Ryann LiebenthalApril 19, 2021 (NewRepublic.com)
How student debtors took a radical idea to the mainstream
ILLUSTRATIONS BY LYNDON HAYES
In the summer of 2007, Thomas Gokey had just graduated from the School of the Art Institute of Chicago, and he was thinking about how much his degree had cost him. His diploma was a simple piece of paper, but it came with a price tag of thousands of dollars—dollars that were themselves pieces of paper, transmitted to him in the form of student loans, which he now owed to the federal government. While chewing on this thought, he had an idea for a project that would occupy him for much of the next year. He obtained a letter of permission from the Treasury Department’s Bureau of Engraving and Printing to go to a Federal Reserve bank of his choice and pick out some shredded bills from its stores of mutilated currency. One day, he walked over to the Federal Reserve Bank of Chicago, five blocks from the Art Institute, and asked for some money.
“Nobody had ever seen this letter before,” he told me. “They were really scratching their heads. So they made phone calls that kept going higher and higher and higher.” Finally, the bank’s vice president came down and took Gokey on a tour of the building. The mutilated money was kept several floors below, past a labyrinth of security checkpoints. “They’re worried about counterfeiting,” he said, “so they just store shredded paper in prime real estate in downtown Chicago.” At last, he entered a big, open room that resembled a vast warehouse. “You could look in any direction, and you couldn’t see the back wall. It was just filled, floor to ceiling, with clear plastic trash bags of shredded money.”
Gokey asked the vice president for a specific amount: the equivalent of $49,983, the sum of debt he’d incurred to go to the Art Institute. The bank executive gathered up a stack of the shredded bills, put them on a scale, and measured out the requested dollars by weight.Be the most
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Once home with his mutilated money, Gokey undertook the painstaking process of pulping the bills and reassembling them into paper sheets, which he planned to sell off to interested collectors. It was a clever plan: He would make an artwork to serve as a means of settling his debt—thereby using his degree to pay off the cost of getting it. He called the work Total Amount of Money Rendered in Exchange for a Masters of Fine Arts Degree to the School of the Art Institute of Chicago, Pulped Into Four Sheets of Paper.
Over the next few years, Gokey exhibited Total Amount of Money, hanging the large greenish-gray sheets—sometimes horizontally, sometimes vertically—on the walls of galleries from the Midwest to the United Kingdom. He calculated the value of each square inch at $4.22, each square foot at $607.70. “I sold some,” he said, “but not a lot.”
By September 2011, Gokey had moved to New York state for a job as an adjunct instructor of art at Syracuse University. He found working for the university perplexing. He was making a pittance as an adjunct, and yet his students were all paying exorbitantly for the privilege of his instruction. “I got really concerned about my students, who were in way more debt than I was.” Gokey has a soft Midwestern voice, curious and engaged while somehow speckled with sadness. He is the kind of person who latches on to an idea and then goes way down the rabbit hole with it. “I was very confused about where the money went,” he said. “Like, why? Why does it work this way? Why can’t it work differently?”
Forty years ago, it did—a year of tuition and fees at a public four-year university was around $2,400 (in 2019 dollars). Now the cost is four times as much. (For private colleges, that number has tripled, from $10,575 in 1980–1981 to nearly $32,000 by 2019.) About 45 million people in the United States (roughly one in six adults) owe outstanding student loan debt, whose total recently surpassed $1.7 trillion, second only to mortgages, according to the Federal Reserve. That’s about $37,500 per borrower, on average, and always climbing (more if you’re Black, a woman, LGBTQ, or an alumnus of a for-profit or graduate school; less but more onerous if you took out debt but didn’t graduate).
Student debt wasn’t significant enough for the Federal Reserve to track it until 1999, when it hit $90 billion, about a twentieth of its current sum. As the numbers ticked up, it grew from a niche concern—the kind of thing that might particularly exercise, say, a bunch of Occupy Wall Street utopians—into a source of anxious national breast-beating. Formerly seen as “good debt” that would more than pay itself back after the supposed $1 million lifetime wage boost of a degree, it’s now understood to be the albatross weighing down an entire generation. The inflection point in this shift might be traced to sometime between the spring of 2012, when outstanding student debt hit $1 trillion, and the 2016 primaries, when Bernie Sanders made free college a part of his campaign for president. Or perhaps it was the next Democratic presidential primaries, in 2019, when Sanders proposed canceling all student debt, defining a leftmost flank on the issue and pushing the idea of cancellation into the mainstream.Be the most
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Whatever the exact moment the notion took hold that student debt had gotten out of control, the pandemic—and its economic fallout—only accentuated the burden. At its highest point, in April 2020, unemployment reached nearly 15 percent. The college-educated fared significantly better, at 8.4 percent, but nevertheless saw their jobless rate quadruple in a matter of weeks. So many redundant white-collar workers, so many unpaid student loan bills. By late March, even Congress was moved to intervene with a temporary solution. At first that came in the 2019 CARES Act, in the form of a federal payment and interest pause that Donald Trump extended in August.
