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Town Hall Forum – Student Loan Debt Crisis

I have known Alan Collinge for a decade or so. Angry Bear has featured Alan and the Student Loan Justice Org. story multiple times. I have written about it on the side also. Finally some clarity being added by the level of these people in the Town Forum who are seen by others to have authority beyond what Alan and a bunch of students and former students have. Greater than 800,000 people have signed a petition to remove the debt on them.

Click om the “Read More” to see the Town Hall Video. More to Come.

Panelists include:

PAUL GRONDAHL – Director New York State Writers Institute (host)

MATT TAIBBI – Author, Rolling Stone Magazine, Reporter (moderator)

Michael J. Camoin – Videos For Change Productions, SCARED TO DEBT (filmmaker), UAlbany MSW ’92 graduate.

ALAN COLLINGE – Founder of StudentLoanJustice.Org (activist)

CATHERINE AUSTIN FITT – Investment Advisor (former Sallie Mae )

THOMAS BORGERS – Wall Street Banker, Financial Investigator

Republican Renegade Emulates Warren’s Student Loan Cancellation, It is Still Problematic

First a story, then an introduction to Student Loan Justice Org. and Their Town Hall Meeting November 20th, and finally some cold hard facts from founder Alan Collinge about what is happening to millions of people who have student loans.

Your Angry Bear blogger and activist went to a garden party in Michigan in support of Democrats and Senator Debbie Stabenow pre-2018 election. I had donated to the Democrats and directly in support of various county, state, and federal candidates. Since I had been involved with student loans for my three, had also talked and written about these loans, and been supportive of Alan Collinge of Student Loan Justice Org.; I had a question to ask. Senator Stabenow sits on the Senate Finance Committee and she supported the the 2005  S. 256 (Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ).

Private student loans were largely stripped of bankruptcy protections in 2005 in a congressional move that had the devastating impact of tripling such debt over a decade and locking in millions of Americans to years of grueling repayments.

The Republican-led bill tightened the bankruptcy code, unleashing a huge giveaway to lenders at the expense of indebted student borrowers. At the time it faced vociferous opposition from 25 Democrats in the US Senate.

But it passed anyway, with 18 Democratic senators breaking ranks and casting their vote in favor of the bill. Of those 18, one politician stood out as an especially enthusiastic champion of the credit companies who, as it happens, had given him hundreds of thousands of dollars in campaign contributions – ‘Joe Biden.'”

Senator Debbie Stabenow was one of the Democrats who voted “yea.” It was a beautiful day and people were there, mostly oldsters like myself and a sprinkling of of young adults. My being older plays in my favor as I am considered safe. So. when I stuck my hand up and was chosen, I asked my question. “Senator Stabenow, you and other Democratic Senators voted for the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 which took away bankruptcy rights for many students who are struggling to pay back their student loans. The total amount of debt they carry is measured in the hundreds of $millions. Many of these students will be carrying their student loan debt into retirement and may have their SS garnished. What do you intend to do to correct this situation?

What do you intend to do to correct this situation?”

Senator Stabenow: “Democrats are not in the majority in 2018”

Recently, it was said she also made a comment of younger people having to suck it up by learning fiscal responsibility due to their having issues paying loans back. Meanwhile, this contingent of up and “hopefully coming ” citizens in chained to student loans and have had their participation in the economy debt-laden by banking, financial interests, and politicians.

Student Loan Debt Crisis Town Hall – November 20, 2020

Friday, November 20, 2020 3:00 PM (EST)

Student Loan Debt Crisis

Panelists include:

PAUL GRONDAHL – Director New York State Writers Institute (host)

MATT TAIBBI – Author, Rolling Stone Magazine, Reporter (moderator)

Michael J. Camoin – Videos For Change Productions, SCARED TO DEBT (filmmaker)

ALAN COLLINGE – Founder of StudentLoanJustice.Org (activist)

CATHERINE AUSTIN FITT – Investment Advisor (former Sallie Mae )

THOMAS BORGERS – Wall Street Banker, Financial Investigator

I have known Alan probably a decade or so and am familiar with his efforts and organization to change the laws governing bankruptcy for student loans. Alan has worked tirelessly on this issue which impacts tens of thousands of younger people who can not get the same relief as businesses and other citizens have through bankruptcy. Our president-elect has played a major role along with other political and financial interests in denying any type of relief for student loan debt.

Along with Alan, the list of participants to this Town Hall should make this interesting. I will be watching it and listening to the conversation. Perhaps, you can join too?

