The Defense to Repayment for Student Loans and Debt Jubilee

maxresdefaultNew Orleans   The announcement by Secretary of Education Arne Duncan that student loans will be forgiven from tens of thousands of students who attended Corinthian Colleges, a for-profit company that went belly up last month teaching many invaluable but expensive lessons in finance and apparently fraud.  The action is important on many levels, but it is vital to acknowledge that it comes because of a debt strike by former Corinthian students organized by the Debt Collective, and that’s big news in and of itself.

The foundation for the action is a rarely used snippet of the Higher Education Act called the “defense to repayment” or DTR by the legal community.  Quoting the Boston Student Loan Lawyer:

The DTR clause basically says that in an action to collect on a federal student loan by the U.S. Department of Education, “the borrower may assert as a defense against repayment, any act or omission of the school attended by the student that would give rise to a cause of action against the school under applicable State law.” In other words, if the school engaged in practices that violated state law which resulted in the disbursement of the federal student loans for which the borrower is now being hounded, the borrower can assert the school’s actions as a “defense,” and the U.S. Department of Education has the authority to do something about it—including relieving the borrower of the obligation to repay the debt. In essence, loan forgiveness.

The problem has been that everything to date has been at the total discretion of the Department of Education with no procedures for a student to apply for or receive the aid unless a school was sued by the DOE or whatever.  Duncan’s announcement commits to creating a special master to cut the knot and create procedures for applications at Corinthian and, very importantly, other institutions.  This could open the floodgates because there is a rogue’s gallery of so-called educational institutions that have been ripping off the dreams and dollars of lower income, working students trying to grab a future against all odds.

A member of the Debt Collective argued that there should have been some “blanket relief” rather than an applicant triggered process, and he’s undoubtable right, but our Citizen Wealth Centers will certainly try to jump on this problem to help process applications and hopeful other unions and community-based organizations will do so as well.

Some in Congress are also squealing because the DOE guesstimate is that there were 350,000 Corinthian students over the last five years who have had loans and if they all applied for and received debt relief the price tag for just this one crooked college would be $3.5 billion.  And, as I say, that’s just the start.

Only some almost biblical jubilee eliminating these debts and then turning off the spigot of deceit and debt loading from so many of these diploma bills right at the tap is ever going to force the level of accountability needed and bring the student loan crisis to a halt.  Corinthian may have been the worst of the worst, but if there’s progress on this front, there will have at least been one good thing connected to their foul name and reputation.

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Forgive Some Portion of Student Debt and Make Payments Affordable

New Orleans   According to a recent report from the credit bureau, TransUnion, covered in the Wall Street Journal, student debt is now knocking on the $1 trillion mark with $900 billion now on the books.  More than $300 billion of that debt is termed “subprime” student-loan debt, where the likelihood of repayment by once ambitious and hopeful young people are now older and broker with shoulders sagging under the burden is rated as next to zero.

What is “subprime” student debt anyway?   This is a sticky wicket!  At one level a student borrower becomes “subprime” after getting the loan based on the credit bureau’s ratings of her payment history, and of course that missing payments or falling behind also means higher interest rates and penalties.  Subprime also defines a category of borrowers with no job and limited assets, which pretty much defines the whole student population asking for a loan.  The more one looks for clarity, the clearer it becomes that this is a bit of political-financial alchemy to keep there from being widespread panic or a real solution to this vexing debt for people.  Whatever the name $900 billion in debt with significant parts, over nearly $400 million on the TransUnion numbers is more than 90 days in arrears, is a huge problem begging not for a payment, but for a solution.

Since most of this debt (93% of student loans are now made by the US Government) is either made by the government or will end up being covered by the government, we need to start applying the same solution that should have been undertaken in the face of the housing crisis and the mass of foreclosures.  We need to write down some portion of the debt, let people move forward with their lives, and make the payments affordable so that the loans are active again.

The cynicism of promising young, impressionable young people filled with hope and aspiration that their ticket to the big game for their future and their success is all premised on higher education is nothing but a big time racket.  The dual promises of the so-called “American Dream” premised on a stable and secure job thanks to education and then later home ownership because of the steady income from that same job is not simply mythical, it is an irresponsible scam in too many ways.  The level of the debt that is also foisted on these same homes by for profit training, degree mills is no different than the “liar’s loans” promoted by unscrupulous mortgage brokers, but, oh, right, they did get away with that too, didn’t they?

The recession has forced us to rethink housing, but education is still skating accountability.

