From the Rolling Jubilee to the Debt Collective
Originally posted on teh Strike Debt blog here: http://strikedebt.org/debtbuy4/
Strike Debt’s Rolling Jubilee project has abolished $3,856,866 in private student loans for a little over $100,000.
These debts were held by students who attended Everest College, a predatory for-profit institution in the Corinthian Colleges network. We bought loans from this school in order to focus public attention on the grim consequences of allowing higher education to be used as a vehicle for private profit. The students at this college were conned. They are being left with no good options as the campuses are closed or sold off to other predatory actors. The Department of Education is not doing its job to protect the students.
In the short term, we intend to help Corinthian College students pursue their grievances. But our long term goal is to end student debt, along with other forms of predatory lending. Access to vital common goods, like education and healthcare, must be available for free, as they are in almost every other wealthy country. To achieve this goal, debtors need to be able to organize together and collectively use their debts as leverage.
In recent months, we have joined Everest students in their fight against Corinthian and the Department of Education. We’ve also launched the Debt Collective, a platform for debtors around the country to find each other and fight back. Learn more at debtcollective.org.
The debt purchased by the Rolling Jubilee – almost $4 million worth – belongs to the most extorted students we know of. They were enrolled in Everest College, a predatory for-profit institution that is part of the Corinthian College network (CCI). Now in its death throes, Corinthian is trying to sell off its campuses, along with its own high-interest student loans, so that the swindling can continue under new management. We chose Everest because it is the most blatant con job on the higher ed landscape. But the problems go far beyond the sleazy for-profit sector. It’s time for all student debtors to get relief from their crushing burden. That’s why this Rolling Jubilee debt buy (one of the last we will make as we get close to spending all of our funds) is also the beginning of the Debt Collective, a long-term organizing project.
What happened to these student debtors?
Everest students have been carefully and deliberately led into a debt trap. The promise of job placements was the bait, and the employment stats were doctored. No university, not even an Ivy League college, can guarantee jobs for their recruits nor should they imply they can do so. The goal was simply to trick students into attending, regardless of their circumstances, so that profits could start flowing. They were then set up to max out on federal loans, after which revenue from the college’s own private Genesis loans (at 14.8% interest rates on average) kicked in. This formula for extracting interest was reinforced by overcharging-- the cost of some degrees on offer was as much as 15 times higher than the same program at a nearby community college.
Who set the debt trap?
A) The private profiteers. They range from Jack Massimino, CEO of CCI (who pocketed more than $3 million in compensation last year) to the executives and shareholders of Wells Fargo and Graham Holdings, the company’s largest institutional investors. The lucre they extracted from tuition depended solely on CCI’s ability to pull student loans from the federal government (a source of up to 90% of revenue) and from cozy arrangements with private lenders. One study of for-profits showed that 41.8 percent of all revenue went to marketing, recruiting, and to profits while only 17.7 percent was spent on actual instruction.
B) The federal government. Elected officials allow higher education to be used as a vehicle for private profit. This formula applies to all sectors—public universities, private non-profit colleges, and for-profits. For-profits (which we should call Wall Street’s colleges) are the worst defrauders, but in many ways they are just the extreme version of our increasingly bottom-line-driven and debt-dependent higher education system. Nor is the federal government a neutral, non-profiting body. Last year, the federal loan program generated a profit of $51billion for the government. That sum, incidentally, is much higher than Strike Debt’s estimate of what it would cost to fund an entirely free public higher education system in the U.S.
C) The industry lobbyists. The Association of Private Sector Colleges and Universities–the trade group for the $30 billion industry–is one of the most powerful lobbies on Capitol Hill. A war chest of up to $25 million annually provides lavish fees for lobbyists, many of whom are well-known former members of Congress, to ply lawmakers (or future lobbyists) with campaign funding. Every wheel is well-greased to make sure that the revenue stream is protected. At its peak, CCI was taking in half a billion dollars in Pell Grants, more than the entire University of California system. Overall, one in ten dollars spent on higher education goes to Wall Street, and much of that comes through the for-profit sector.
Who got trapped?
While students at UCLA and NYU are also burdened with crushing debts, there are demographic factors that made Everest students especially vulnerable. Students from low-income households, disproportionately from minority backgrounds, are more and more shut out of strapped community colleges and channeled into the for-profit sector. Recruiters see low income students as easy prey, and the marketing is targeted to exploit their precarious circumstances. Race, class, and gender markers are used to appeal to their dreams and their economic desperation. The California Attorney General found that CCI targeted single parents close to the poverty level, a demographic that company recruiters described as “isolated,” “impatient,” individuals with “low self-esteem,” who are “stuck” and “unable to see and plan well for the future.” Throw in the false advertising about job opportunities, the lies about job placement, the high rates of withdrawal and default, and you have a perfect recipe for turning the American Dream into the American Scam.
Who owes whom?
Everest students should owe nothing to creditors who knew, in advance, that students were being hustled and that they would be unable to pay back the loans. The true delinquents are the private and federal lenders who were fully aware the Everest operation was a swindle. All current and former Everest students deserve to have their debts discharged, not just those whose campuses have shut down. They are also owed a decent education. Revenue clawed back from the profiteers by legal means should be used to fund their enrollment in public colleges.
What should be done?
The Rolling Jubilee bought Everest College debt for 3% of its face value. That is its true worth. At the very least, no student at a CCI college should pay back more than 3% of their private debt. And they have a valid case against the Department of Education for sanctioning their defraudment. Be aware that the door is always open to individuals willing to renegotiate with their creditors. (The student debt chapter in the Debt Resistors Operations Manual provides some advice for individuals about how to do this). But debtors who are united can achieve much more, and they can give advance help to others being led into the same debt trap. That is where the Debt Collective comes in. It will draw on shared knowledge and resources to push for redress, and, ultimately, for a free educational system.
What is the Debt Collective?
As part of our work in Strike Debt, we launched the Rolling Jubilee to promote public education about the injustice of requiring public goods, such as education and healthcare, to be personally debt-financed. Rolling Jubilee was intended to be a spark and not a solution, and our long-term aim has always been to transform personal grievances into collective political action by helping people realize that they are not “a loan.” Debt collectives, effectively debtors’ unions, are the next stage. Only by organizing together, through the pursuit of collective bargaining and debt strikes, can debtors build power against the creditor class. Debt collectives can also serve as platforms for creating a positive vision of a sustainable economy: free public education, national healthcare, and affordable housing for all.
In the last few months, we have worked closely with Everest students, offering IT and media support, along with legal advice. This is how the Debt Collective begins–as a resource that debtors can use to self-organize. As we develop our technology platform, more sophisticated tools will facilitate organizing across a broader range of people. Debtors with financial obligations in common will be able to communicate among themselves and take effective action to defend their interests. Over time, the Debt Collective will become a political force, with a voice that can challenge and dismantle the debt-money system of the creditocracy. Most student loans take decades to pay back, the Debt Collective is here for the long haul. Are you?
Join us as we begin this journey. You are not a loan. Visit the Debt Collective at debtcollective.org.