fresh voices from the front lines of change







Steven L.

Last month the “Corinthian 15,” in collaboration with the Debt Collective, announced that they would not pay the debts they had accrued while enrolled at schools run by the for-profit corporation called “Corinthian Colleges Inc.” Corinthian, which had more than 70,000 students enrolled in its schools last year, collapsed amid a cloud of allegations after failing to meet regulatory requirements. Many students were caught with unfinished educations as well as mounting debt.

The Corinthian story is certainly an unjust one. These strikers have raised issues that go to the heart of our nation's entire student debt crisis. That crisis affects 41 million Americans, who hold an estimated $1.3 trillion in debt. Those are staggering numbers – and if we do nothing they will continue to soar.

There is a solution. Most student debt is held by the federal government. We can demand that the government release all student debt borrowers from their obligations. As we've discussed at greater length elsewhere, this debt hampers economic growth while imposing an unfair burden on borrowers. (You can sign a petition here calling on the government to cancel all student debt.)

The Corinthian Affair

In the universe of educational chicanery, Corinthian is one case among many. But what a case it is. Government officials found that Corinthian misled students about their job prospects (gambits including inflating its figures by bribing employers to briefly "hire" its graduates), failed to provide promised career counseling (links to well-known job websites were sometimes offered instead), lured students into predatory loan programs, and used illegal debt collection methods.

Corinthian was mismanaged, too. Its three-week government hold on payments, along with the attendant negative publicity, was all it took to trigger the corporation's collapse.

Under Federal rules, student debts may be forgiven when an institution is closed down. Instead, in a deal brokered by the Department of Education, Corinthian's operations were sold – to a company whose primary line of business is debt collection.

As part of the deal, the new owner agreed to forego collection of $480 million in Corinthian's privately held debt, a move widely described as “debt forgiveness.” But that's not really forgiveness, because a fraudulently obtained debt is not legally enforceable – neither in whole, nor in part. So what, exactly, is being “forgiven”?

The rules are rigged against these students. Student debt typically can't be discharged through bankruptcy (although it can be in some cases – hard-hit debtors should know their options.) But, while most students can't escape their obligations through bankruptcy, Corinthian Colleges Inc., is free to do so (as its Canadian subsidiary did two weeks ago).

Whose Department?

The Department of Education has not behaved well toward Corinthian's student debt holders. Inside Higher Ed reported that they will see their debts reduced by approximately 40 percent under the $480 million deal. But their degrees had little value in the marketplace, even before the corporation collapsed, and at this point they're essentially worthless. They're paying 60 cents on the dollar for something that was fraudulently sold and has little value.

What's more, this deal only applies to Corinthian's privately held debt. While the entire story isn't known, it's entirely possible that 40 percent of this debt had already been written off as noncollectable or had been sold for pennies on the dollar to a debt collection entity.

Instead of helping students break away from this deceptive and discredited outfit, the Department brokered Corinthian's sale to a company whose primary business was debt collection. By working to keep Corinthian (or some version of it) open, it appears to have blocked these students from applying for federal debt relief, which is available when a school closes.

The $480 million deal doesn't address the far larger universe of federally backed student loans. The intent, in fact, may have been to prevent students from applying for federal relief.

Why would the Department of Education do that? Here's one possible reason: The department generates income from the student loan program, with total projected profits of $120 billion over the next 10 years.

The Corinthian affair makes it appear as if the department's own budgetary concerns are a higher priority than the interests of the students it serves. That concern has been raised in the past, and was recently echoed by a group of United States senators.

Reasons to Forgive

What the Corinthian 15 is doing is certainly brave. We live in a world where a person's cost of living, and even their employability, can depend on a favorable credit rating. They're endangering their own futures by standing up to Corinthian and the Department of Education. Their strike highlights the injustice of a system that gives defrauding corporations more legal rights and flexibility than it grants to student debt holders – even those who, like the Corinthian 15, have been defrauded.

School closures aren't the only circumstances under which the government can forgive student loans. Debt can be forgiven in other situations, too – when graduates join the military, work for the government or a nonprofit organization, or become teachers in low-income communities. Another program allows borrowers to adjust their payments based on their income level and ability to pay.

These debt-relief programs exist because we've already recognized that there can be excellent moral and social reasons for forgiving student debt: for the greater social good, or because that debt has become an onerous burden on the individual.

We believe that today's student debt has become an unjust burden, not just on individuals, but on society as a whole. We believe it's morally wrong to burden so many young people with crushing debt as the “cost of entry” into the working world, especially when they are entering the worst job market for college graduates in modern history. And we agree with economist Amir Sufi, who recently commented that “there is increasing amounts of evidence that student loan debt is holding back auto spending, home ownership, and general economic activity ... it has this drag on the economy.”

We believe we'll become a better nation when we forgive all student debt.

The Jubilee

This is not an unprecedented idea. Debt “jubilees” have been taking place since the dawn of civilization and are woven into the moral and ethical fabric of our society.

Our nation has already agreed that it's appropriate to forgive student debt when it becomes an excessive burden on the individual. Shouldn't we make the same judgment when that debt becomes an excessive burden on society as a whole?

As we wrote in January,

... (L)ower- and middle-class American young people (face) a terrible choice: either accept their economically disadvantaged lot in life, or assume a crushing debt on the hope that tomorrow’s earnings will eventually offset today’s burden.

This is not a moral system. It is our nation’s Faustian bargain with the future, forcing students and their families to mortgage their hopes and dreams … it has led to a form of indentured servitude for young college graduates, many of whom entered the worst job market in decades.

There are moments in history when a new idea forms and takes hold. We believe that student debt forgiveness is one such idea, and that its time has come. If you agree, please join us.

As of this writing, 1,338 borrowers have joined the Corinthian 15 in their debt strike. The strikers have received expressions of support from 13 senators, including Sen. Elizabeth Warren; Rep. Maxine Waters; and the Massachusetts Attorney General – and the list is growing. It's time to support them – and all student debt holders – by calling on our leaders to cancel student debt.

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