Once Joe Biden took office, the debate over student debt centered not on whether to cancel but on which way and how much. Biden had said he wanted to wipe out $10,000 “immediately,” though he waffled on the method of action. Senator Elizabeth Warren and incoming Majority Leader Chuck Schumer asked for $50,000 by executive order on Biden’s first day in office. “You don’t need Congress,” Schumer urged at an outdoor press conference in midtown Manhattan. “All you need is the flick of a pen.”
Among the advocates for immediate executive action were those Occupiers, now calling themselves the Debt Collective, their 2011 demand for full debt cancellation suddenly seeming manifestly reasonable. Yet what few people realized was that it was because of those diehard activists, who’d never stopped organizing around debt cancellation, that we were all talking about it in the first place. For years, they’d faced almost ceaseless derision from the media and political establishment, and now that the issue was gaining traction, they were for all intents and purposes erased, their movement overshadowed by political machinations. For the Debt Collective, this was a big victory. It had taken nearly a decade, but they had finally been eclipsed by their own success.
While working at Syracuse University, Thomas Gokey heard about a protest movement in New York City that was coalescing around many of the same issues of indebtedness and value that had been on his mind for years. He felt called to be a part of it, but Total Amount of Money had just been accepted to the annual ArtPrize exhibit in Grand Rapids, Michigan—an art fair founded by Rick DeVos, son of Betsy, who helps fund it. “And I thought, You know, these things always fizzle. I’m gonna show up, it’s going to fizzle, and then I’m going to miss this opportunity.”
But when Gokey got to Grand Rapids, Occupy Wall Street was still on his mind, and he started talking about it with the people who came to his exhibit. “Those conversations, they all took the same form of like, OK, this is a clever solution to your debt. But what about my debt?’ And I said: Let’s talk about that. What are we going to do?” During the three-week run of the exhibition, Gokey began attending meetings of the Occupy Grand Rapids encampment. When ArtPrize 2011 ended, in early October, he traveled back to New York and made his way to the main Occupy encampment, at Zuccotti Park. Almost immediately, he said, “a switch flipped in my brain. It was like, wait a second, what if we all stopped paying our debt? What if we organized a debt strike? This is how we’re going to gain leverage over Wall Street.”
At the time, no major politicians were talking about canceling student debt. The only measures to address the problem had so far been largely superficial. Two years earlier, Barack Obama had reformed the repayment system, adding a series of plans that pegged monthly payments to 10 or 15 percent of a borrower’s discretionary income and forgave the remaining balances after 20 or 25 years. Obama had also brought the federal loan system entirely in-house: Previously, most borrowers had taken out money from a bank, with the loans insured by the government.
Back in 2010, even this seemed radical. Tennessee Republican Senator Lamar Alexander called the move to direct loans a “federal takeover” such as would be expected in the Soviet Union. Nor were the most left-leaning voices in Congress then particularly concerned with student debt. The best any of them could come up with was to propose lowering interest rates or refinancing—pretty standard neoliberal fare. Bernie Sanders’s initial College for All Act, which wasn’t introduced until 2015, made no mention of cancellation. And anyway, it failed.
But on the ground at Zuccotti Park, debt was among the most popular and incendiary topics. “When the occupation of Zuccotti began—and we had no idea who, if anyone, was actually going to show up,” wrote the debt scholar and anthropologist David Graeber in 2014, “we discovered that the largest contingent by far were debt refugees.”
Gokey didn’t discover the student debt working group until after the park was cleared, when he was among hundreds arrested during an Occupy-organized protest. After his release, he was briefly stranded in New York, sleeping in churches while waiting to get back his wallet and cell phone, among other items, from the police. He heard about an event the following week, a launch for the Occupy Student Debt Campaign’s student debtor Pledge of Refusal, in which signatories would commit to stop paying their debts if a million others also did so. Finding himself still in the city, Gokey decided to attend.
Back in Syracuse, Gokey had already become active on InterOccupy, the internal network of the OWS organizers. Also loitering was David Graeber, who would sometimes email the other Occupiers with strange, esoteric ideas. Some of them went over Gokey’s head, like the suggestion of buying up personal debts that were sold on the secondary market. “When I read the email at first, I didn’t understand any of it,” Gokey said. “A couple weeks later, I went back and reread that and was really scratching my head.… I didn’t believe it; it seemed too good to be true—that we could buy and abolish someone’s debt for pennies on the dollar.”
“I didn’t believe it; it seemed too good to be true—that we could buy and abolish someone’s debt for pennies on the dollar.”
Intrigued, Gokey started lurking on debt buyers’ internet forums. Delinquent debts are often sold by their initial lender and wind up on what’s known as the secondary market, bundled in tranches with other debts and traded for a fraction of their total value. Gokey thought if he could cobble together $5,000, he’d have enough to buy up to $1 million of debt. It could be another art project. He spent the next nine months researching how to go about it.