Rolling Jubilee: A Wolf in Sheep’s Clothing?

authored by Alan Collinge of the Student Loan Justice Organization, a grass roots group seeking the swift return of standard bankruptcy protections and other consumer protections to all student loans in the U.S.

“We started by going after Sallie Mae debt because Sallie Mae is for my generation sort of the Voldemort, this cosmic level of evil out there,” Gokey said. But after suggesting that Sallie Mae typically sells those debts for 15 cents on the dollar, St. Peters abruptly changed course and refused to deal with Gokey and Debt Collective, he said. (St. Peters did not return a call seeking comment.) Think Progress, “Debt Activists Just Canceled $4 Million In Student Debt. For Their Next Trick, They Need Your Help”

In recent weeks, much media attention has been focused on a project dubbed the “Rolling Jubilee”- an action whereby people’s defaulted student loans are purchased for “pennies on the dollar” with donated money, and the debt is extinguished. To date, the Jubilee claims to have forgiven some $4 million in defaulted student loan debt at a cost of about $100,000.

Sounds like a great idea, right? After all, who would not want their student loan debt to be paid off for them? Looking at the board members for the Rolling Jubilee (which includes Occupy Wall Street pioneer David Graeber), one could only assume this would be a slam dunk for the 99%. Further evidence that they may be onto something: Sallie Mae’s Douglas St. Peters has criticized the project, and the concept of loan forgiveness generally (if the banks oppose it, its got to be good, right?). Surprisingly however, it turns out that this project is, I am sorry to report a terrible idea with troubling implications. Consider the following and see if you don’t agree:

Putting aside the obvious criticisms- that the project only applies to private loans and does nothing to address the rising cost of college, skyrocketing debt loads, or the uniquely predatory nature of the debt due to the removal of fundamental consumer protections (like bankruptcy) that exist for all other loans, the most troubling aspect of this project lies in the systemic effect of the project- who it helps, and who it really doesn’t. Upon examination from this perspective, the project reveals itself to be, frankly, suspicious.

Think about it. The RJ, by purchasing defaulted debt, only “feeds the beast”, and in fact makes defaulted debt more valuable on the market. This rewards the horribly predatory behaviors that the absence of bankruptcy protections and other factors have enabled in the private student loan industry. Since, after exhausting all existing opportunities for collection of these loans, the debt holders know there is a buyer for the “worst of the worst”, this only encourages the lenders and loan holders to inflate this debt as much as possible, with the knowledge that there is a willing buyer for even the worst performing loans! So that is quite a red flag,

Being a long time Zucotti Park resident myself, I’d almost be willing to overlook this distasteful aspect of the project, and instead focus on the suffering that this transaction eased…but there again, we get an unpleasant shock: The loans that the project buys are almost certainly at or past their statutes of limitations(private student loans still have these), and/or were likely never paid on by the borrower much if at all. So while it is impressive to hear of the large amounts of debt being forgiven, the fact is that the people who are finding their debts erased more than likely won’t care much because they are either no longer under any legal obligation to pay the note and have long since forgotten about it, or never intended to pay the note in the first place, and never would! So these borrowers won’t likely be gushing with praise and thanks, and frankly won’t be helped much if at all by the repurchase of the debt. I suspect that people learning of their debt being purchased and erased were, instead of relieved and grateful, were more perplexed as to why anyone would go to the trouble of clearing up debt that they themselves had forgotten about long ago! By far, the happiest participant in these transactions, are the banks/collection companies who are thrilled to get anything for the loans! People with cosigners for their loans (about 90% of private loan borrowers), and people who have been paying at least something for their debts should not hold their breath if they are hoping to one of the lucky few to get their loans absolved- it simply won’t happen.

So this project does very little for the borrowers it affects, and nothing but encourage and exacerbate the predatory underpinnings of the lending system by rewarding instead of resisting it (Resistance being an oft-repeated theme by the folks running this program, and its affiliated organization, dubbed Strike Debt). There is no resistance, here, only paying into a predatory lending system for almost no real benefit. I wouldn’t go so far as to call bullshit on this project, but it is really, extremely tempting to.

Unless there were grand plans to somehow buy off ALL student loans in the country- and I’ve been told that there isn’t, there is almost nothing good to say about this project, and a lot of troubling questions that cry out for answering.

It is surprising to me that the well regarded people (David Graeber, Andrew Ross, and Astra Taylor) who sit on the board for this project would let their names be attached to it upon reflection.

