Contracting for Debt: The Relationship Between Debt Capitalism, Higher Education, and the Black-white Wealth Gap

Abstract

This Note explores the relationship between contractual parties in the credit market, as shaped by debt capitalism, through a brief history of slavery, peonage, and credit/debt legislation. Debt capitalism is a racially exclusionary system — stemming from slavery — in which asset acquisition, facilitated by working to pay debt, (1) is a requirement for inclusion in the economic market, and (2) has a disparate impact on excluding Black Americans from wealth building given their bargaining power position. Over time, debt capitalism shifted from using Black enslaved people as primary sources of labor and collateral to indebting freed Black Americans. Currently, debt capitalism continues to extract labor and interest from Black Americans in particular through different forms of debt peonage. I highlight what I call modern student debt peonage through the story of the Greenes, a couple who filed for bankruptcy and claimed that the U.S. Department of Education owed them reparations in the form of student debt cancellation.

By exploring predatory consumer bankruptcy practices and the strengths and weaknesses of the Greenes’ claims in the context of the socio-political and economic subordination of Black Americans by the U.S. government, this Note debunks the idea that a student loan is a valid enforceable contract signed by equal parties. The Note supports policy proposals for student debt relief, such as full debt cancellation, bankruptcy reform, and abolishing the current student debt complex. This Note encourages the use of an alternative framework for negotiating and defining credit relationships, which relies on a more equitable understanding of opportunity. This alternative framework could mobilize debt relief policies that reduce the Black-white wealth gap.

Keywords: Contract Law, Bankruptcy Law, Consumer Law, Legislative History, Policymaking, Economic History, Student Debt, Higher Education Policy, Credit Markets, Black History, Wealth Inequality, Race, Racial Justice, Peonage, Slavery

JEL Classification: I2, I22, I23, I24, I25, I26, I28, I3, J1, J15, J16, J47, J62, J68, K11, K12, K35, N31, N32, Z13