Eventually he started calling debt buyers. “Normally, it’s a waste of time for them to do a deal that’s, like, under $30,000. And so I kept saying, like: Will you sell me just like $50 worth of debt just so I can learn how to do this? And they would just hang up on me.” The buyers were aggressive—all of them men, none of them willing to engage with the thought experiment Gokey was presenting—and the calls never lasted longer than a minute. This was new for Gokey, who was used to enthusiastic cross-disciplinary collaborations. A recent project of his had enlisted a biochemist to give him an oxytocin nasal spray and then help analyze the chemical contents of his tears. “I’d cold-call a brain scientist and say: Hey, can you help me? Can you help me take oxytocin? I don’t know how to do this without getting myself in trouble. And at first, they’re very skeptical and standoffish, and then they’re like: Oh, this is so exciting. I want to help you. Which is why it was so strange when I started cold-calling debt buyers and got a completely different response. And just a total group of jerks.”
One of the buyers ran his own website with tips for getting into the field—finding good debt to buy, avoiding scams, and so forth. This buyer (whose identity Gokey declined to reveal) was one of the people who had hung up on him—several times. But then, weirdly, the buyer started Gchatting him late at night. Sometimes he would talk about his family, sometimes the industry, and sometimes he would start spewing crazy antisemitic conspiracies. At last, Gokey persuaded this guy to sell him a small amount of debt: $14,000 worth in exchange for $446, a not-insignificant portion of Gokey’s assets.
Months earlier, Gokey had told some of the other Occupy Student Debt Campaign members about his debt-buying plans. In fact, he’d mentioned it to Ann Larson, an early member of the group, at that very first OSDC event back in November. Initially a bystander, Gokey had found himself pulled out of the audience and conscripted to perform in a mock “graduation day” ceremony, dressed in a trash-bag gown and holding a placard listing his loan balance. Next to him stood Larson, who would soon become a close collaborator and colleague.
“I just remember thinking: This person is insane,” Larson told me. “It was like one of these things when somebody’s talking to you, and you just want to slowly back away.” But once she understood the implications of what Gokey was proposing, she went down the rabbit hole herself. The student debtor Pledge of Refusal abjectly failed, garnering only a few thousand signatures, so the OSDC turned to personal debt in general, a huge component of the 2008 financial crash. The group wanted to find a way to bail out individuals just as the government had bailed out the banks. When Gokey came to them with his research into debt buying, they realized he’d hit on something that could gain them publicity and build momentum for more structural change. Now calling themselves Strike Debt, the activists initially started with medical debt, purchasing $15 million owed by about 2,000 people. They sent the former debtors a letter announcing their windfall. All told, Strike Debt bought up $30 million worth of personal medical and private student loan debt that then just ceased to exist.
Ann Larson joined the Occupy Student Debt Campaign before it even really existed, when it was just a few people meeting regularly in Zuccotti. As Occupy started, she was working as an adjunct in composition and literature at the City University of New York and elsewhere, and, like Gokey, she was alarmed by the amount of debt her students were taking out. But at the time, she said, there was “no movement and no union you could join. It was just like, well, everyone is just going to be disgruntled individually by themselves.” So she was immediately drawn to the calls for a mass mobilization against unjust debts that were coming from OSDC members like the sociologist Andrew Ross and Pam Brown, then a graduate student at the New School. When the group decided to organize its ill-fated pledge, Larson began learning to code and took over management of the OSDC website.
At the time, there were just a few other core members: among them Gokey, Ross, Graeber, Brown, the writer and filmmaker Astra Taylor, and Taylor’s frequent artistic collaborator Laura Hanna (as well as some other members, like the academic and activist Amin Husain, who later left the group, along with Brown, when it divided largely over racial issues). They were working on launching Gokey’s debt-buying project, which they’d started calling the Rolling Jubilee. The organizing took different forms: Collaborators gathered to hash out logistics at Brown’s apartment and Ross’s New York University office, and Larson started working “like a dog” to build a website and other infrastructure.
The Rolling Jubilee launched via a livestreamed telethon in 2012, on the one-year anniversary of Zuccotti’s eviction. Hoping to raise $50,000, Taylor and Hanna rounded up a number of big-name guests, including Janeane Garofalo, performers from Fugazi and Sonic Youth, and Taylor’s partner, Neutral Milk Hotel front man Jeff Mangum. The project, which quickly went viral, collected almost $200,000 through Larson’s website before the event even started. At the close of the telethon, they’d raised nearly $300,000, enough to abolish several million dollars of delinquent debt. “At the end, there was all this confetti, and I just had, like, sweat dripping down my forehead,” Taylor said. “Because I was like, That’s [$300,000] that we have to spend ethically, and we’ve promised not to pay ourselves a cent. And we’ve promised to have it be perfectly audited by professionals and be perfectly transparent. And it was a huge amount of work.”
Among the more time-consuming and emotionally intense tasks was overseeing the email inbox, which fell to Larson and fellow organizer Winter Casuccio. “Messages by the hundreds began pouring into Strike Debt’s email accounts,” Larson wrote online. “The majority were from people begging for help.” “As a Catholic, I am praying,” wrote a man named Tom. “But I feel that God has abandoned me and am entertaining bad thoughts.” Larson and Casuccio tried to respond to every supplicant, but they weren’t able to offer much other than sympathy. “I’m still traumatized over reading those messages,” Larson said.