Notes and References:

Debt Activists Just Canceled $4 Million In Student Debt. For Their Next Trick, They Need Your Help Alan Pyke, “Think Progress”

“The Argument” Alan Collinge, Student Loan Justice Org.

Strike Debt is a nationwide movement of debt resisters fighting for economic justice and democratic freedom. You are not a loan.

Fair Market Valuation; CBO, Student Loans, Food Stamps, Etc.

Earlier in 2013, CBO’s Douglas Elmendorf’s forecasted return on Student Loan’s resulting in a positive return for the Government. Later Elmendorf reversed the forecast claiming student loans would cost the government and the taxpayers by generating a negative return. Using one cost model (FCRA) to estimate the return, the government will make $184 billion on student loans in the next 10 years. Using another cost model (Fair Market Valuation ) to estimate return, the government will lose $95 billion over the same period. So why the difference? Utilizing the Fair Market Valuation methodology would necessitate additional compensation for investors to accept the risk that losses may exceed those already reflected in the cash flows. A premium for the possibility that debtors will default in large numbers is added into the calculation. Wait a minute, these are students locked in by signature to these loans which can not be discharged through bankruptcy. So why?

I happened upon a New America Foundation article by a former senior analyst in the Republican staff of the U.S. Senate Budget Committee Jason Delisle, who proclaims much the same as the CBO’s Douglas Elmendorf positing the Fair Market Valuation methodology being a fairer and more accurate way to assign risk to student loans. Beneath Jason’s article and within the comments section associated with the article by Jason were comments by Alan Collinge of the Student Loan Justice Org disputing Jason’s assumptions on Fair Market Valuation (The New America Foundation agreed to a discussion with Alan and reneged. Alan has gone unanswered by Jason and The New America Foundation).  Alan’s argument is the Fair Market Valuation methodology uses the less abundant commercial data to evaluate the return on student loans as opposed to the more readily available and abundant Department of Education student loan data (which has been used in the past by the CBO). The difference between the two databases is the Fair Market Valuation uses commercial loan data reflecting riskier loans than what occurs from the Federal Direct Loans program. While there exists a level of default within the student loan program administered by the Federal Direct Loans program; remember too, Federal Direct Loans can not be discharged through bankruptcy proceedings. Additionally, the collection percentage on Federal Direct Loans is much higher than commercial credit collections which can be disposed of via bankruptcy proceedings. Griffith and Caperton of the Center for American Progress add to the criticism of using Fair Market Valuation stating government loans of all types has cost taxpayers 94 cents for every $100 loaned over the last 20 years. While the FHA took a huge hit when Wall Street crashed, it still performed better than the commercial counterparts. Government programs appear to be on pretty stable ground in their projections yet The New America Foundation and the CBO arbitrarily claim otherwise. Reviewing the history of government lending over the last 20 years shows it has overestimated the total costs to government by $3 billion. For those who may not know, Federal Student loans are like a Roach Motel, checking in by loan signature is near to impossible to negate or check out except to die, become disabled, or pay it off . . . a bankers dream. CBO’s Douglas Elmendorf is showing a partisan preference for the Fair Market Valuation of Student Loan which in the end favors commercial interests over students and the Direct Loan program.

Most recently, another supporter of the Fair Market Valuation methodology of loans, Jason Richwine formerly of the Heritage Foundation and the AEI, wrote an article at the National Review on Farm Subsidies. Myself, I am not a big fan of farm subsidies; but if it comes to eating, I would prefer my food to be homegrown rather than controlled by an out-of-country food cartel the way oil is today. ~ 50% of the US food base is imported today, so why more? There is a need to control subsidies to food manufacturing farms which differ from the family farms as many know them; but to throw the baby out with the wash, I am not sure is necessary. The SNAP program has been heavily contested in Congress with the Repubs looking to balance the budget on the back of the poor. One comment by Jason Richwine within his Farm Subsidy article challenges the ~$4.50/day food stamp recipients get daily and its correlation to health:

“Henry Olsen criticized House Republicans for seeking to cut food stamps but not crop-insurance subsidies in the recently passed ‘farm bill.’ Point taken. But personally I think he is being too hard on conservative activists. To say that cutting the food-stamp budget by a small percentage is ‘the taking of food from the mouths of the genuinely hungry’ and will ‘cut back on your dinner’ is a bit overblown. In fact, I would guess that a randomized controlled study, were it done, would show that food stamp recipients are no healthier than non-food stamp recipients in the long run.”

