‘Accepting the competitive challenge’: The ideological and legislative origins of the student loan industry in the U.S., 1958-1973
Keywords: Student loans, Debt, Neoliberalism, United Student Aid Funds (USAF), Richard Cornuelle, Higher Education Act of 1965, Student Loan Marketing Association (Sallie Mae)

This thesis examines the ideological and legislative origins of the student loan industry and their relationship with the emergence of neoliberal modes of governance in the U.S., between 1958 and 1973. Specifically, it explores how the presidential administration of Lyndon B. Johnson sought to create the country’s first universal, federal program of student loans via the Higher Education Act of 1965 and how a non-profit student loan guaranty agency, United Student Aid Funds (USAF), in conjunction with the American Bankers Association (ABA), lobbied for crucial changes to the legislation, merging the proposed federal student loan program with novel embodiments of market-based finance and individualized debt. The thesis draws on five months of archival research at the Hoover Institution at Stanford University; the National Archives in Washington, D.C.; and the Lyndon Baines Johnson Library and Museum in Austin, Texas. I trace the intellectual roots of USAF through its parent organisation, the Volker Fund, and Volker Fund employee Richard Cornuelle, whose thesis of the ‘independent sector’ served as motivation for establishing USAF. Cornuelle defines the independent sector as voluntary associations of people underpinned by private finance which compete with the federal government in order to provide basic services for citizens. Advocating a rejection of Keynesianism and a return to independent sector governance, Cornuelle discussed his successful attempt to establish the country’s first nationally operating student loan guaranty agency, USAF, in 1958. Having lobbied itself into the Johnson administration’s Higher Education Act, USAF, in partnership with the ABA, worked with the Johnson administration to administer the newly established Guaranteed Student Loan Program (GSLP). I examine how USAF and the ABA worked with the Johnson and Nixon administrations to establish the Student Loan Marketing Association (Sallie Mae), a government sponsored enterprise designed to produce private liquidity for and increase profit through the GSLP, via an act of Congress in 1972. Finally, I consider how, with the liquidity and potential profitability of the GSLP established, USAF and the ABA lobbied the Nixon administration and Congress to amend the country’s bankruptcy code to counter the tsunami waves of defaults and bankruptcy declarations which began shortly after the program’s inception. I draw on Foucauldian understandings of neoliberalism as market-based discourse and governmentality through which collective governance is individualized, marrying this approach with Marxist analyses of how processes of assetization and the commodification of debt underpin social reproduction and capital accumulation within contemporary neoliberal capital. This thesis contributes to the recent ideational turn within neoliberal studies by considering the ideological, institutional, and legislative relations and frameworks through which such processes are mobilized and unfold.