Abstract
America is drowning in student loan debt. About 45 million Americans owe the astounding sum of $1.75 trillion in outstanding student debt, and many of them default on their payments. While most agree that something must be done, attempts to alleviate the problem have met political backlash and legal challenges. In June of 2023, the Supreme Court struck down the Biden administration’s comprehensive student loan debt forgiveness plan, and recently the administration initiated the politically contested “Saving on a Valuable Education” plan (“SAVE”). Amidst this political tug of war, this Article aims to offer a critical and nuanced analysis of the student loan debt crisis. We discuss the crisis’s root causes and critically evaluate the plans currently on the table, arguing they cannot provide a fair and sustainable solution to the problem.
In an attempt to reach the root of the student loan debt problem, this Article introduces the phenomenon of the higher education arms race. The educational arms race involves a process through which individuals are pushed to acquire higher education, not because of the intrinsic value of education, but merely because they need a diploma to compete in the labor market. Employers increasingly require college diplomas as a signal for the quality of prospective employees, even in jobs that do not objectively require higher education. For those without higher education, little options remain except for low-paying and menial jobs. These hiring demands force individuals to obtain a degree at all costs, including incurring debilitating debt.
This Article stipulates that any long-lasting solution to the student debt crisis must involve measures to alleviate the higher education arms race, and it proposes two such solutions. The first seeks to broaden the scope of post-secondary education through lifelong learning, especially through on-the-job training. We show that on-the-job training can enhance productivity, but that the enhanced productivity is not reflected in the workers’ salaries. We maintain that formalizing on-the-job training can correct this discrepancy and enable employees to receive a wage premium (akin to the premium received for a college diploma) for their training. This, we believe, will mitigate the compulsion to obtain unnecessary and expensive degrees, while broadening access to lifelong education. The second solution involves imposing a fee when employers hire over-educated employees. Hiring over-educated employees implies employers use college credentials solely as a signal for quality, and in these cases, it is efficient and just that employers will pay for the benefit (information) they received—or else stop using it. By adopting employer-focused solutions and promoting lifelong learning, we argue, policy makers can address the root causes of the crisis and diminish the accumulation of debt.
Recommended Citation
Tammy Harel Ben Shahar and Omer Kimhi, Can Employers SAVE Us from Student Loans? Credentialism, Arms Races, and Debt Forgiveness, 82 Wash. & Lee L. Rev. 189 (2025).Available at: https://scholarlycommons.law.wlu.edu/wlulr/vol82/iss1/5