STUDENT DEBT ROBS YOUNG PEOPLE OF THEIR DREAMS. WILL DEBT CANCELLATION HELP?
From left to right: Representative Ro Khanna, California’s 17th Congressional District, United States House of Representatives; Kat Welbeck, Civil Rights Counsel, Student Borrower Protection Center; Joseph Jaramillo, Senior Attorney, Housing and Economic Rights Advocates
Also available in Spanish.
45 million student borrowers owe $1.7 trillion in loans, contributing to a dramatic drop in first-time college enrollment. Progressives want to cancel $50,000 in student debt per person.
By Jenny Manrique
Five years after graduating as an audio-visual technician from SAE Expression College in Emeryville, Calif., Gabriel Stewart has $52,000 in outstanding student loans.
Promised a high-paying job after graduation, he instead is barely able to pay the interest on the loan with the income from multiple jobs, and he fears that missing payments will affect his credit score. He, his wife and son still live in a small room in his father’s house.
“I couldn’t pay rent anywhere,” Stewart said during a March 5 press briefing hosted by Ethnic Media Services. “All of our money was going to paying off our debts.”
Today, 45 million student borrowers have $1.7 trillion in student debt.
Stewart’s current job at a software company and a pandemic-related moratorium on loan payments have helped his financial situation, but his debt prevents him from buying a car or borrowing money for other needs.
“It’s always that looming feeling of when the payments start again and how we are going to be able to afford them,” Stewart said. “It’s a constant stress in the back of my head.”
President Joe Biden recently rejected a Democratic proposal to forgive up to $50,000 in federal student debt, saying he only supports the cancellation of up to $10,000. He argues that the higher amount would benefit the rich, who can afford to pay it, and that it would need Congressional approval.
But according to California Democratic Representative Ro Khanna, Biden has the authority to forgive the debts by executive order. Canceling $50,000 debt per student would cost a little over a trillion dollars, free 75% of borrowers from debt, help boost the economy and offset the pandemic-related decline in first-time college enrollment.
Khanna says cancelling the debt could be funded through his proposed Stop CHEATERS Act***, which would collect $1.2 trillion dollars in 10 years by auditing the wealthiest people’s income to prevent tax evasion.
“If we forgive the student loan, people will be able to start families, buy houses and start businesses. It’s really lifting the burdens on this next generation and letting them pursue their dreams,” said Khanna. “Certainly student loans should not be forgiven to people like me who are in a position to pay them off, but for the vast majority of Americans, especially those making under $125,000 a year, we need to forgive those loans.”
For-profit colleges and the debt
For-profit colleges have benefited from a business model that pressures students into applying for expensive federal and private loans, and promises them a complete education in a short time leading to high-paying jobs.
These schools don’t offer scholarships or financial aid, but many have been forced into bankruptcy or shut down by the U.S. Department of Education for unlawful activity. Corinthian Colleges, an institution with 91 campuses in 21 states, filed for bankruptcy in 2015 after several state attorneys general took legal action for misleading advertising to recruit students, securities fraud and consumer fraud.
For-profit schools enroll more than a million students who are less likely to graduate, more likely to default on their student loans, and more likely to end up with higher debt burdens, said Joe Jaramillo, a senior attorney with the Oakland, Calif.-based Housing and Economic Rights Defenders (HERA).
“Indeed, half of these students default on their student loans within five years of leaving the school,” Jaramillo said.
HERA has helped hundreds of Californians manage student loan repayments and apply for relevant loan-discharging forgiveness options. Its multilingual curriculum on choosing a college and paying for education is available to its clients, most of them Latino and Black students and low-income seniors. Their debt is so high that if they default, their wages, Social Security benefits or tax refunds may be garnished or liens put on their private property.
“The federal government can do all of this automatically without even going to court,” Jaramillo explained. “Private (student) debts are treated like any other credit card or loan debt that typically requires them to go to court, which can also be very harmful because a lot of people get sued and can’t afford legal representation.”
Feeding the wealth gap
After mortgages, student loans are the second largest class of U.S. consumer debt. Kat Welbeck, civil rights counsel at the D.C.-based Student Borrower Protection Center, says it’s impossible to examine this debt without a lens of racial equity and economic justice.
“Black and Latino borrowers have less household wealth and are taking more loans to pay for school,” Welbeck said. “Therefore, they have more debt, which cuts into opportunities for wealth creation over time. And so what happens when it’s time for their children to go to college? There is potential for that cycle to repeat.”
According to her organization, 90% of Black students and 72% of Latino students take on debt to pay for college, compared with 66% of white students. Black borrowers still owe 95% of their original student loan 20 years after starting college, and Latinos owe 83%. In contrast, white borrowers have paid down nearly half of their debt 12 years after starting college.
“This is both a civil rights crisis and a consumer-protection crisis,” Welbeck said.
Andrea Campo was majoring in the criminal justice program at Heald College in Hayward when the school was shut down as part of student fraud lawsuits. Heald offered to forgive Campo’s $13,000 debt if she renounced her credits, but the process was so difficult to navigate, her debt kept going from one creditor to another for several years.
“This has impacted my life significantly,” said Campo, who was raised by her grandparents and was the first in her family to complete high school and go to college.
As a 19-year-old with no understanding of the complex system she was entering, she said she felt “deceived by the recruiters. I thought that to have a prosperous future, I shouldn’t have put a limit on the financial burden of education.”
She later found out that “those numbers weren’t realistic, based on what job I was able to get, which was none in the career that I was going for.”
Because her school broke the law, Campo was able get all of her debt forgiven with HERA’s help.
But the impact of debt is pulling down a whole generation of students. Stewart, the audio-visual technician, said many friends have given up going to school because they are “learning how debt is destroying other people’s lives.”
“This is changing society a lot,” Stewart said.