March 17, 2014
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Back in September, the U.S. Department Education announced
its two-year and three-year federal student loan default rates. The
rates were 10 percent and 14.7 percent respectively, both record highs.
At the time the report was released, Secretary of Education Arne Duncan
called these numbers “troubling.”
NYU professor of
social and cultural analysis and Occupy activist Andrew Ross would
likely call these figures extortionist. Also, not at all unexpected.
“Creditors
have their foot on the throat of the global economy,” said Ross on a
panel last month at The Brecht Forum in New York. The panel—which
included writers, professors, and activists—was there to discuss debt
resistance, and Ross’s new book Creditocracy And The Case For Debt Refusal.
Resisting one’s debts is a tactic rarely if ever discussed by the
American media’s talking heads. Ross’s book humanizes the cryptic
problem of a society funded on credit, offering a political voice to
those whose economic power has been throttled.
Ross digs into the
injustice of the main kinds of American debt—medical, municipal,
student, and housing—but his biggest ax to grind is with student loans, a
contract that so easily binds teenagers and their cosigners to decades
of indebtedness to the banks. Students across the nation are being
turned into what credit financiers call “revolvers”, the most desirable
customer out there, the kind that month after month pays off their
interest without making a dent in their principal balance (those that
are able to pay this off as well are termed “deadbeats”).
The Student Debt Crisis and Government Action
Ross’s
sharp, morally charged language in his talks and throughout the book in
many ways mirrors that of senator Elizabeth Warren, who back in May
2013 introduced the Bank on Student Loans Fairness Act, which proposed
that student debts be refinanced at the same .75% rate that banks get.
It doesn’t seem like this will be happening anytime soon, though the
bill did spread awareness about the problem of student debt, and may
have helped pull Congress from the brink of allowing student loan
interest rates to double on June 1.
Just days ago Warren
spoke at the launch of the “Higher Ed Not Debt” campaign, created by a
coalition of unions, think tanks, and progressive organizations to
educate citizens about their debts and put pressure on legislators to
enact laws that will ease Americans’ 1.2 billion trillion in student
loans. “It’s about values,” said Warren. “Where, as a country, do we
believe we should make our investments?.... Invest in billionaires or
invest in students?”
Warren is right, the urgency of the
student debt crisis and the ideological shift required to dig us out of
it cannot be stressed enough. The average loan to a 25-year-old
American student has
risen 91 percent over the past decade. 7 million borrowers of the existing 40 million
are currently in default.
Penalties for not paying one’s student debts are harsh, even more so than other forms of debt.
Rohit Chopra, student loans ombudsman at the Consumer Finance Protections Bureau, recently
told Business Insider,
"Unlike other consumer credit, borrowers in default on a federal
student loan might see their tax refund taken and their wages garnished
without a court order." Since its creation as a provision of Dodd-Frank
in 2010, the CFPB, which set as one of its earliest goals curbing the
“unfair, deceptive, or abusive, practices” of debt collectors, has had
little success in administering anything more than a few wrist-slaps to
the multi-billion dollar industry, comprised of more than 4,500
collection agencies.
But Creditocracy
is no clarion call to get borrowers excited about supporting good
legislation or penning letters to their representatives. Instead, Ross
points to the toothlessness of the federal government in their
delusional partnership with the banks, “Central banks increasingly act
to ensure the solvency of banks, and not sovereign governments trying to
cope with public deficits.”
Debt as a Psycho-Social Problem
As
Ross points out, it’s actually kind of amazing that “Given the
battering that bankers have taken over the past five years...they still
command even a fraction of their standing as indispensable members of
society.” This has something to do with the “self-projected mystique” of
the banking community and the magical dark art of wealth production in
which they deal daily. Even if most Americans agree that the
ethical standards of bankers are low, the seduction of the American success story still dumps on them a huge burden of guilt for becoming mired in their loans.
