Debt Eaters


The countdown to the July 1 deadline for setting a new federal student loan interest rate carried with it all the drama we’ve come to expect from Congressional financial cliffhangers. There was lots of finger-pointing as the clock wound down. Senate Republicans blocked a proposal to extend the current 3.4 percent rate for federally subsidized Stafford loans, causing it to temporarily double to 6.8 percent. Finally, last week, Congress agreed on a compromise that would link the interest rate to the 10-year treasury bond—which is still likely to lead to interest rates on new loans more than doubling over the next four years.

But some students working on issues of college affordability and student debt see the interest-rate issue as symbolic at best and a distraction at worst.

Subsidized Stafford loans—which allow low-income undergraduates to have the government pay their loan interest while they’re in school—make up only 2.4 percent of the more than $1 trillion in student debt owned by the federal government. Chris Hicks, student debt campaign organizer for Jobs with Justice, argues that debating interest rates only scratches the surface of the student debt problem and does nothing to address the outstanding debt already owed by students and recent graduates.

“We’re talking about such a small piece of it, it’s clearly not where the priority should be,” Hicks says.

As student debt has grown exponentially in recent years, it’s become a mounting concern on campuses across the city and the nation. According to the Consumer Financial Protection Bureau, which oversees federal loans, student loan debt increased 20 percent from the end of 2011 to May 2013, and now totals $1.2 trillion when private loans are included.

There are multiple reasons for the growth, starting with Congress’s deregulation of online education in 2006, leading to a boom in for-profit colleges. Since many for-profits have high tuition rates and are not eligible for federal loans, the result has been an increase in private borrowing.

Meanwhile, regulations on all student loans make it impossible to get rid of the debt in bankruptcy (though some programs will forgive portions of one’s debt), and private lenders enforce strict rules that in some cases don’t even wipe out the debt upon the borrower’s death.

With educational costs and loan debt rising in an unforgiving job market, young people of all stripes—from occupiers to straight-laced overachievers—have done the math and feel they are paying too much and getting too little.

Groups such as New York Students Rising, a statewide organization started in May 2011 in the wake of City University of New York tuition increases, have linked up with national efforts to confront the issue in a more unified way.

Biola Jeje, a recent Brooklyn College grad who works with New York Students Rising, says the issue of affordable education has gained traction since Occupy Wall Street helped bring disparate groups together, turning localized efforts into statewide and national ones.

She was involved in organizing a statewide student walkout on October 5, 2011, protesting tuition hikes and pressuring high-paid administrators to bear some of the brunt of the financial crisis. Since then, she says, there has been an increase in Brooklyn College Student Union membership and participation in general assemblies on campus, but also a more concerted effort to build a movement with staying power.

The group’s ultimate goal is to provide enough funding to CUNY and the State University of New York to restore them as systems that provide free education, as they did until 1975 and 1963, respectively. But, she says, for now her group is focused on campaigns like demanding extended library hours at SUNY New Paltz (a fight it won last winter), insisting that students get more for their rising tuitions, even if it’s just more time in the stacks.

One of the prime targets of the new student debt activists has been Sallie Mae, the private lender meant to bridge the gap between federal loans and the total cost of college. The publicly traded company owns $162.5 billion of student debt, nearly 20 percent of all student debt in the country, according to the company’s 2012 annual report. It gave out $3.3 billion in private education loans in 2012, a 22 percent increase from the prior year and a 45 percent increase from 2010.

Sallie Mae lobbies aggressively, spending $1.23 million to that end in the first half of 2013, mostly on fighting regulation of private lenders. Hicks also says he suspects the company of trying to reduce levels of federal financial aid, leaving more college costs to be funded by private loans; a Sallie Mae spokesperson replies that its lobbying efforts are focused on making it easier to pay off student loans, including allowing some loans to be discharged via bankruptcy. Last year, Sallie Mae also joined the American Legislative Exchange Council—the Koch brothers-funded group that has recently drawn attention for promoting rightwing state legislation, including “right to work” and “stand your ground.”

During a Sallie Mae presentation at an ALEC convention last November, 10 members of the Student Labor Action Project disrupted the meeting, using the human microphone technique popularized during Occupy Wall Street to chastise the company for “hiding behind” groups like ALEC.

Alyssia Osorio, a City College student with New York Students Rising, was among 20 students who attended a Sallie Mae shareholders meeting in May, asking for more transparency and disclosure of its lobbying efforts. That won them a meeting with the company’s new CEO.

On June 25, a small group of student borrowers and recent graduates met with that CEO, Jack Remondi, to demand that Sallie Mae not only make public its membership in any lobbying and tax-exempt organizations and quit ALEC, but that it also provide immediate relief for struggling borrowers by reducing principal debt, refinance interest rates for struggling borrowers, share default losses by writing off principal, and publish information explaining how loans are modified and who is eligible.

Afterward, Sallie Mae issued a brief statement that it was pleased to “share how we help students graduate with less debt and how we modify loans to reduce interest rates for those who experience difficulty in repayment.”

Hicks says students’ requests were all met with a no. Still, he insists, the student movement around debt issues is gaining ground.

“We went from getting arrested outside the building to the Department of Education secretary meeting with us,” says Hicks. “We’ve now gone from demanding the meeting with Sallie Mae to having the meeting.”

Student loan activists’ demands go far beyond lower interest rates: They’d like to see bankruptcy protection for all student borrowers, easier refinancing of student loans, and increased Pell grant funding and other need-based aid. Students in the Roosevelt Institute Campus Network and the United States Students Association put out a report in March that also suggested simplifying the government’s current income-based repayment plan, which allows graduates with low incomes to cap their loan payments at 15 percent of their discretionary income, but which has long been beset by poor publicity and a confusing application process.

But are efforts to help students repay debt merely band-aids?

New York state reform activist Bill Samuels thinks so. He says even state-level legislation, like Oregon’s new “pay it forward” bill — which would make public universities free in exchange for graduates paying back 3 percent of their annual income for 25 years after graduation—doesn’t go far enough. “The problem is you have to take a loan out, period,” he says.

Indeed, student and faculty leaders say they’ve noticed divisions between private school activists, who are more likely to focus on their debt burdens, and public school activists, who are more concerned with access to education in the first place. Emma Francis-Snyder, a Brooklyn College student, says class differences made it hard to form a unified movement during Occupy Wall Street. “We could never bridge the gap between the private schools and the public schools,” she says.

Jeje says differences between the approaches of public and private school students had as much to do with style as substance. “A lot of the citywide private school kids were sort of just about occupations,” she says of the movement’s start. But, she says, all students have now come together around efforts for affordable education for all.

Hicks agrees that the brightest glimmers of hope for solving the problem don’t have to do with repaying loans, but with offsetting the overall cost of education. California voters agreed to raise income taxes for high earners and hike sales taxes to help stave off higher education cuts last year, and Massachusetts’s latest budget proposal increased state funding for the University of Massachusetts in exchange for the school freezing tuition and fees.

In New York state, most efforts have centered around fully restoring recent cuts to SUNY and CUNY. New York’s DREAM legislation would also have opened the state’s Tuition Assistance Program to all students who meet the funding criteria, regardless of immigration status. But the bill died in the senate at the end of the legislative session in June.

“We can’t keep talking about interest rates,” says Hicks. “We need to look into solutions like that to put money back into higher education.”