Tuesday, February 24, 2015

Finally, a National Student Debt Strike: "We are the first generation made poor by the business of education"


One of many ads for a Corinthian Colleges, Inc. institution

by Gaius Publius

The first national student debt strike has been announced, by an offshoot of Occupy no less. This is a big deal.

Public debt — debt as a result of government lending — is not killing this country. The U.S. government pays almost literally 0% interest on its debt, rolls it over constantly, is today reducing the deficit by large amounts, and many would argue, not spending enough, since every dime that leaves the government's hands goes into a private pocket somewhere. (Think about it; if the government spent nothing, zero money would circulate.)

But private debt — debt owed to banks and private lenders — is killing the world. Since the 2008 global crash, the name of the game for the global greedy has been this — forgive no debt; make every lender whole. The crush of private debt is the cause of crises in Greece, Spain and Italy, to name a few of the European unlucky. And thanks to wealth-captured governments, including ours, creditors have us all in handcuffs, chained to a debt-repayment regime few can endure or survive, enforced by governments that lenders have bought and own.

It was only a matter of time before the first debt strike — a genuine anti-rich rebellion — would erupt. I thought Greece might be first ("Your debt is cancelled, German bankers. Deal with it"). But Syriza, for all its pre-election tough talk, is trying to bargain with the Germans, to "deal." So who would step up?

Student Debt and Mortgage Debt

In the U.S. two of the most toxic forms of private debt are mortgage loans (remember those millions of home loans used to create all those derivatives?) and student loans. I've thought for a long time that it would change the world, literally upend the rich-vs.-poor power dynamics, if there were either a nationwide mortgage strike or a nationwide student loan strike. They took a risk, the lenders, and lost; got paid for their risk in interest payments; and if they can't collect, it's over for them. Call it the cost of doing business.

Their ultimate power move is to use government and the courts to force repayment. The debtors' ultimate power move is to unilaterally cancel the debt and move on. The lenders have been playing their card for years. When would the debtors make their own strong move?

Chances for a mortgage loan strike have looked slim to me. Mortgagees have much to lose, including careers, for those who are fortunate enough to have them, and actual homes, places to live. Many are in mid-life and have families. So I've been holding out hope for — and encouraging in my own small way — a student debt strike. After all, if you graduate with $50,000 or more in debt, can't find a decently-paying junk job, much less a badly-paid career job, are in your twenties with not much to lose (if you're that lucky), are pre-family, and have parents with a roof you can use — why not?

Not everyone is in that situation — for example, the woman in the video above — but the number of those with not-much-to-lose in the student debt pool is at least higher than in the mortgage-saddled population.

All the student debt crisis needed — all it needs — is a spark. Well, here comes the spark, in the form of the first announced student loan debt strike framed as a political and organizing act. It's nascent (new-born). Let's see if it grows. The details are below; please read on, then help if you can. This really is a salvo in the war between the Rich and the Rest. The Rest are finally fighting back.

Announcing the First National Student Debt Strike

First, from the Atlantic (huge h/t to Alexis Goldstein for these links):
Student debt in the country now amounts to a gargantuan $1.16 trillion—an increase of $31 billion from the previous year. The number of students who are unable to repay their loans isn’t very encouraging, either. About 11 percent of student debt today is either delinquent or in default.

What if something could make those figures disappear, no gimmicks involved? Today, Debt Collective—an offshoot of an organization known as Rolling Jubilee—is calling a student "debt strike," the first of its kind in U.S. history, according to its organizers. The strike is being carried out by the "Corinthian 15," a group of students from across the country who are refusing to repay their loans and demanding that the Department of Education cancel their debts.

Rolling Jubilee has already purchased $14 million of debt off the secondary market—purchasing it from financial institutions that sell it at a lower rate after 180 days of delinquency—and is now buying another $13 million to account for the money owed by 9,438 student borrowers across the U.S. 
There's much here, and I don't want to overburden you in one go, so let's just look at a few pieces, and I'll stay with the story as it evolves. A group of students, self-dubbed the "Corinthian 15," are refusing to pay student debt owed to a predatory (and Dept. of Education–supported) for-profit "education" corporation, Corinthian Colleges, Inc., recent owner of Everest Colleges and Universities, among many others.