So
strong is the narrative that to be in debt reflects some personal
failing, that average Americans, who needs to go into debt to pay for
the bare necessities—food, housing, education, medical expenses—enforce
the payback morality of the big banks.
Study after study
find that borrowers feel shame about being in the red, resulting in an
unwillingness to share their story with others. One study conducted by
the Royal College of Psychiatrists, which reviewed thousands articles on
debt and mental health published between 1980 and 2008, found that
people with housing debt experience, “heightened levels of uncertainty;
and feelings of stigma, shame and biographical disruption.” It also
found that in general, “People with debt and mental health problems
often do not seek help for financial difficulties.”
A 2013
study
out of Northwestern found that young adults ages 24-32 in debt had
higher diastolic blood pressure and rates of self-reported physical and
mental health issues. Debt grinds on the American psyche, yet speaking
out against debt, or even speaking about one’s debts, is discouraged.
David
Graeber, perhaps the most famous critic of today’s debtor economy,
summarized the mechanism for debt-shaming well in his essay “After The
Jubilee”: “The last thing the 1% wants, as the world economy continues
to teeter from crisis, is to give up on one of their most powerful moral
weapons: the idea that decent people always pay their debts.”
Another
misconception about student debt that helps keep borrowers isolated and
silent is the idea that it is mainly a middle-class white-person
problem. Not so. A staggering 81 percent of black students have student
debt, more than white students, and their default rates are much higher,
about four times those of white students’. College costs are
rising faster for low-income students
than for the wealthy. “As with every other form of personal debt,”
writes Ross, “the overall impact of student debt is magnified among
low-income families.”
Debt is also a major concern among
LGBTQ students whose families, according to Ross, are often financially
unsupportive, refusing to co-sign for federal PLUS loans. In 2012 the
Occupy Student Debt Campaign played on these twin hurdles of shame and
discrimination by promoting the slogan “Silence = Debt”, a nod to Act
Up’s famous rallying cry from the 1980s “Silence = Death”.
The Case For Debt Refusal
The
problem of student debt, which began with moneyed interests and is
perpetuated by myths of privileged borrowers, social obligation toward
the banks, and the shame of indebtedness, can be combated, without
government aid, if borrowers tap into their collective political power.
Ross’s tenets of debt refusal can be boiled down to a few key points:
1.
“The banks, and their beneficiaries, awash in profit, have done very
well; they have been paid enough already, and do not need to be
additionally reimbursed.”
2. “Obliging debtors to
forfeit future income is a form of wage theft, and, if the debts were
incurred simply to prepare ourselves, in mind and body, for employment,
they should be resisted.”
3. “Economic disobedience is justified as a protective deed on behalf of democracy.”
Ross
encourages his readers to reconceptualize debt as a form of wage theft
or a tax on the poor, hoping to organize borrowers in the same way that
labor unions have been able to do with workers.
Recently,
this tactic was put to practice, with disappointing results. In
November 2011 Ross joined with several other activists to launch OSDC,
an offshoot of Occupy Wall Street. The movement asked people with
student debt to sign a petition saying that they would refuse to pay
their student debt if a million others signed alongside them, the idea
being to harness the power of default to energize the growing debt
resistors movement. In Ross’s words, the goal of the campaign was, “to
offer a more self-empowering way of taking action and focusing public
attention on the issue.”
Other demands of the campaign
included free public high education (cost estimated at $70 billion);
interest-free student loans; full fiscal transparency from public
universities; all existing debt canceled. The ploy flopped, with only a
couple thousand financial saboteurs pledging their support, though
nearly a million people ended up defaulting on their loans that year
anyway. These astounding problems in American higher education have yet
to be redressed. Ross mentions several potential reasons for the
campaign’s failure: not enough funding, the difficulty of getting people
to identify as debtors, subversion from the financial sectors, and the
risks of default (of which more shortly).
