Now is not the time to broaden the scope of one's critique. The student lending crisis is complex and inextricably bound to larger U.S. problems (excessive deregulation, the sub-prime mortgage crisis, etc.). While it's perfectly acceptable as a researcher and advocate to incorporate these various themes, it's absolutely necessary - in my view - to remain committed to this cause and to providing solutions for ways in which to end the student lending crisis. There is no doubt this work, I've come to realize, is going to require a lifetime commitment on my end. I know the ins and outs of academia, and I appreciate its depth. Alas, education truly matters to me, and I think everyone ought to have access to it.
Below is the final installment to "The Plight of Current Borrowers," my paper that was delivered at the Rev. Jesse Jackson and the Rainbow PUSH Coalition's recent convention on student loan reform. If you wish to read the paper in its entirety, which includes all the footnotes, you can do so here).
There are a variety of ways by which the Administration, Congress, and the Department of Education could be helping current borrowers now and in the future. Short- and – long-term options are detailed below. Again, the complexity of the student lending industry and its relationship to the Federal Government means that hasty solutions aren’t the answer. In addition, student groups ought to be more involved in helping current borrowers. SAFRA has been passed and the next issue is the Department of Education’s attempt prospectively to limit borrowing at for-profits institutions through rulemaking. But that should not be the only focus. Although I applaud the consumer groups’ effort (POSD, PIRG, USSA, NACAC, etc.), their strategy is not as direct as it could be. They should have said the next big priority is to help current borrowers who have been saddled with debt, drawn attention to the lives currently being ruined, and from that moved on to prospective solutions armed with survey data and case studies showing how bad the debt/default situation is right now. Instead, they have tried to buck the money and influence monster head-on without building a convincing case.
The Department of Education has the power to set up hotlines immediately to help answer calls from current borrowers. I investigated the type of responses one receives when calling the general line, and also asked my readers to tell me what sorts of responses they received. Overall, the Department of Education was unhelpful and informed me, as well as other callers, to “get in touch with their lenders to find out information about deferment of loans, etc., etc., etc. (if the loans were issued by private lenders).”
But lenders’ customer support lines are invariably staffed with lightly trained people making modest wages who know little more than to read scripts in front of them (not to mention the obvious conflict of interest in seeking advice about your loans from your lender). If the Department of Education were to install hotlines for current borrowers, they could in the very least provide support to individuals who are not aware of the types of loans they have. At this juncture, most borrowers with whom I am in contact (and that numbers in the thousands now) feel that no one cares about their financial situation, and many are unaware to whom they owe their debt (that is why I always make a point to ask borrowers if they have Federal loans, private loans, or both). Moreover, Secretary Duncan has the power to intervene and do something for current borrowers.
Although IBR has been implemented to help current borrowers and it is a good start, it has fallen short in a number of ways: (a) it does not cover private loans; (b) if a married couple files their taxes jointly, and both have student loan debt, both incomes are considered as one, but only one’s person debt load is taken into account, resulting inflated payments that are impractical for these couples with high shared debt loads; most importantly, it does nothing to assist with people in default. The number of people who will default is expected to rise, so it is imperative that a program like IBR or something else will assist them in getting out of this devastating situation. If these shortcomings were to be addressed, this good program could become a major part of helping – most likely – millions of people recover from default and dramatically improve their lives.
Most of the solutions I suggest also come with a number of questions about why the Obama Administration and Department of Education are failing to address the devastating effects of how the student lending industry is structured and operated. Instead of dealing with the crisis directly, the legislation that has recently been passed only addresses a few aspects of the problem. Most worrisome is how millions of current borrowers have been left out of these solutions. While restoring bankruptcy rights to student borrowers is crucial, that is not the best possible approach to helping the indentured educated class. Indeed, restoring consumer protection rights is important. However, declaring bankruptcy is not a simple task, and it also leaves the borrower in a problematic financial situation. Instead, it would be more beneficial if additional legislation were proposed to ease the burden of owing mountains of debt. For instance, Sen. Sherrod Brown drafted a bill called the “Private Debt Swap Proposal.” (This bill proposes that the Federal Government take on private loan debt – i.e., assumes ownership of it – and therefore allow borrowers more flexibility with the terms of repayment). So far, there has been no interest or traction on this bill, and yet it could be a productive way to help current borrowers.
In my opinion, the biggest mistake the White House and the Department of Education are making is tackling the debt crisis on a prospective basis. Individuals in tax trouble are not being told to wait for new legislation so future generations of taxpayers are helped; rather, the IRS is trying to help current taxpayers resolve their debts. Likewise, homeowners facing foreclosure are not told to wait for legislation to help a future generation, but are being provided with assistance now. Why are student loan borrowers, who do not even have the same consumer protections to start with, being treated so differently?
It is more than possible to work out programs to help borrowers get back into repayment and allow them the opportunity to become productive citizens. If borrowers are expected to pay their loans back, which most of them wish to do, why can’t the interest rates be abolished, along with as the huge penalties people must pay in order get out of default? How do those fines and penalties help someone who is struggling financially to get back on their feet?
Substantial evidence supports the claim that the student lending crisis is real and devastating. All of the testimonials I’ve collected over the past year and a half illustrate that the lending crisis is far-reaching and affects millions of U.S. citizens. Indeed, it’s not just the borrowers who are suffering, but those who co-signed on their loans, their children, and so forth. As an inter-generational problem, it has the potential for long-term devastating impacts. While Japan has its “lost generation,” it is no exaggeration to say we risk losing many generations. Indeed, at this point they have no legal recourse, which could be used as leverage against their lenders. Current borrowers should not have to wait for future solutions. A two-part approach that includes both dramatic short- and long-term solutions could help millions of current borrowers get back on their feet and allow them to once again to become productive U.S. citizens. It’s time to listen to these voices and consider taking an approach that will affect their lives in a powerful way – they have been punished long enough.
President Obama said in his State of the Union Address, “‘in the United States of America, no one should go broke because they chose to go to college.’” Unfortunately, this reality has to come to pass for millions of Americans. While we need to continue to innovate, and reform education and education financing for future generations, we also owe it to current debtors, who have unfairly funded an unregulated industry, to help them pay back their debt in a reasonable, non-punitive way. It is time to move beyond high-flown rhetoric; it is time to act.
Instead of evacuating from areas like the Midwest for California, student loan refugees are fleeing the country for opportunities in South Korea and elsewhere (it's a strange thing that I'm now teaching The Grapes of Wrath here in South Korea. It's oddly similar to the current crises affecting the U.S., and it's a tale that's uncannily similar to my grandmother's upbringing in Kansas). Moreover, I had to evacuate my home in D.C. I sold everything, gave mementos away much like Ma Joad did, also said painful goodbyes to my family and friends, and fled to Asia. Even the simplest idea of the American dream is over.