Social Welfare or Risk Management? Reconsidering US Federal Student Loan and Social Welfare Policies

Federal student loans’ complicated history challenge the assumption that American social welfare programs have ever been about guaranteeing economic security. College financing instead indicates that US social welfare was grounded in managing the labor market and risk. New Dealers promised security when they described their experiments that, as historians insisted, ushered in an unprecedented period of economic prosperity and stability for the many white men, whose jobs qualified them for government guarantees. Complicated financial products replaced those promises in the late twentieth century, when those poorly regulated financial products (like student loans) posed the most risk to immigrants and citizens of color, particularly women. Student loans have always epitomized risk because the few colleges and charities willing to extend credit since the Founding could not repossess the degrees increasingly needed for well-paying work as the country industrialized. Those financial products were rare before the 1920s, after, historians have shown, the country’s white elite embraced financial products to mitigate risk. New Dealers never considered extending credit to undergraduates but did embrace earlier state and private efforts to mitigate risk and manage the labor market. The federal mortgage program directly shaped the 1960s federal loan program that Republicans and Democrats designed to nurture a student loan industry to indirectly fund an academy that, education historians have shown, has actually historically depended on tuition. The federal loan program only mitigated the risk for bankers willing to lend to those campus financial-aid officers picked without requiring a credit check. As such, the links and parallels between the other financial products linked to the strange career of 1930s social welfare programs calls into question whether the Roosevelt Administration’s efforts to give working people a New Deal both saved capitalism and made managing risk an inh