Luke Herrine was in law school at New York University when he fell into Strike Debt’s web, after attending a meeting at the Judson Memorial Church, in Greenwich Village, across the street from the law school. He had been drawn to the issue after reading Graeber’s book Debt, which traces the history of the concept from the prehistoric to the present, arguing that the notion of debt is embedded in the social contract.
But amid the success of the Rolling Jubilee, Strike Debt was riven by what Andrew Ross called its “race moment,” a crucible common to Occupy working groups. Among other issues, some members felt that the Rolling Jubilee, initially conceived as a stunt, had grown too big. “What to do with the money became a huge problem,” Brown told me. Giving it to debt collectors, who would simply use it to buy more debt, risked boosting precisely the predatory system Strike Debt was trying to undermine. Conflict erupted when some, including Husain, suggested the money should go to other, more positive endeavors, like creating land trusts in Detroit, and that race should be centered. Strike Debt is “limited by not being multiracial, multiethnic, multicultural,” Husain said in explaining his departure from the group. Unable or unwilling to surmount this disagreement, the collective essentially disbanded.
Herrine, who had been helping Strike Debt organize events, moved on to other things. Sometime in the summer of 2014, he got a call from Larson and Hanna, who had helped reconstitute the group under the new name Debt Collective. Larson and Hanna were working with California-based students of Everest College, a subsidiary of the for-profit chain Corinthian Colleges, who were accusing the company of fraud and protesting the debts they had incurred to attend. (Their claims were bolstered by suits filed against the school by multiple state attorneys general and the Consumer Financial Protection Bureau for predatory practices.)
Because for-profit schools rely almost entirely on federal student loan dollars, they engage in a variety of schemes to get students to borrow huge sums to cover their inflated tuitions—in many instances, students have testified that they were not even made aware of all the loans taken out in their names. Students of Corinthian also alleged that the school had vastly goosed job and salary figures for graduates to lure students to enroll in its worthless programs. One of those students was Nathan Hornes, who called enrolling at Everest “the dumbest decision” he’d ever made.
Hornes’s description of the swindle paints a grotesque picture: He said instructors would suddenly quit or get fired for trying to warn the students about the school. “And then the next thing you know, the person who literally just took that class the quarter before is now teaching that class, but they’re also still in school and taking other classes.” Sometimes, he said, a class period consisted of playing Monopoly or hangman on the chalkboard. “It’s the most absurd thing that’s ever happened in my 30 years of living, and it’s just like, I can’t believe at 20 years old I thought this was OK.”
Two years in, Hornes tried to transfer out—to the University of Southern California, Cal State, even Argosy and the University of Phoenix, two other for-profit schools, a fact he didn’t realize—but none would accept his credits. The Everest recruiters had told him his college costs would be covered by grants and scholarships, so he didn’t feel much incentive to leave and start his degree over from scratch. He decided to stick it out. “So I graduate in April, May, and then I got a letter a couple of months later, and it said: Hey, you owe us $700, starting in October. And I was like, wait, what? How do I owe you money?” He called the school to ask what was going on with these loans. “And they’re like, oh, yeah, by the way, we had to pull out loans for you guys.” Hornes said he asked them, “Wait, why did you do that? Who signed off on that?” When Hornes and his sister had enrolled, the school had helped him fill out a Free Application for Federal Student Aid. But, he said, he hadn’t ever signed the financial aid forms. The school, it turned out, had done that for him. Now he owed $68,000.
When Nathan Hornes enrolled at Everest College, the school helped him create an account with Federal Student Aid, but he hadn’t ever signed the financial aid forms. The school, it turned out, had done that for him. Now he owed $68,000.
On graduation day, administrators told him he wouldn’t be able to walk across the stage unless he signed a paper saying the school wasn’t liable for helping him find a job and he relinquished the right to sue. The same day, a friend of his who was working for Everest while in school was fired—having graduated, he was no longer necessary to boost their job-placement statistics. That’s when Hornes decided to start organizing. In the week after he graduated, even before he found out about his debt, he met with a handful of other students at Klatch Coffee, just down the street from the campus, to figure out how to fight back. The group, which grew to 150 within a few weeks and kept adding students from other campuses in the area, soon decided to file a class-action lawsuit.
When the Debt Collective members learned of the plan from a newspaper article, Ann Larson told me, they said, “This is amazing. This is exactly what we’ve been saying people need to do, and here they are doing it, without us even knowing.” Larson and Hanna started contacting the students and talking to them about how they might organize their protest into something bigger. The students wanted to sue the schools, but they had signed arbitration agreements preventing them from taking legal action, and the majority of their student loan debt was issued by the federal government. “Your target is the U.S. Department of Education in Washington, D.C.,” the organizers told them. “It was their job to make sure this didn’t happen to you.”
Herrine began scrutinizing the text of the 1965 Higher Education Act for some recourse. In his research, he came across an item that intrigued him: a line added in the 1993 reauthorization of the act, which stated that students who had been defrauded or misled by their schools could assert a “borrower defense to repayment” and have their federal loans canceled. Herrine was excited. It seemed to him that he had found in the law precisely the issue he was looking for.
