Perspective | History says student loan debt relief isn’t un-American (2024)

But history reveals that such claims are false. For much of the country’s history, Americans have pressed their governments for relief from debts — and often, legislators granted it. This long tradition suggests that today’s ruling won’t put an end to the debate over debt relief, and the activism associated with it may yet pave the way for new protective policies.

Even before the U.S. Constitution was adopted, indebted Americans sought relief. Over a six-month period between 1786 and 1787, thousands of armed farmers, calling themselves Regulators, marched on courthouses in organized regiments, preventing judges from issuing judgments against debtors and freeing them from prison. Although this insurgency, known as Shays’ Rebellion, ended in military defeat, the Massachusetts state legislature ultimately issued a moratorium on debt collection, as did the legislatures of several other states.

Other debtors pursued similar ends through less violent means. In 1819, for instance, when the United States entered an economic depression, Kentucky was particularly hard hit, and many residents urged the state legislature to provide debt relief. Lawmakers responded with zeal. In 1820, they chartered a new bank, and authorized it to lend up to $1,000 (almost $26,000 in 2023 dollars) to individuals for the repayment of “just debts.”

The Kentucky legislature also went further, stipulating that creditors must accept repayment of debts in the form of (badly depreciated) notes from one of two state banks. If they refused, a debtor could delay repayment for two full years. When the state Supreme Court declared this law unconstitutional, the legislature passed a statute creating an entirely new court. Unsurprisingly, the old court deemed this move yet another violation of the state's constitution, and for three years, both high courts remained in operation, each refusing to acknowledge the legitimacy of the other.

While Kentucky’s court standoff was extraordinary, the legislative effort to protect over-indebted borrowers was common throughout the 19th century during times of economic hardship. State legislatures also prohibited the sale of mortgaged properties at too great a discount from their former value, and passed “redemption laws,” extending the time available to debtors to buy back their mortgaged properties once they had entered foreclosure. Some even closed their courts temporarily to prevent the issuance of judgments against debtors. State legislatures were also responsible for the proliferation of homestead exemptions, which shielded a portion of debtors’ assets from collection even if they could not repay their debts.

Courts deemed many of these measures unconstitutional, but state legislatures continued to pass them, calculating that the political benefit to passing these laws outweighed the risk of a judicial determination that they overstepped. One pro-debtor newspaper in Kansas urged its legislature to enact a stay law in 1890, remarking that “if in the opinion of the Supreme Court it should prove unconstitutional, no harm will have been done.” Chiding legislators for their “fear,” the columnists pointed out that, “Legislatures [had] passed unconstitutional laws before.”

Crucially, farm organizations repeatedly mobilized their members to fight for debt relief. They also worked to ensure that Americans did not perceive over-indebtedness as a personal failing.

These efforts shaped the politics of the issue.

The push for debt relief during times of economic hardship carried into the 20th century and influenced legislative responses to the Great Depression.

On Feb. 23, 1933, for example, thousands of over-indebted farmers converged on Minnesota’s state capitol, demanding relief. Gov. Floyd B. Olson addressed them from the steps of the state capitol. Describing the dire economic situation and the mounting threat of violent resistance to debt collection, Olson announced a moratorium on mortgage foreclosures until May 1.

It was not at all clear that the governor had the power to halt mortgage foreclosures, but the state legislature quickly passed a law to validate all postponements made in compliance with the governor’s proclamation. The statute also allowed local courts to extend the time available to borrowers to repay their mortgage debts.

When the United States Supreme Court reviewed this law in Home Building & Loan Association v. Blaisdell, it broke its century-long pattern of invalidating states’ moratoria on debt collection, ruling that such emergency debt relief did not violate the Constitution’s Contract Clause. By doing so, the court acceded to state legislatures’ regularized practice of intervening on behalf of debtors during times of economic hardship.

Yet generous debt relief found fiercer opponents and fewer advocates as the 20th century wore on. Post-WWII prosperity and new lending technologies made credit more ubiquitous for wage-earning borrowers, but large-scale protests for debt relief largely disappeared. Unlike 19th-century farmers, 20th-century wage earners never faced frequent deflationary crises, which might have taught them to organize and mobilize for debt relief. Their advocacy organizations also didn’t prioritize the issue like 19th-century farm bureaus had.

Organized labor initially viewed credit positively — as a way to spur demand for the wares its members produced. Civil rights organizations focused on fighting predatory arrangements that victimized Black Americans due to their exclusion from mainstream finance. They saw legislation mandating nondiscrimination in credit, not debt forgiveness, as key to full economic inclusion, and the solution to debt-related problems in minority communities.

The orientation of these organizations also meant that there was no push to save indebted wage earners from stigmatization. A 1938 solicitor general’s report had asserted that laws which discharged the debts of insolvent wage earners would facilitate, “if indeed...not stimulate, extravagance, shiftlessness, petty dishonesty and utter disregard of the rights of others.” Over time this perspective won out.

As consumer credit further expanded from the 1970s onward, creditors’ groups worked to paint those in need of debt relief as undeserving. In 1984, the consumer credit lobby secured an amendment to the bankruptcy code which introduced the term “bankruptcy abuse” into law.

In the 1990s and early 2000s, this lobby worked to mean test access to Chapter 7 — the most generous part of the bankruptcy code. They succeeded in the Bankruptcy Abuse and Consumer Protection Act of 2005, because as then-law professor Elizabeth Warren noted, the issue was “never a top priority” for unions and liberal advocacy organizations, despite Americans’ mounting levels of debt.

Yet, in the 18 years since that law passed, protesters have revived arguments about the power of private debts to subjugate and oppress. Some have worn chains made of duct tape or staged protests pinned under a giant “debt boulder.” All have emphasized that debt is often unavoidable, incurred to meet people’s basic needs. Many find themselves indebted after medical emergencies or job losses. Collectively, Americans hold $17.5 trillion in debt, some $2.9 trillion more than at the end of 2019.

For much of American history, legislators recognized that widespread reliance on credit created a need for a safety valve. They did so despite the recognition that lenders could pass the costs on to future debtors in the form of more expensive credit, or even restrict access to credit altogether. Because of the key role of credit in the lives of millions of American households, these remain serious concerns. Yet, Congress, state legislatures and borrowers have weighed these risks before and still often decided in favor of relief. In light of this long tradition, it is clear that the demands of today’s student-loan debtors are far from un-American.

Many early debt relief laws proved temporary, remaining in force for only a matter of months or years. All of them were partial, offering relief to only certain kinds of debtors. But these short-lived statutes had long-term consequences, as new generations of debtors looked to the last set of relief measures as proof that government could protect them, especially in times of widespread distress.

Historically, that meant even temporary victories facilitated durable changes in law and public policy. If the current fight for student debt relief follows this pattern, it will outlast this ruling, reshape the way we think about relief and pave the way for new protective policies.