Let’s restate the loans to market value, just as we have argued with underwater housing mortgages and rewrite the payments to affordability, which even the new federal consumer protection outfit has argued for in the housing sector.  Let’s give young people a chance at a future, even if we can no longer guarantee them a good one.

 

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Oil Field, Big Money, Big debt or School?

Dauphine Island     A front page article in the Times blurted out that “Pay in Oil Fields, Not College, Is Luring Youths in Montana,” as if they were sounding the alarm that perverts were roaming loose in the playgrounds.  A 19-year old was shown in front of his new, black GM Silverado pickup in short sleeves with the snow dusted trees of eastern Montana behind him.  Just out of high school, he was making $50,000 per year in the latest oil field boom with fracking wells there between Montana and North Dakota.  A young woman was making $20 per hour as a server.  Others were helping build the “man camps,” hotels, and houses.  School principals when interviewed told of shooing away recruiters, as if they were candy men, from their charges.  Community college enrollments were down by almost half in the area.  I scratched my head reading this, was in an alarm or an advertisement?

We have national crises of youth unemployment with escalating higher education costs and student debt loads that are staggeringly unconscionable with no relief in sight, and someone thinks it might be news that young people would jump at the chance to make $40 or $50 grand right now, today in the oil fields.  What world are these people living in?  Pull up your pants and stop showing so much of your class!

We all remember forks in the road in our lives, where we might have taken this route or another, made this decision or another, and our lives would have been totally different.  Being born and raised in the oil patch from Wyoming to Colorado to Kentucky and finally to Louisiana where we chased the fields, I can tell you the siren call is loud and tempting.  I worked as a roustabout in the Velma oil fields south of Oklahoma City the summer after graduating from high school to make money to go to college.  I was only there to make money.  I’d work my shift during the day and at night I would process invoices and run totals on a hand cranked calculator in the office.  One 20 day stretch it was over 100 degrees on that red dirt and dry as a bone so much that several times we dropped a job, threw our tools in the truck, and when highballing on the dirt roads to fight grass fires with tanks strapped to our backs to keep the fire from the horsehead pumping wells.  I was offered a job as a foreman on a crew at the end of the summer, but I had spent too much time listening to Pete Bills tell about his life from Oil City, Pennsylvania to Texas to Oklahoma chasing oil to be tempted.

On the other hand the next summer working offshore for a contracting company on Chevron rigs out of Venice, Louisiana, 14-on, 7-off with 12-hour shifts and living on the rigs, I had one year of college done, Vietnam was raging, I was making money, and the bloom of school was off the rose from studying, working shifts in the cafeteria, driving a laundry truck, and stacking boxes of books at the college bookstore.  Drilling was in full force on the huge new fields in Prudhoe Bay, Alaska, they were desperate for workers with oil field experience, and the rumor was that they were so desperate you could get a critical job draft deferment.  Alaska, too, was something ever kid raised in the West wished and wondered about – it was Wyoming on steroids!  But, at the end of that summer the gut check was really all about the money.  If I signed on for 90-days straight on a drilling rig they would pay me $20,000 for the tour, shake my hand and I could come back for more or keep walking wherever my life led me.

$20,000 for 90 days work would be tempting today for 19-year old, but $20K 45 years ago was big time, crazy money!  Thanks to the miracle of Google, I can tell you that those 20000 dollars in 1967 would have had the same buying power as $137,186.63 in 2012!!   I was going to Williams College at the time which then, as now, was priced at the top of the scale, but $20K would have paid my tuition all four years meaning a 90-day turn in Alaska and the financial loan and debt burden of school would have been next to nothing.  I rolled around on that platform bunk 10 miles out in the Gulf of Mexico many a night trying to figure out what to do and whispered about what it all meant to the young girl back home I was dating in New Orleans until her father would come to the door in the wee hours to reel her back in again.

Maybe if the offer had been a little firmer?  Maybe if my years in the warm weather of Louisiana and then the freezing winter of western Massachusetts hadn’t made me wary of 90-days in the winter in Prudhoe Bay?  Maybe if I had been willing to break with my parents then, as I was only a few months later?  Maybe if I were surer about the draft deferment or whether my bad knee would keep me away from the rice paddies and war of Southeast Asia?  Maybe this, or maybe that?  In the end I passed on Alaska and all the money that came with it then, and went back to school for another 4 months before leaving to organize against the war and making the series of large and small decisions which became my life to this day.