He called up Hanna and Larson. “The Department of Education’s not just going to give it to you,” he told them, “but we could find a way to get these debts canceled with some organizing and some creative strategy.” The Debt Collective started organizing Corinthian borrowers through the Facebook group for the Everest Colleges Avengers (as the students called themselves), and, in the meantime, Herrine tried to figure out whether the Debt Collective could use the borrower defense provision to petition the Department of Education to cancel the Corinthian students’ federal student loan debt. Deanne Loonin and Robyn Smith, two longtime student loan experts he consulted at the National Consumer Law Center, said it could; indeed, they had fought for years to get the department to use it for their own clients.
But because the department had never really planned for this provision to be employed on a large scale (or perhaps at all), there was no internal process in place for how to apply it. So the group set about creating a process themselves—designing an application for loan relief that they could collect from borrowers and submit to the Department of Education. The main objective was to make a form that couldn’t be scrutinized to death by the department: There would be no appeals to specific legal circumstances, and the complaint wouldn’t try to parse individual levels of fraudulence, nothing that could become a sticking point for broad cancellation. The idea, Herrine said, was “to make the simplest possible application.” Once they had drafted something they agreed on, the group created a website and began collecting submissions.
Their efforts started drawing media attention. By December 2014, the idea of using borrower defense had reached Senator Warren, who called on Secretary of Education Arne Duncan to use it to cancel the Corinthian students’ debts. To apply more pressure, the Debt Collective organizers decided to launch a formal debt strike. “These borrowers aren’t paying anyway—they’ll say they’re striking,” Herrine said. “Why not turn inability and unwillingness to pay into a collective action?”
With some grant money they had received, the Debt Collective flew the small group of students, whom they began calling the Corinthian 15, out to San Francisco, where they all roomed together in an Airbnb. Legal experts at the East Bay Community Law Center in Berkeley offered a know-your-rights training to inform the borrowers of the repercussions for them if they let their loans default, and at night everyone shared their debt stories. “It was just a deeply powerful and emotional space, where people were able to talk about the pain of having debt for the first time,” Herrine said, “and to think about the possibility of resistance. To me, these are the moments in organizing that are the most amazing, where you see people have this experience of being like, oh, this is not my fault.”
Once the Corinthian debt strike had garnered some press (including on the website of this magazine, in May 2015), the Debt Collective harnessed it for a bigger push to cancel the borrowers’ debts en masse. They got the attention of Rohit Chopra, the student loan ombudsman at the Consumer Financial Protection Bureau, where Herrine had spent the summer of 2014 as a legal intern. In March, Chopra set up a meeting among Debt Collective organizers, Corinthian borrowers, and officials from the Education and Treasury departments. “That meeting sort of shifted the tide,” Herrine said, “because there was a lot of press.” Herrine had brought a red-painted cardboard box filled with debt-relief applications printed at his law school, and at the end of the meeting he slammed it down on the table, to muted bumfuzzlement from the administrators in attendance. Undersecretary of Education Ted Mitchell, who agreed to take the box, made some unconvincing promises to look into the issue.
Although the department was initially evasive and noncommittal, increased media coverage had begun to focus public scrutiny on the department’s inaction. Eventually, the Debt Collective managed to persuade someone at the department to provide an email address for borrowers, so they could send their applications directly to their creditor.
In the middle of the debt-strike campaign, Corinthian filed for bankruptcy. Once it collapsed, the Department of Education focused on recouping as much of its own money as possible, not helping defrauded students. Yet as the applications for relief began flooding in, the press started asking what Herrine called “hard questions about why they weren’t canceling these people’s debts.” “With abundant evidence of fraud available at both the federal and state levels,” the New York Times editorial board chided in September 2015, “it’s perplexing that the federal government has not promptly granted loan forgiveness for at least some of the people with complaints.”
Finally, several months after the Debt Collective launched its campaign, Secretary Arne Duncan announced that students of Corinthian and other provably fraudulent schools, like ITT Tech, would get relief under borrower defense. But it took more than a year for the department to hash out the terms of the new regulation, and the rules, finalized in October 2016, weren’t set to go into effect until the next summer. Larson and others maintain that, after delaying relief for months, the department was continuing to drag its feet in discharging Corinthian loans, perhaps hoping to pass the work off to a future Hillary Clinton administration. (In fact, a month before the 2016 election, Elizabeth Warren sent a searing letter to then Secretary of Education John King, noting that the department had forgiven only 4,000 borrowers and was still aggressively collecting on nearly 80,000 delinquent Corinthian loans.)
And then we got Betsy DeVos, who made undoing borrower defense a top priority of her term and spent almost the entirety of her tenure as secretary trying to make good on that promise. DeVos announced that she would approve claims from defrauded for-profit students “with extreme displeasure,” then stopped processing claims altogether, and eventually changed the rules and tried to issue only partial loan discharges. But judges repeatedly ruled against the administration in lawsuits brought by state AGs and the Project on Predatory Student Lending, a group formed at Harvard, and ultimately DeVos failed to completely circumvent the process.