How For-Profit Colleges Make Money

What's the business model of a for-profit education corporation? Most work like this. Student loans are backed by the federal government, so it doesn't matter who they're given to by private lenders. The taxpayer will cover all defaults. So if you're a rapacious CEO of a profit making "education" institution, here's how you maximize your "take" (in loan-paid tuition):

Offer the least education you can get away with ...
To the greatest number of students you can enroll ...
Carrying the greatest debt burden you can saddle them with ...
Then hope they drop out.

After that, who cares? The college has already received its money. When students drop out with no degree, default on their loans, or both, the lender sends the bill to the government for the unpaid balances and the "education" corporation moves on to the next gullible twenty-something it can lure in. That "lure" is always a "better life" — the promise of jobs (in the form of an advertised "job placement rate") and graduation (in the form of an advertised "graduation rate").

By law, for-profit institutions are "limited" to deriving only 90% of their revenue from the government's student aid program  — "only" 90%. It's like the government is giving to the unscrupulous many, permission to print money. Needless to say, the many are taking them up on that offer.

And if you thought high dropout rates are a by-product, you'd be wrong. Prepaid education for a dropped-out student lowers your cost. There are fewer bodies in the classroom; room for more borrowers with fresh government money at their disposal.

Who Is Corinthian Colleges, Inc.?

Let's take a closer look at Corinthian Colleges. Wikipedia on Everest College, one of the suite of "colleges and universities" in Corinthian's portfolio (my emphasis):
In July 2007, the California Attorney General threatened to file suit against Corinthian Colleges, corporate parent of Everest College, unless it settled allegations that it had misrepresented its placement statistics.[8] According to a case filed in Los Angeles County Superior Court, Corinthian Colleges allegedly "engaged in a persistent pattern of unlawful conduct" by overstating the percentage of those who obtained employment from its courses, inflated information on starting salaries and made misleading or false statements about which programs it was authorized to offer and which were approved by the California Department of Education.[9] The suit stated that Corinthian's "own records show that a substantial percentage of students do not complete the programs and, of those who complete the program, a large majority do not successfully obtain employment within six months after completing the course."[9] In late July, Corinthian Colleges agreed to pay $6.5 million to settle a lawsuit alleging that the chain engaged in unlawful business practices by exaggerating its record of placing students in well-paying jobs; the amount included $5.8 million in restitution to students as well as $500,000 in civil damages and $200,000 in court costs.[9]

Everest was one of 15 for-profit colleges cited by the Government Accountability Office for deceptive or questionable statements that were made to undercover investigators posing as applicants. Two unnamed campuses were cited in this report.[10] Department of Education statistics indicated that Everest College graduates had the highest default rate of any school in California for students entering repayment in 2010[11] and the fifth highest rate in Arizona.[12]

In September 2010, a group of Everest College graduates sued the school for fraud, alleging deceptive recruitment practices concerning costs of attendance, the value of the degree, and whether credits earned there would transfer to other schools.[13]

In Milwaukee, Wisconsin, where a Corinthian Everest campus was financed with $11 million in city bonds, 25% of students found jobs and over half dropped out; the campus closed in 2012, two years after it opened.[14][15]
There's quite a bit more at the link. This is literally criminal behavior. Corinthian Colleges, Inc. may be in trouble (check the link on their name above), but the students they fooled are still saddled with their debt, and the Dept. of Education won't forgive it.

What the Strikers Say

Keeping all that in mind, listen to what the strikers say (my emphasis):

19 February, 2015

Who are we? We are the first generation made poor by the business of education.

We are people living paycheck to paycheck, single mothers, and young people just starting out. We wanted an education because we were driven to learn and to achieve a better life for ourselves and for our families.

