5 Ways Student Debt Resistance Is Taking Off
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On September 9, Sallie Mae became the 50th corporation to cut ties with the American Legislative Exchange Council—and the first to do so under pressure from students.
As a member of the controversial legislative advocacy group, commonly known as ALEC, Sallie Mae had drafted model legislation to limit higher education funding. And why not? The more students have to pay out of pocket, the more Sallie Mae, a student loan company, can rake in—including tens of millions in Department of Education contracts to service federal loans.
Students took notice. In October 2011, members of Occupy DC marched from their base at McPherson Square to Sallie Mae’s lobbying headquarters. “The conversation at [that] moment was going after those profiting off student debt,” says Chris Hicks, the student debt campaign organizer for Jobs With Justice-American Rights at Work, a national worker advocacy group. Sallie Mae was selected because it had the most lucrative student loan business, “starting a ball rolling that has only gained momentum since then."
In March 2012, 36 protesters were arrested for blocking the street outside Sallie Mae’s offices. A year later, students introduced a shareholder resolution calling for the company to disclose its executive bonus structure, its lobbying practices, and its connections with ALEC. Now, more than a month after leaving ALEC, the company still languishes under federal investigation for charging higher interest rates and fees to students of color, evidence that it failed to reduce interest rates for military service-members, and calls for the Department of Education to cut its contract. As company spokesperson Martha Holler described the decision to sever the ALEC connection, "The noise level was distracting from the original business purpose."
Meanwhile, Sallie Mae's business, student debt, is exploding. Last year, the national total topped $1 trillion, outscoring credit card debt and auto debt. From 2005 to 2012, the average burden went from $16,651 to $24,803, upping student debtors’ chances of losing credit, having their wages garnished, and accruing more interest—and debt.
It's a crisis of uncharted proportions. It's also, as the groundswell against Sallie Mae suggests, a spark.
From national-level organizing, which unites student, worker and progressive groups, to levying local pressure on administrators and elected officials, student debtors are flipping the script on student debt, moving it from individual responsibility to systemic crisis. Here are five forms of student debt resistance taking hold nationwide.
1. Targeting the Feds
Within the Beltway, student debt reform is moving in fits and starts. In 2010, President Obama signed the Student Aid and Fiscal Responsibility Act, which ended federal subsidies to banks offering private loans. Last year, the Department of Education implemented the “Pay As You Earn” plan, which caps federal loan payments at 10 percent of discretionary income and relieves outstanding payments after 20 years (which is less generous than Representative Karen Bass’ 10-10 proposal).
This year, interest rates have carried the debate. In July, Congress opted to let payments double from 3.4 percent to 6.8 percent, before reducing the hike a month later. Senator Elizabeth Warren's Student Loan Fairness Act, which cuts interest rates to the same 0.75 percent rate that banks receive from the Federal Reserve, still sits on the table.
Student and progressive groups have played a role in each of these proposals while offering a range of others, including reforming bankruptcy laws to cover student debtors and unifying different sources of federal financial aid. For its part, Sallie Mae spent $16 million in federal lobbying between 2008 and 2012, joining industry allies to plug up reform.
The organizing around Sallie Mae goes hand-in-hand with efforts to pressure the federal government, Hicks says. “If Sallie Mae came out and said we're going to forgive 10 percent of everyone's debt, I think there would be an expectation that the Department of Education would respond in a similar way, and vice versa.” Whatever happens to Sallie Mae on the legal front, he adds, will be a signal to the entire industry. When the company moved to offer fixed-interest loans last year, for example, Wells Fargo and Discover followed.