After Luke Herrine approached Deanne Loonin and Robyn Smith about borrower defense, the pair submitted a memo on behalf of borrowers. In it, they argued that there would be no legal barrier to adopting the policy, because the Higher Education Act also allowed for executive action to compromise, modify, or waive any federal student loan.
This provision was news to Herrine, but when he realized it existed—it had been in the HEA from the moment it was signed into law in 1965—he wondered why it wasn’t being used more broadly. Perhaps, he thought, this provision could be used to cancel all student debt, not just the debts of defrauded for-profit students. Herrine devoted some time to the question and published a series of blog posts at The Regulatory Review defending his premise—that, using a power akin to a prosecutor’s discretion to waive pretrial detention, the Department of Education could voluntarily eliminate an individual borrower’s federal student loan debt.
His idea hit at a novel political juncture: the cusp of a presidential primary that would serve to elevate a number of leftist policy proposals, including student loan debt relief. At some point, Herrine was in touch with Julie Margetta Morgan, a longtime advocate of student debt relief who has argued, with economist Marshall Steinbaum, that a college degree has lost its value as a wage amplifier, and thus often saddles its recipient with more burdens than benefits. Morgan, then at the Roosevelt Institute, asked Herrine to write a white paper for the Great Democracy Initiative, a left-leaning policy shop that she had co-founded.
A few months later, Morgan was a policy adviser on Elizabeth Warren’s presidential campaign, and, lo and behold, last January the senator announced a student loan cancellation policy relying on the provision Herrine had written about. Warren was calling for the cancellation, by executive action, of up to $50,000 per borrower. (A Warren staffer confirmed that the idea came from Morgan, who was recently appointed to a position in the Education Department.) Suddenly, debt cancellation was everywhere. Each of the Democratic primary candidates addressed the issue, albeit often pathetically: Amy Klobuchar was against it, Pete Buttigieg was evasive, and before becoming Biden’s VP pick, Kamala Harris (who had sued Corinthian as attorney general of California) tweeted out her support for $20,000 in cancellation “for Pell Grant recipients who start a business that operates for three years in disadvantaged communities”—i.e., unicorns. After the election, pressure continued to mount: In early February, Schumer and Warren joined Representatives Ayanna Pressley, Maxine Waters, and others in the House on a resolution calling for Biden to cancel $50,000, which was supported by the NAACP, the American Medical Student Association, and dozens of other organizations, along with a third of all state attorneys general. Representative Alexandria Ocasio-Cortez took to Twitter and Instagram with a step-by-step guide for pressuring representatives to take up the mantle. “We cannot take no for an answer,” she wrote.
In the wake of this moment, just before the election, the Debt Collective began working on a new campaign, the Biden Jubilee 100: 100 student debt strikers for the first 100 days of Biden’s presidency, each echoing a call for full student debt cancellation.
Trump inadvertently paved the way for executive debt cancellation when he directed DeVos to extend the CARES Act’s pause on federal loan payments and interest accrual. (Joe Biden further extended the pause through September 2021 on his first day in office.) Unless he was using the compromise/waive/modify provision, Trump seemingly had no authority to extend the pause. So if the Department of Education could halt collection under the provision, and Trump had apparently just asserted that it could, why couldn’t it cancel the debts altogether?
On its way out the door, the Trump administration attempted to set the record straight in a memo arguing that in cutting interest rates to zero, DeVos had made use not of the compromise provision but rather another part of the Higher Education Act that governed economic hardship deferment, as well as the HEROES Act of 2003; using the compromise statute to cancel student debt by executive action, the administration insisted, would be unconstitutional. In a video conference with staff, Betsy DeVos urged Education Department lifers to “be the resistance.”
Broad cancellation would provide a massive stimulus to the economy by directing what would otherwise have been debt payments to consumer spending of all kinds.
For the Debt Collective, this was just the Trump administration spitefully trying to slam shut a door it had, by its own occasionally useful incompetence, swung open. Moreover, cancellation would be good policy, however it was achieved. Not only were people hurting because of the pandemic—having to choose, as Biden said, “between paying their student loan and paying the rent”—but broad cancellation would provide a massive stimulus to the economy by directing what would otherwise have been debt payments to consumer spending of all kinds. One study, by Bard College’s Levy Economics Institute, estimates this could be as much as $1 trillion over 10 years. It would allow people to make choices currently foreclosed by their debts, such as buying homes, getting married, having children, going into low-paying public service positions; it would help redress the racial wealth gap; and, if combined with measures like College for All, it would finally begin to move our higher education system to one that, as in the vast majority of the developed world, does not finance itself through the iterative indenture of its young people.
Those who object to canceling student debt usually point to income quintiles: People with large quantities of debt—i.e., people who went to graduate school—are more likely to earn high incomes. Some critics even argue that cancellation would be “regressive,” that it would give the biggest boost to high earners and those privileged enough to go to college in the first place. Conservatives often cite the unfairness of forgiveness for those who saved for college or already paid off their debts (a critique that could be levied against all progress)—or the burden on the elusive “taxpayer,” as though student debt isn’t itself a regressive tax (paid with interest) imposed upon those who can’t afford to pay outright.
