Are You Ready to Occupy Education? Occupy Student Debt Hopes So
March 23rd, 2012 by Dr. Bruce Johnson
The Occupy Movement aimed at Wall Street is now similarly focused on higher education and, more specifically, student loan debt. Current estimates place the nation’s student loan debt at $1 trillion dollars, which exceeds credit card debt according to the Federal Reserve Bank of New York. Building on the attention gained by Occupy Wall Street, Occupy Student Debt hopes to raise awareness of the debt crisis and help champion change. But who’s to blame for the problem: schools, students, or both? And will our government take steps necessary to provide relief?
In a recent gathering at Pace University, called Occupy the System: Confronting Global Capitalism, educators and students discussed a variety of topics, including some that have a direct impact on academia. One of the issues discussed was student loan debt, “which panelists said seduces teenage students who have little or no conception of what debt is into high-interest loans that saddle them with personal guilt and little prospects once they leave campus.” It was acknowledged that this is a problem that was ongoing prior to the economic recession and the beginning of the Occupy Wall Street movement; however, “the movement has placed student debt under a magnifying glass and enabled people to be more outspoken.”
Occupy Student Debt
In October 2011, Occupy Student Debt launched a website and their mission is “to collect user-submitted student debtor stories in the hopes of illustrating the true impact of the student debt crisis on millions of struggling Americans.” The website points to a 600% increase in tuition rates from 1980 to 2010, an inability to include student loans in bankruptcy filings, consequences for defaulting on student loans, and the “predatory for-profit student loan industry” as some of the key challenges.
There is another website that is similar in its purpose to effect change, Occupy Student Debt Campaign that asks faculty, debtors, and non-debtors to sign a pledge, which states the following:
• “We believe the federal government should cover the cost of tuition at public colleges and universities.
• We believe that any student loan should be interest-free.
• We believe that private and for-profit colleges and universities, which are largely financed through student debt, should open their books.
• We believe that the current student debt load should be written off.”
In November 2011, a Huffington Post article, Occupy Student Debt Campaign Announces Nationwide Loan Refusal Pledge, noted that student loan debtors were encouraged “to stop making their student loan payments after a million signers have made a similar pledge,” and “the campaign hopes to draw attention to the connection between the increasing cost of college and rising student debt loads.” In December 2011, the article Occupy Student Debt’s Failure to Launch reported that only 2,694 debtors signed the pledge – out of a goal of 1 million. As of today’s date, the Occupy Student Debt Campaign website indicates that 3,322 have signed the pledge.
The following statement is posted on the Occupy Student Debt website indicates that it: “is not affiliated in any way with the ill-conceived campaign urging borrowers to voluntarily default on their student loans that was launched in late November 2011.” Occupy Student Debt Campaign asks student loan debtors to sign a pledge and encourages them to default on their payments. In contrast, Occupy Student Debt wants to change the “national dialogue” about the student debt issue.
Are For-Profits to Blame?
Any discussion about the student loan debt crisis ultimately involves the for-profit industry because of the default rates, the source of income for this industry, and a question of quality. The Chronicle article Student Debt and For-Profit Institutions noted “that most students in this industry have to borrow to attend school and over 50% of the for-profit institutions have default rates greater than 20%.” In 2009, the U. S. Department of Education estimated that the overall student loan default rate was 8.8%. The result is a call for greater consumer protection, so that the “for-profit sector will be able to make greater contributions to our educational system without damaging the futures of so many vulnerable students.”
The Chronicle article further characterized the for-profit industry as having “potential to make important contributions to educational opportunity in the United States;” however, this industry also “relies on the federal government for most of its revenues.” Why is this an issue? Because these institutions are concerned with maximizing their income and it is funded through the use of student loans. Furthermore, some for-profits “successfully meet the needs of their students, but they are a dwindling portion of the sector.” The increase in student enrollment with for-profit schools “does not reflect informed consumer response to a high-quality product.” What these statements suggest is that taxpayers are providing a revenue base for this industry; however, they may not receive an education that is equal in value.
