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.
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.