We trusted that education would lead to a better life. And we trusted you to ensure that the education system in this country would do so. But Corinthian took advantage of our dreams and targeted us to make a profit. You let it happen, and now you cash in.

Each month you force us to make payments into an immoral system that profits from our aspirations.

We paid dearly for degrees that have led to unemployment or to jobs that don’t pay a living wage. We can’t and won't pay any longer.

Repayment plans presented as a helping hand simply aren’t good enough. The wrong done to us is deeper than that.

We are not alone in this fight. Corinthian’s predatory empire pushed hundreds of thousands into a debt trap. But even beyond for-profit schools, tens of millions of students are in more debt than they can ever repay. And you are the debt collector, with powers beyond a payday lender’s wildest dreams.

To the Department of Education and to the lenders, servicers, and guarantee agencies who have stolen our futures, we say: enough! Erase these loans.

To current and former college students across the country, we say: we stand with you to demand the end of a higher education system that profits from all our dreams. Join our fight.

We won’t pay. We are the Corinthian Fifteen ...
Remember what I wrote about captured government enforcing debt collection? This is how that works in education. The Dept. of Education is the agent of debt collection.

"We are the first generation made poor by the business of education ... people living paycheck to paycheck, single mothers, and young people just starting out ..." The cry of a lost generation, abandoned by their government and striking back — by striking.

Some Links

I want to leave you with a few links and a request that you help:

Announcement link: http://strikedebt.org/studentstrike/

Support and information link: https://debtcollective.org/studentstrike

More on one of the Everest "colleges" from Buzzfeed

Atlantic magazine backgrounder (same link as above)

And just for fun, here's another Corinthian Colleges, Inc. ad:

Please do help. These are the front lines, and just because the global rich haven't eaten you yet, doesn't mean they don't have plans. Thanks!


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At 8:40 AM, Anonymous Thad said...

"We are the first generation made poor by the business of education"

Well, you're part of the first generation for whom education is a business.

It's all part of executives profiting personally by consuming the commonwealth at the expense of the taxpayers. Despite all of the intentional complexity, it's really pretty simple:

Corporate executives don't invest in their companies' futures anymore. They take current earnings, borrow money, buy back stock, both creating upward movement on the stock and increasing earnings per share on a reduced balance of outstanding stock, both of which usually lead to increasing executives' bonuses. . Nothing for the company or its shareholders has been added. Indeed, the companies are being stripped of future earnings and prospects.

Not investing in the company includes not investing in training its employees. Whereas companies used to accept responsibility for making sure educated employees could perform their jobs, employees are now expected to train themselves and be ready to "hit the ground running" when hired. Hence the huge increase in training posing as education while education itself is being starved. I'm sorry, but "Dental Assisting" "without all of the irrelevant filler courses" which our local branch of "Kaplan University" offers is not an educational degree program. It's vocational education.

STEM education which is currently being emphasized is a good thing. We have too many lawyers and not enough engineers. But let's not kid ourselves. This emphasis is not about full employment for American workers. It's about finding enough cheap workers for American" employers.

If you don't believe me, get a degree in Computer Science. Go to a really good school like Carnegie-Mellon or Rensselaer which educates AND trains you. Go ahead and rack up that enormous debt. And then go out into the employment world which is allegedly begging for people who can code and see who gets the job - you or an Indian here on an H1-B Visa - beloved by Democrats - because there aren't any Americans who can fill the job.

American society and most especially the assholes who talk about how much they love the Free Enterprise system are standing around while current crop of predatory executives strip their companies and destroy their companies' futures. And we are all standing around while "education" predators put our young people in chains of debt. Thanks to the young people who are refusing to stand around.

At 2:53 PM, Anonymous Anonymous said...

Americans are going to have to evolve into a post-consumer society. As long as poverty is the only thing that our elites are willing to provide their fellow citizens, then we need to stop playing their very profitable (for them alone) game. Buy only what you need that you can afford. forego everything else, and wait for change to fly into town as the 1% lose portfolio value.


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