardly vanquished bipartisan interest in tax cuts. The real sea change occurred in the 1970s, when the economy stagnated, inflation soared, economic inequality increased and tuition rates skyrocketed. Taxpayers revolted. Their uprisings left local and state authorities with far less revenue to cover basic services and often empowered politicians eager to further slash taxes and spending, rather than create new government programs.
Although Americans bemoaned how unaffordable college had once again become, Democrats rarely advocated offering schools direct financial aid in the belt-tightening political culture of the 1970s and 1980s. President Jimmy Carter, for example, fought overwhelming bipartisan enthusiasm for tuition deductions by encouraging Congress to open up the student-loan program to the increasing number of Americans who wanted to go to college but could not afford it. When tax-cutter Ronald Reagan replaced Carter, Republicans quickly reversed that policy and instead tried to offset tax cuts benefiting the 1 percent by slashing what little help the tax code offered parents, students and schools.
For example, the 1986 Tax Reform Act taxed graduate student research and teaching stipends, imposed new limits on charitable giving (including to universities), ended parents’ ability to assign income to children in order to shelter that money for their college educations, capped how much postsecondary schools could borrow through tax-exempt bond financing, and stopped individuals from claiming a personal exemption if they, like many college students, appeared as a dependent on someone else’s return.
Only in the 1990s could a Democratic administration and a Republican-controlled Congress find common ground on assisting students through loans and tax breaks, as neither party wanted to robustly underwrite colleges and universities.
Retaining college-education write-offs now is just a Pyrrhic victory against a GOP hellbent on giving money away to the rich. Those credits and deductions certainly help a lot of Americans, but their bills would be lower if the money had been collected and spent directly on higher education.
Such funding would not really subsidize students and parents but instead stop them from having to underwrite the universities that businesses, governments, nonprofits and communities rely on for research, workforce training and public services. These institutions are, after all, public goods integral to the nation’s prosperity. Only a dramatic bump in local, state and federal investment, not a tax break, can keep them from continuing to once again become private luxuries incapable of keeping America great.