Well Jason Richwine is correct on one thing, the Food Stamp recipients would be no healthier than the poor non Food Stamp recipients not on SNAP. Consider the SNAP ~$4.50/ day could not buy a one time saltier and higher fat content Quarter pounder meal (soda + fries) at McDonalds. So why quibble over 5 or 10 cents? The true issue is ~$4.50 per day does not go far in many sections of town or in the suburbs and at the store as it now stands. If health is truly the issue here, maybe the program should be expanded to include others and increased in daily dollars? Health is not so much the issue as being hungry or hungrier and then being expected to work while hungry in order to gain the Food Stamps as expected by many states. Or perhaps they can eat cake?

Jason Richwine claims the Fair Market Valuation methodology (based upon commercial data) will give a more accurate picture for the farm subsidies which he also asserts are also less risky than the Food Stamp and the Student Loan Programs. Jason may have a point here since the economic growth of recent has been driven by wild swings on Wall Street and Repubs always look to the poor to make up the difference. I would want to look to past projects to determine what the historical difference has been before making radical changes resulting in phantom deficits. This seems to have been throw to the side with the push to use Fair Market Valuation for relatively stable programs with good returns.  The Food Stamp program is but one area for Fair Market Valuation to come from Jason Richwine.

“Right now, the cost of almost every government credit or insurance program – from crop insurance, to student loans, to public pensions – is underestimated. The movement for ‘fair value’ accounting is intended to fix that problem.”

What Alan Collinge points out does makes sense. Jasons Delisle and Richwine and CBO Director Douglas Elmendorf scrapped decades of data on student loans and other programs which show a return even after historical cost. In place they assume higher risk as taken from commercial loan data, a riskier environment which is not reflective of degree of risk within these programs. We are not talking MBS or CDOs here and the end game are students locked into these loans whether they default or not. The long arm of the government extends much further for students than it does for AIG, Lehman, or Goldman’s Executives to the extent it will garnish Social Security or Disability benefits and future wages. The risk of default Delisle and Richwine, which is so prevalent in commercial loans, is mitigated substantially in Student Loans.  The wild swing seen in the CBO’s projection of Student Loan Return was caused by using the riskier data of FMV and assuming the interest rate charged no longer covers the cost of the Student Loan program. Commercial Investors would demand a higher interest rate to cover losses in case Wall Street blows up the economy again or risk as taken from commercial data (Fair Market Value) rather than the historical data (FRCA) of the US Department of Education. In the end, this will drive interest rates higher for student loans and other loan programs to cover projected potential phantom deficits or costs. This makes sense on Wall Street and for TBTF who failed to mark down investments when they defaulted; but, it does not make much sense for student loan borrowers who are locked into it. there are other things to consider.

An Invitation to Jason Delisle of The New America Foundation by email on September 25, 2013:

from: run75441 aka Bill H
To: delisle@newamerica.net

Good morning Jason:

I write on Angry Bear Blog and I have also helped many soon-to-be college students apply for grants and loans.

I have been reading and watching the discussion going back and forth on Fair Market Valuation of student loans and the resulting change in return as projected by Douglas Elmendorf’s CBO. This change in valuation establishes a basis for a dramatic change in how student loans rates are calculated for risk and return which in most cases does not exist in the same manner as what exists for commercial loans when using commercial loan data. There is no bankruptcy for student loans which would mitigate the risk factor and is also reflected by the collection rate as opposed to lets say credit cards?

Allan Collinge has rasied several points challenging Douglas Elmendorf and your conclusions on the utilization of Fair Market Valuation in determining the return on student loans. Reviewing all of the posts, I have not come across a response to Allan’s points arise from The New America Foundation. His points go unchallenged and I would offer you an opportunity to respond in dilogue to Allan on Angry Bear Blog in your own and unaltered words. Is this a possibility?

Please let me know. Thank you for your time and consideration.

Regards,

Bill

 

1. Deseret News; August 14, 2013 “Making a Killing or Getting Fleeced?”

2. The New America Foundation; March 23, 2012, “Fair Values Accounting Shows Switch to Guaranteed Student Loans Costs $102 Billion”

3.  Student Loan Justice Org

4. Forbes, July 11, 2013 “Interview with Student Loan Activist Alan Collinge – Fair Value In An Unfair System?”

5. The Center for American Progress, May 2012 , “Managing Taxpayer Risk”

6  National Review, September 23, 2013;  “Farm Subsidies, Even Worst Than You Think”

7. The Center for American Progress, April 26, 2006,  “Understanding Mobility in America

8. The Heritage Foundation; May, 2012 “The Real Cost of Pensions”