Forgive, forget or reform? The problem of student debt is finally paying off with some long-overdue solutions
Before she even graduated from the University of Nevada, Reno, Lisa started getting bills showing how much she had borrowed and nudging her to start paying immediately to keep her interest down.
In 1995, she’d accrued $24,000 in debt and was still at a least year shy of a bachelor’s degree.
The amount of money she had already borrowed and the amount she needed to finish school freaked her out. She figured she was digging a hole that would only get deeper.
Rather than finish her journalism degree, Lisa quit school. She sent out 150 resumes to newspapers across the country and took a job at a newspaper in a Los Angeles suburb for $8.50 an hour.
Since then, she’s had good paying work at Boeing and other tech companies in Seattle, but the work is not consistent.
For those three years in college, Lisa, now in her forties, owes $100,000, an amount that is steadily growing all the time.
The debt is never far from her mind. Lisa declined to give her real name because she’s afraid of collection agencies. She even lacks a land line to avoid their calls.
Lisa found student-debt activist Alan Collinge online back in 2007. Collinge runs the organization Student Loan Justice and wrote “The Student Loan Scam” in 2009.
In the pre-Occupy Wall Street days, student debt was a fringe subject, Collinge said. People assumed students like Lisa mismanaged their finances or majored in the wrong subject. Besides, people believed that student debt was “good debt.”
“People just didn’t take it seriously,” Collinge said.
Now that nearly one in three people will default on their student loans after 10 years, student debt is harder to ignore, he said.
It’s getting worse. Collinge expects eventually half of students with loans will default.
“Student loans are going to become one huge, national joke,” he said.
Nobody’s laughing. Occupy Wall Street helped draw attention to the issue, as did news that the total amount of student debt owed in the country has surpassed $1 trillion.
But while more activists are taking on what’s sometimes referred to as the “student debt bubble,” there’s no unified message on what to do about it. Everyone offers a different panacea for the student debt crisis. When these get to the level of state and federal legislatures, most solutions falter.
Every Wednesday evening in Seattle, students and Occupy Seattle members march the streets banging pots, hitting drums and blowing vuvuzelas in a Student Debt Noise Brigade (SDNB).
With the help of the Backbone Campaign, a Vashon Island-based economic justice activism group, SDNB started marching on Capitol Hill in May. It is calling for the federal government to forgive student debt. It’s called a jubilee, a Biblical call to free slaves and forgive all debts.
“Education should be free,” Damien Conway, a member of SDNB, said. “No one should be a debt slave to better yourself.”
A second group of marches, in September, organized at the University of Washington just in time for the school year.
The odds of outright forgiveness are long.
In 2011 President Obama signed an executive order to create a program that would collect a wage-based payment from students for 20 years after college, at which point the remaining debt would be forgiven.
Activists say debt forgiveness should happen faster than that. Too many students default on their loans before 10 years.
They’ve rallied behind the Student Loan Forgiveness Act, which would collect a wage-based payment from students for 10 years after college, at which point the remaining debt would be forgiven.
Safety in numbers?
Occupy Wall Street protesters want to take a different approach. They believe the federal government won’t forgive debt, so activists must withhold payment.
Thomas Gokey, an activist who works with Occupy Student Debt and an anti-debt organization called Strike Debt, said those with student debt must unite to gain power.
Gokey and others with Occupy Student Debt are collecting pledges from people who say they will refuse to pay their student loans in order to send a message to the government and schools about the high cost of education.
Unlike a union strike, with coworkers walking out side-by-side, debt strikes involve people who may not even know each other. Participants agree to refuse to pay their debt bills at a set time — a potentially catastrophic move for people with mountains of student debt.
There’s safety in numbers, Gokey said.
“We’re not asking anyone to strike debt as an individual,” Gokey said. “We need to collectivize our resistance. It becomes much less scary to think about striking debt with millions of other people.”
The group has already collected online pledges from thousands of students, and it hopes for a million pledges.
There’s still work to do, Gokey said, because 6 million students in the United States are already in default. But while lenders across the country could collectively absorb 1 million students refusing to make payments, a single organization could be sunk by such a move.
“A smaller group of people could simultaneously strike and make a midsize lender go belly up,” he said.
Many students say they’re scared to refuse payment. Defaulting means that fines and interest multiply the amount of money owed.
Organizers say such fear helps maintain the status quo.
“Banks and the government want you to be terrified about resisting,” Gokey said. “One of the things that’s so oppressive about debt is that it tends to atomize and individualize you.”
Bringing bankruptcy back
But Collinge, of Student Loan Justice, seeks a solution that may not be as sexy as striking against debt, though it might be easier for Congress to pass. Collinge wants students to have the option to declare bankruptcy as they did in the past.
High tuition and interest rates hurt students, but the lack of consumer protection makes student lending predatory.
When students default on their debt, the federal government can reimburse the lender while the lender continues to demand repayment from the student. A defaulted loan can yield lenders more profit than a student who pays his loans on time, giving businesses incentive to let students fall behind on payments.
When businesses flounder in debt, they’ve got a restart button — bankruptcy. But in 1998, the Higher Education Act eliminated the possibility for students to do the same.
The act was meant to prevent wealthy law students and doctors from filing bankruptcy right after school to avoid paying for their education, a scenario which Collinge said happened less than 1 percent of the time.
Reinstating the option to go bankrupt isn’t giving people a free pass, said Natalia Abrams of the Backbone Campaign and cofounder of the nonprofit Student Debt Crisis. Bankruptcy is disastrous, Abrams said, but unlike default, it at least offers debtors some closure.
Not the ticket?
Student loan debt is a bigger deal today in large part because student loans are more essential.
Back in the 1970s, a student could earn enough money for tuition in 200 hours of work. Today, Collinge said, it would take more than 2,000 work hours.
Prospective students now must choose to enter the workforce without a four-year degree or face years of student debt and risk default.
“It used to be that college was the ticket to the middle class,” Abrams said.
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