But what is the taxpayer burden, anyway? Because student loans represent money already spent, forgiving them would have no effect on the national debt, although it would raise the annual budget deficit, which takes into account the expected repayment on those loans. (This amount is already limited by the Education Department’s own estimates that a third of the student loan portfolio is junk—in other words, uncollectible.) To account for this shortfall in their campaign plans, Sanders proposed taxing Wall Street trades, and Warren rolled out an “ultra-millionaire tax.” If Biden decides to test his authority to cancel student debt, it will be up to Congress to recoup the costs with presumably similar tax plans.
Among those who support some amount of cancellation, $10,000 and $50,000 have emerged as headline figures. These numbers are a little bit arbitrary, but not entirely so: Supporters of the $10,000 figure argue that it would benefit the majority of borrowers currently in default (who are disproportionately Black and paradoxically tend to have the lowest balances, often because they never completed their degrees), while sparing wealthy borrowers. They’re countered by researchers who have found that $50,000, with phaseouts for higher earners, would leave about 80 percent of current borrowers debt-free while doing the most to close the racial wealth gap—though, because of Covid, this sweet spot has actually gone up to $75,000. Others, like economist Darrick Hamilton and public health scholar Naomi Zewde, continue to tout full cancellation, focusing on wealth over income and emphasizing “the added burden that a long history of discriminatory policy places on borrowers of color.” Black Americans, who typically start out with one-eighth the family wealth of their white classmates, must take on debt in higher numbers, and they graduate with roughly double the amount of debt. Then, if they wish to overcome persistent racial and gender wage gaps, Black and female borrowers must credentialize to higher levels than their white, male counterparts—perhaps going on to earn an expensive grad degree just to start at a bachelor’s-level salary. In other words, they pay more for their degrees and earn less from them.
What these numbers don’t convey is the extraordinary psychological and emotional toll of debt, as I learned from Biden Jubilee strikers. Anecdotes aren’t data, but the anecdotes are nevertheless compelling.
Take Richelle, a 33-year-old Black woman working as a teacher in South Los Angeles. After years struggling through a series of setbacks—two pregnancies right out of high school, when she was enrolled at a local community college; a nursing degree she discovered was worthless because ongoing legal issues kept her from getting licensed; struggles with rent; moving in with her mom; and all the mundane challenges of being a single working mom and trying to go to school—she emerged in 2018 with a doctorate in education and took a job as a principal at the public charter school where she’d been teaching for three years. She was making $85,000 a year, still not really enough to cover her $3,000 monthly rent, student loans, and other bills, but enough that she no longer had to take out payday loans every month. Then, in 2020, her school’s charter wasn’t renewed, and it closed down. Just before the pandemic, she moved back in with her mom and returned to teaching, working remotely as a STEM teacher in another public charter middle school, which came with a $20,000 pay cut. Meanwhile, with interest, her student loans are now more than $200,000. Instead of creating intergenerational wealth, she’s poised to pass on a legacy of debt to her two children, who both dream of attending Howard University. How will she save for their college educations if she can’t pay off her own loans, and if her debt keeps her from ever being able to build equity through a retirement account or by buying a house of her own?
Or look at Rebekah Valorn, who was homeschooled in rural Wisconsin until the age of 16, then lived at home while going to a state school for environmental science. She graduated without student debt in 2007, but she didn’t manage to find a job in her field before the recession hit and the work dried up altogether. So she decided to go on to grad school, and when that didn’t help her get a leg up either, she returned to school for a law degree, focusing on environmental issues. “I finished my graduate degree in 2010,” she told me. “And the economy had not gotten any better.” By that point, she said, higher-level engineers who had been laid off had flooded the market for the entry-level mechanical drafting and other tech jobs. “So after another year, poverty, and forbearance, I said fuck it. I already had about $30-ish–thousand in student debt. And when I ran the calculations, like, this is just going to be in an income-based payment for however many years it takes. So I might as well go on to more school. Which I know is that dreaded moral hazard.” Critics of cancellation often point to the “moral hazard” risk, by which they usually mean that creating an expectation of eventual forgiveness will leave students with no incentive to control borrowing, nor schools to control tuition. “But how did education become a moral hazard issue? Like, what is immoral about wanting more education?”
The Debt Collective’s perspective on student debt is moral and absolute, which is both clarifying and a little scary. The group starts from a premise that I share: that financing higher education by asking the non-wealthy to take on increasingly unmanageable levels of debt is wrong. Education ought to be a right of citizenship in a wealthy, humane, democratic society. Its effects are not limited to enhancement of the individual receiving it—intellectual, financial, cultural, social, or otherwise—but benefit us all by creating an astute citizenry and a populace whose members are well matched to their interests and labor goals. Therefore, education ought to be provided as a public good. Student debt shouldn’t exist in the first place. So, obviously, we should get rid of it.