Nonetheless, I can’t read an article like this one in the Times without knowing how easy it would be to grab the job and the money now, rather than the certainty about school debt and uncertainty about employment later.  If I were living anywhere in the West east of Billings, I would be in the oil fields in a minute today.  I still think about how close the call was then in Louisiana to pass on Alaska and give Massachusetts one more, last chance.

More of us need to realize, there but for fortune….

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Forgiving Interest and Amnesty for Student Debt Fines and Penalties

Toronto  A trillion dollars in student debt is on the books in the USA.  The Department of Education paid $1.4 billion to bloodsucking debt collection agencies last year.  Debt collectors refer to the process as “lip smacking,” an “oil well” of opportunity, and so forth.  The government claims it will collect almost 85 cents on the dollar and finance professors say 50 cents on the dollar is more likely.  The costs of the debt collectors is larded on to the debt held by the borrowers, so for the government it is a pass through with no guilt and no pain, but for citizens chained to the debt by their dreams it is more weight taking them to the bottom.  Debtors refer to their student debt as a “modern debtors’ prison” and something that they will take to their grave and never escape.  The leading institutions that have amassed the debt are in many cases on-line universities led by the University of Phoenix, Kaplan (owned by the Washington Post), and a host of others that come close to being predatory “educational” institutions that working people have grasped for and then found no lifeline.

All of this was a front page story in the New York Times.  Ok, they didn’t use the words predatory, but the information was unmistakable.  They also didn’t have much to offer in the article that might indicate in this economy that there is any hope or relief in sight.  There needs to be!

One easy solution that wouldn’t change the world but would make a difference is to forgive all of the interest payments on student loans which is what is done in Canada for example.  Talking in the car about the ACORN Canada organizers student debts largely from graduate programs or similar situations, all agreed that they got the money back on their taxes.  It would help.

Having the Department of Education act to reduce fees and penalties would also make a huge difference.  I’ve argued in the past that as a matter of protecting and advancing citizen wealth more of us need to do everything we can to get people with this debt away from collectors and before judges where the odds are amazingly good that the grossness of the added-on debt will be reduced to something closer to the original obligation or put on a basis where some form of payment can be made.  Frankly rather than have the DOE pay bloodsuckers $1.4 billion, the DOE needs to move to adjust the debt for any good faith and full realization effort to bring the debts current and pay them off as performing loans.  Heck even the IRS in many cases waives interest and penalties, so why can’t the DOE?

Thirdly, the DOE and the rest of the government have to protect students.  Recently I dealt with a family in Phoenix where in a couple of years a young man to his shock ended up in debt $50,000 to one of these heavily investigated and fined so-called educational operations that claimed they were training him to design video games, but kept baiting and switching him from one course to another because they couldn’t deliver leaving him still without a degree but with a mountain of debt.

We can’t build the economy of the future on this kind of flimflam and debt, and men and women trying to navigate the changing financial fortunes of the country are paying the price.  We need a student debt bailout for the millions who are drowning now.

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Cost of Higher Education Stirring Students to Streets in Montreal

Student Protests in Montreal

New Orleans   I had not been paying enough attention to a random piece about students rallying in Montreal until my coattails were pulled the other day by a friend and colleague, Eric Shragg, who is a professor, author, and activist in that city.   In a brief email he mentioned that the increase in US-terms was not catastrophic, but that students with lots of community support were reacting in record numbers – more than 200,000 hit the streets in late March – because they saw the tuition rise as the sharp stick of neoliberal retrenchment poking them – and their futures – in the eye.  The increase in fact was over $1000 and represented a 75% hike in what had amounted as extremely reasonably priced higher education.

A video link from Eric on YouTube was an impressive organizing “flyer” for increasing the pressure even more this coming Sunday, April 22.  It’s worth checking this out:

In Canada students are widely organized and represented by their own associations, and, if anything, this is almost truer in Montreal and Quebec in general.  Three different student organizations have taken the lead in organizing the protest where 170,000 students are currently boycotting classes.  Shrewdly they have adopted the color red for their activity, symbolizing debt (“going in the red,” obviously – brilliant!) and the color enlivens all of their activity.  According to yesterday’s news the government and the students are still miles apart but entering discussions of sorts with the large demonstration looming ahead this weekend.  Quebec Premier Jean Charest  has also refused to meet with CLASSE, the largest of the striking student groups, by trying to claim that they have encouraged vandalism and violence, essentially the standard response in trying to reframe the government’s position to tactics rather than substance to distract the public from the tuition increase.

This is not “occupy.”  This is action, and it is worth following and taking seriously.

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