Imagining the End of Student Debt

It’s a shameful thing to be in debt. Once you’re in debt, you’re not supposed to talk about it. It’s your fault. You borrowed too much. You must accept the consequences of your immoral actions, after all, no one forced you to take out that loan. Lenders, on the other hand, can claim the moral high ground. We lent this student $50,000 to attend college, it’s not our fault she can’t find a job.

Thanks, in part, to Occupy, this idea – which places responsibility for a failed economy on individuals – is starting to unravel. As activists, citizens, workers and debtors, we are starting to ask if all debts must ultimately be paid off. As a student debtor recently posted on Twitter, “Are you obligated to repay a loan to the mafia?”

Student debt is a particularly striking example of illegitimate debt.

In the US, two-thirds of college graduates leave school with student loan debt, an average of $25,000 each. According to research from Crediful, debt rates have increased 500 percent since 1999. Student debt, which has passed $1 trillion, will burden students and families for years to come. Many graduates struggling to find well-paid jobs will never be able to pay what they owe. Those who cannot afford to complete degrees, an increasingly likely prospect, will have no choice but to make debt payments for a diploma they never earned.

Why Does College Cost So Much?

The increasing cost of college in the US is partly the result of the wide availability of loans, combined with drastically reduced government funding for higher education. But that is not the whole story. College costs have skyrocketed  because higher education is debt financed, which allows administrators, the government, and Wall Street to profit from student debt. Many executives who manage universities want to raise tuition.

Bob Meister, of the University of California, has explained that US colleges are run like corporations. Administrators use tuition dollars as collateral to improve their institution’s bond rating in capital markets, allowing them to fund lucrative construction projects. Tuition revenue (increasingly funded by debt) is a giant money spigot that college executives use to enrich themselves. This is why it makes little sense to debate the interest rate of a small subset of undergraduate loans in the US Congress, or to lecture students on how best to manage their loan payments after college. These distractions allow powerful people to evade the fundamental issue; the mass impoverishment of students is extremely profitable for the one percent.

How does Wall Street Profit from Student Debt?

Wall Street has its own method for profiting from student debt. The SLM Corporation is a good example. Sallie Mae, which is now a private company, sells student loan payments to Wall Street. Wall Street packages this debt, which is backed by the federal government, into a financial instrument called SLABS – Student Loan Asset Backed Securities – which are similar to the collateralized securities that crashed the US housing market. Finally, Wall Street sells those debt bundles on the global market for a spectacular profit. Malcolm Harris noted that “in 1990, there were $75.6m of these securities in circulation; at their apex, the total stood at $2.67tn.” From reduced state funding and exploding tuition costs to student loans sold as securities, debt financing of US higher education is inseparable from strategies of capitalist accumulation and exploitation.

What can we do?

In the early days of the Occupy movement, a group of us met near Zuccotti Park and began brainstorming ways to challenge the student debt system through direct action. We created the Occupy Student Debt Campaign, which includes a pledge of student debt refusal. Pledgers agree to stop paying their loans once one million others agree to do the same. The pledge is based on the idea that the time for petitioning the government is over. Our elected officials have been bought, paid for by the financial firms that profit from student misery. What incentive could they possibly have for ending the debt financing of higher education that has been so profitable for them?

The pledge is also based on a list of four principles. For example, we believe education should be free (ie publicly funded) as a public good so that future generations do not have to bear the burden of debt.

The student debt pledge continues while the Occupy movement is evolving and expanding. This summer, a series of debtors’ assemblies is taking place in NYC. Most of us are in debt, whether student debt, credit card debt, or medical debt. These assemblies quickly took on the moniker #strikedebt and became a coalition. We are working together on a model that will allow people to challenge the illegitimate debt system in multiple ways, including online pledges, direct action and mutual aid projects. We’re all in this together, and by helping each other, we can begin to live in the kind of world we want to see. That is how we Occupy Wall Street.

Ann Larson is from the Occupy Student Debt Campaign and tweets at @AnnLarsonNYC