Unraveling the U.S. Middle Class

Interest rates on student loans, including on popular federal programs like the unsubsidized Stafford (now nearly 7 percent) and Parent Plus (8.5 percent), are running several percentage points higher than the rates on secured loans, like home equity lines of credit.

“The difference of rates between secured and unsecured loans is higher than I have ever seen,” said Scott White, director of counseling services at Westfield High School in New Jersey. “This is one further impediment to access to post-secondary education for all but the well-to-do.”

Judy Campbell, Brennan’s guidance counselor at Hollywood High School, where three of every four students qualify for a free or reduced-price lunch, suggested that his family was “not poor enough for need-based aid and not rich enough to write a check.”

When asked over dinner whether she felt guilty that Brennan had taken so much upon himself, his mother, Caryn, began to cry. “We didn’t expect to end up in this situation,” she said.

Goal Is College. Hurdle Is Finding Financial Aid, New York Times, JACQUES STEINBERG, April 30, 2009

Americans take the middle class society of the last half-century for granted, assuming that if “the economy” is prosperous then “most of us” will be prosperous. It’s not surprising, since “most of us” have never known any other culture /economy (unless you are older than 60 or even 70) and few have been overseas.

In fact, there is no real reason why the U.S. economy can’t become something else. We could become a society permanently and sharply split between cultural and financial haves and have not’s, with little in-between. As long as we buy into Reagan’s first principal (“government isn’t the solution, it’s the problem”) this is the risk we take.

Markets, left to themselves, will concentrate the wealth of a society in smaller and smaller groups. The ideals of a democracy make it clear that this concentration of wealth is unproductive at best and dangerous at worst. So we need the government (among others) to counter this concentration.

There are all sorts of ways to do this, from the income tax (minus the loop holes that make it so regressive) to inheritance taxes to educational funding. The conservative focus on Regan’s aphorism, then, has only ensured that the United States has become progressively less democratic.

Cheap, accessible education is not a luxury to be set aside until the economic crisis is over. A recession will shift capital in all sorts of ways but it will not prevent the ongoing concentration of wealth and power. If we don’t drive down the cost of education, and make more (non-loan) money available for students, Obama’s election won’t mean a thing.