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The Average 25-Year Old's Debt Has Grown 91% in the Last Decade -- Will Borrowers Learn to Push Back?

Debt grinds on the American psyche, yet building a movement against it has proven difficult.

Back in September, the U.S. Department Education announced its two-year and three-year federal student loan default rates. The rates were 10 percent and 14.7 percent respectively, both record highs. At the time the report was released, Secretary of Education Arne Duncan called these numbers “troubling.”

NYU professor of social and cultural analysis and Occupy activist Andrew Ross would likely call these figures extortionist. Also, not at all unexpected.

“Creditors have their foot on the throat of the global economy,” said Ross on a panel last month at The Brecht Forum in New York. The panel—which included writers, professors, and activists—was there to discuss debt resistance, and Ross’s new book Creditocracy And The Case For Debt Refusal. Resisting one’s debts is a tactic rarely if ever discussed by the American media’s talking heads. Ross’s book humanizes the cryptic problem of a society funded on credit, offering a political voice to those whose economic power has been throttled.

Ross digs into the injustice of the main kinds of American debt—medical, municipal, student, and housing—but his biggest ax to grind is with student loans, a contract that so easily binds teenagers and their cosigners to decades of indebtedness to the banks. Students across the nation are being turned into what credit financiers call “revolvers”, the most desirable customer out there, the kind that month after month pays off their interest without making a dent in their principal balance (those that are able to pay this off as well are termed “deadbeats”).

The Student Debt Crisis and Government Action

Ross’s sharp, morally charged language in his talks and throughout the book in many ways mirrors that of senator Elizabeth Warren, who back in May 2013 introduced the Bank on Student Loans Fairness Act, which proposed that student debts be refinanced at the same .75% rate that banks get. It doesn’t seem like this will be happening anytime soon, though the bill did spread awareness about the problem of student debt, and may have helped pull Congress from the brink of allowing student loan interest rates to double on June 1.

Just days ago Warren spoke at the launch of the “Higher Ed Not Debt” campaign, created by a coalition of unions, think tanks, and progressive organizations to educate citizens about their debts and put pressure on legislators to enact laws that will ease Americans’ 1.2 billion trillion in student loans. “It’s about values,” said Warren. “Where, as a country, do we believe we should make our investments?.... Invest in billionaires or invest in students?”

Warren is right, the urgency of the student debt crisis and the ideological shift required to dig us out of it cannot be stressed enough. The average loan to a 25-year-old American student has risen 91 percent over the past decade. 7 million borrowers of the existing 40 million are currently in default.

Penalties for not paying one’s student debts are harsh, even more so than other forms of debt.

Rohit Chopra, student loans ombudsman at the Consumer Finance Protections Bureau, recently told Business Insider, "Unlike other consumer credit, borrowers in default on a federal student loan might see their tax refund taken and their wages garnished without a court order." Since its creation as a provision of Dodd-Frank in 2010, the CFPB, which set as one of its earliest goals curbing the “unfair, deceptive, or abusive, practices” of debt collectors, has had little success in administering anything more than a few wrist-slaps to the multi-billion dollar industry, comprised of more than 4,500 collection agencies.

But Creditocracy is no clarion call to get borrowers excited about supporting good legislation or penning letters to their representatives. Instead, Ross points to the toothlessness of the federal government in their delusional partnership with the banks, “Central banks increasingly act to ensure the solvency of banks, and not sovereign governments trying to cope with public deficits.”