Debt Refusal In Action
Recently,
however, a few very exciting projects have been undertaken by debt
refusal activists. Most successful has been the Rolling Jubilee, a
project of Strike Debt, which the OSDC had a hand in founding. On
November 13, 2013 the Rolling Jubilee announced that it had raised,
without any corporate donations, more than $600,000, which it used to
abolish $13.5 million worth of medical debt. It did so by descending
into the Hades of the predatory lending scene—the secondary debt market,
where banks who figure it’s time to cut their losses on loans that
aren’t yielding returns sell their customers’ debts for pennies on the
dollar. These debts are bundled into packages and sold as debt
portfolios to collectors who think they can make a scavengers’ profit
off the borrower. Rolling Jubilee went through the same process, buying
up these secondary debts on the cheap, then, rather than cashing in on
them, simply canceling them. Ross quips that the campaign was, “like a
going-out-of-business sale at the ‘Fuck Capitalism” store.”
Student
loans are federally guaranteed, meaning that in the case of default,
the government picks up the tab, another side of this multifaceted issue
for debt refusal campaigns to contend with. Since student loans are the
safest bet out there for predatory lenders it’s unlikely that the
Rolling Jubilee could be replicated to pay off these debts, as there is
no secondary market. According to their website, Rolling Jubilee is in
the process of researching a way to buy off private tuition debt that is
not federally backed.
Refusing to pay one’s debts comes with
harsh consequences. The reality is that there is virtually no end to the
havoc credit collection agencies can wreak on the lives of borrowers
and their loved ones. Student loans are the only kind of debt that
cannot be cancelled by filing for bankruptcy.
If borrowers refuse to pay or can’t, lenders, as Chopra suggested, can
garnish their wages while bypassing the courts; they can require
cosigners to pay in their stead; they can revoke the borrower’s
professional license; they can send the borrower to debtor’s prison.
Women, LGBTQ people, people of color, and people from low-income
backgrounds are, in general, more exposed to these risks.
It
also seems that Strike Debt, in not consulting the proper financial
advisors when they conducted the Rolling Jubilee, opened themselves up
to tax risks, which the IRS can decide to go after up through 2017.
Naked Capitalism editor Yves Smith
wrote a great post
back in December 2012 about how these potential pitfalls could land
those that the Jubilee was trying to help with yet more debt.
One
idea that’s been tossed around by activists who work on the issue of
debt refusal, such as Strike Debt, is to focus on getting people who
know they will be defaulting on their loans anyway to do so
collectively. At the end of March, Strike Debt will release the second
edition of its Debt Resistors Operations Manual (DROM). The new DROM,
published by Common Notions (the original existed in pdf and pamphlet
form), will feature new chapters, most notably a chapter on climate
debt, and expansion of existing chapters, particularly the last chapter
about organizing around debt. Launch events will take place in Oakland
and New York in the coming weeks.
It is also important
to note that, while the debt resistors movement in the U.S. is
relatively weak, there are ally organizations worldwide including the
International Citizens Debt Audit Network (ICAN) throughout Europe,
Egypt, and Tunisia; CAC in France; ELE in Greece; IAC in Portugal. The
most recent Rolling Jubilee was inspired by the
Jubilee South
movement of the 90s and early 2000s, widely acknowledged to be one of
the most important and effective social justice campaigns ever
undertaken, and particularly Jubilee 2000 where more than 40 countries
collaborated in cancelling third-world debt, organizing peaceful
protests all around the world. “Much of the white middle-class
indignation,” writes Ross “is a response to being treated like the
indebted brown peoples of the South, or minority populations in the
North with long experience of disenfranchisement and bad debt.”
Hopefully
these movements will manage to unite the debtors of the world in
collective action. Until then, the invisible hand of unchecked credit
market forces remains at the throats of borrowers everywhere.
Hannah Gold is a journalist, creative writer and former intern at the Nation. She lives in Brooklyn and blogs here and on Twitter @togglecoat.
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