Starting from this point neutralizes much of the hand-wringing and arcane number crunching around the idea of debt cancellation. If the whole debt-financing system is regressive, how could it also be regressive to dismantle it? But this simple moral salvo tumbles a house of cards that is at best daunting to address. It isn’t enough to cancel all existing student debt. Although this would be the biggest single welfare provision the government has ever offered, it would also be a onetime stimulus, and tomorrow the debt counter would start ticking up all over again.
The current proposals from the Biden camp and in Congress generally steer clear of this minefield, by tying their cancellation to Covid-relief measures, gesturing not so much at the broken system as at the specific hardships generated by a once-in-a-lifetime calamity. But there have been some interesting glimmers of intrigue. Before the Democrats mounted surprise wins in both Georgia Senate seats in a January runoff election, there was a consensus in Washington that Biden was likely to cancel some, presumably paltry, amount of federal student debt by executive action. But when the Senate flipped after the Georgia results, the calculus changed. Biden had been on the record as dubious about executive cancellation and was known to prefer legislative action. Now such action was possible, if a long shot. Not only had the Senate gone blue, but Bernie Sanders was chair of the Budget Committee, responsible for drafting reconciliation bills, which Biden could use to pass legislation unlikely to surmount the filibuster. The initial $1.9 trillion Covid relief package passed in March didn’t offer student debt relief, but it did stipulate that any future forgiveness—wink, wink, Joe—wouldn’t be taxed as income.
Meanwhile, a coalition of legislators continued to urge executive cancellation of $50,000, while Biden gravitated insistently toward $10,000, preferably via Congress. In early February, Jen Psaki, Biden’s press secretary, tweeted that the president was “reviewing whether there are any steps he can take via executive action.” At a town hall a few weeks later, Biden offered a confusing defense of $10,000, suggesting that he didn’t believe he was able to cancel more, and that canceling “debt for people who have gone to Harvard and Yale and Penn” would come at the expense of early-education programs for poor children. The remarks earned him widespread rebuke on Twitter. “Very wealthy people already have a student loan forgiveness program,” wrote AOC. “It’s called their parents.”
She’s right. Maybe 5 percent of American students attend an elite school, even fewer an Ivy (less than 0.5 percent), and those who do generally aren’t saddled with huge loan balances. Only 7 percent of Harvard undergrads take out any loans at all. The vast majority of America’s college students attend public universities, the kind that used to be free but now find their students squatting in the libraries. The largest single source of federal student debt is the University of Phoenix. And sure, the boomers might shake their fists and shout about government handouts, but then again they might not, since as the fastest-growing demographic with student debt (mostly parent loans), they’re likely to be in debt themselves.
Millennials, on the other hand, having been screwed twice in two decades, might reward the Democrats for taking them out of the red for years to come. Almost half of millennials have student debt, and along with the zoomers and the post-zoomers, they make up half the U.S. population. That’s a lot of future voters. Yes, it would be manifestly unfair to cancel debt for millennials while leaving the coming generations to die on the vine. But that’s also what’s politically brilliant about it: Canceling the debt of one group might impel a one-two punch, accelerating the push for a comprehensive free-college bill that would help lift American higher education to its once-promised glory. It may not win over many hearts on Wall Street, but isn’t that sort of the point?
Millennials, having been screwed twice in two decades, might reward the Democrats for taking them out of the red for years to come.
Biden apparently hasn’t gotten the memo, but his staff may have. The day before Psaki’s tweet, the Biden team had announced nominations to the Education Department of several borrower and pro-cancellation advocates, including Julie Margetta Morgan, the National Consumer Law Center’s Joanna Darcus, and Tariq Habash, of the Student Borrower Protection Center. Biden had already nominated Rohit Chopra to head the Consumer Financial Protection Bureau. Perhaps he will do something big and bold on student debt, Mitch McConnell and gauzy fantasies of bipartisan accord be damned. But only time will tell, and every day, that debt counter just goes up and up.
In the meantime, the leaders, if you can call them that, of the Debt Collective remain tireless, but they are so, so tired. Tired of fighting, tired of reading harrowing emails from sad and broken people, tired of putting their lives on hold for a struggle they just can’t give up. They would like to feel that their work has meant something—and is no longer necessary.
Perhaps something is finally shifting, if slowly. On day 58 of the Biden Jubilee 100 campaign, Secretary of Education Miguel Cardona announced that the department would provide full discharges to about 72,000 borrower defense applicants, mostly former Corinthian and ITT Tech students. It wasn’t the end of student debt, and it certainly underscored the bravado of the 100 days demand, but it struck $1 billion from credit scores and the rolls of debt collectors, and it never would have happened if 15 debt strikers and a handful of organizers hadn’t decided, the better part of a decade ago, that they simply weren’t going to take no for an answer. As Thomas Gokey recently said to me on a Debt Collective campaign call: “We can’t win what we don’t organize for.”Ryann Liebenthal @ryannliebenthal
Ryann Liebenthal’s first book, Overdue: The Shameful History of America’s Student Debt Crisis, will be published in 2022.
(Submitted by JP Massar)