Is it students’ fault?
In an Investor’s Business Daily editorial Occupy Brain Dead College Students, another perspective of the student loan debt crisis was presented: “It's true that some graduates wind up with a mountain of debt — mostly kids who went to elite private schools. But are we really supposed to believe that these kids were smart enough to graduate from such colleges but too dumb to understand how much it would cost? In any case, no one put a gun to their heads and forced them to sign the loan documents.” This raises several questions. Do students believe they are making a wise investment and do they fully comprehend the student loan paperwork they are signing?
A recent study shed some light on the question concerning students and their loans, High Debt, Low Information: A Survey of Student Loan Borrowers. The study was conducted by Healey Whitsett, senior analyst at NERA Economic Consulting, and he found that “two thirds of those who took out private student loans did not understand the difference between private and federal options,” and “almost two thirds were surprised by their repayment terms, their monthly payment or their interest rates.” What is even more telling are the additional findings that “80 percent of the students surveyed reported gathering some information influencing their decision to take out student loans from their college counselors or website.” This indicates that a majority of students are relying upon the information received to make their loan decisions, which may or may not be accurate.
Student Loan Debt Relief?
Sandy Baum, professor of economics at Skidmore College and senior fellow at the George Washington University School of Education and Human Development, states in A Step in the Right Direction that “the strength of the anti-student-loan movement and the number of students defaulting on their student loans suggest a serious lack of awareness of the repayment protections already in place.” Baum cites options such as reduced payments under the Income Based Repayment plan, loan consolidations, and zero payments for unemployed students. She acknowledges that a “repayment plan and providing incentives for loan consolidation will not revolutionize the world of student debt;” however, “the administration’s efforts to provide better information could have a major impact on many borrowers.” One such requirement is the Net Price Calculator, designed for students to estimate the total degree program costs.
Rep. Hansen Clarke introduces The Student Loan Forgiveness Act of 2012 (H.R. 4170)
Recently introduced to Congress is The Student Loan Forgiveness Act of 2012 (H.R. 4170). Among the findings listed: “Excessive student loan debt is impeding economic growth in the United States. Faced with excessive repayment burdens, many individuals are unable to start businesses, invest, or buy homes. Relieving student loan debt would give these individuals greater control over their earnings and would increase entrepreneurship and demand for goods and services.” One of the key provisions of this act is to "forgive the debt of student borrowers who make 10 years of payments (no more than 10 percent of one's discretionary income). The bill and would also cap interest rates and protect borrowers who suffer financial hardship, such as unemployment.” Other provisions “would cap the interest rate on federal loans at 3.4 percent,” which is “great news for borrowers, since the interest rate is set to be 6.8 percent for all federal Stafford loans as of July 1, 2012.”
The website Support the Student Loan Forgiveness Act of 2012 is collecting signatures to be delivered to governors, state legislators, The U.S. House of Representatives, The U.S. Senate, and President Barack Obama. Presently there have been 443,974 signatures collected. This is quite a contrast when compared to the number of student loan debtors (3,322) who have signed the Occupy Student Debt Campaign website. This seems to indicate that people support change without signing a pledge to default on their student loan.
There is no doubt that the student loan debt in our country has caught the attention of educators, students, institutions, and our government. Blame has been laid at the feet of students, the economy, and the for-profit industry. The government has taken some steps to address it. But will this really solve the issue? If the economy was thriving and jobs for those with all types of college degrees were available, would this still be an issue? It seems that this is a time not only for us to occupy the academic landscape with our discussions, but to ensure that students make informed choices based on accurate and complete information. Transparency, accountability, and financial management need to be part of our discussions and the solutions proposed.
Are you ready to occupy education and address the student loan debt crisis? Share your thoughts via Twitter @DrBruceJ.
Photo © Alex Milan Tracy / Demotix/Demotix/Corbis