On 3rd Anniversary of Occupy Wall Street, Activist Project Pays Off Nearly $4 Million in Student Debt
Over the last few days, over 2,700 Everest College students woke up to find that someone had paid off their private student debt.
This was no act of goodwill by the government, which is currently suing Everest parent Corinthian Colleges for its predatory lending practices. Nor is it a gift from Everest itself, which is expected to shutter its doors and possibly leave 72,000 students out of their time and tuition.
Instead, the disappearing student loan debt is the second major piece of financial activism by a group of Occupy Wall street activists.
To inspire Americans with student debt to unionize, the Rolling Jubilee Fund, a project of Strike Debt, has purchased and abolished a portfolio of private student loans issued to Everest students.
Strike Debt is also launching a new initiative – The Debt Collective, which will “create a platform for organization, advocacy and resistance by debtors”.
“Solutions are not going to happen if we just wait for Congress to do it,” says Thomas Gokey, one of the organizers. “We need a social movement. We need debtors to unite to exert collective power.”
The portfolio was valued at – to be exact – $3,856,866.11 in student debt.
In the vast scheme of things, $3.8m is barely a drop in the bucket as the student debt owed by Americans has now surpassed $1tn.
The gesture, however, is meant to be symbolic as it proves that debt can be conquered – and at a discount. Rolling Jubilee bought the $3.8m worth of student loans for a total of $106,709.48 in cash. That’s about 3¢ for $1 of student debt.
“The Rolling Jubilee doesn’t actually solve the problem. The Rolling Jubilee is a tactic and a valuable one because it exposes how debt operates,” says Gokey.
“It punches a hole through the morality of debt, through this idea that you owe X amount of dollars that the 1% says you owe. In reality, that debt is worth significantly less. The 1% is selling it to each other at bargain-based prices. You don’t actually owe that.”
The 1% in this scenario are the companies issuing private student loans and the debt buyers, who often purchase student loan portfolios like the one purchased by the Rolling Jubilee.
This is not the first time that the group has shown that consumer debt can be purchased for cents on the dollar.
Last year, the group managed to buy $13.5m of medical debt owed by 2,693 people as well as $1.2m of other personal debt for a total of $400,000.
The funds that are making these purchases possible came directly from the US public. For little over a year, from November 2012 to end of December 2013, Rolling Jubilee was accepting donations from its supporters. The campaign was able to raise about $700,000.
“It’s really a crowdsourced project,” says Laura Hanna, one of the members, noting that majority of contributions were quite small.
For example, Kurt Padilla, a Rolling Jubilee donor, says he only gave $20 to the cause.
Intimidated by the numbers of the occupiers and their camp near New Haven, Padilla preferred to keep his distance – watching as the movement unfolded on Twitter. It was through the social media platform that he first heard of Rolling Jubilee.
“I just thought that the concept of mutually buying discounted debt and abolishing it was really clever,” he says. “I realize that the debt market is too big for Rolling Jubilee to make a difference, but the action just pokes some really big holes in capitalism. I suppose that by donating, I got to play a small role in this affront to the status quo and that really appealed to me.”
At the time of his donation, Padilla did not have any debt himself. Since then, however, he and his wife have taken on a mortgage and accumulated some credit card debt.
“Although we are on track to pay it off before the interest free introductory period runs out,” he adds.
Even though they might not be directly helped by the efforts of Rolling Jubilee, past donors are excited about the campaign’s ability to purchase and abolish student debt.
“Talk about bang for your buck. Rather than straight paying $50 worth of someone’s bill, that $50 gets so much more done the way Strike Debt did it,” says Jaime Taylor, a 30-year-old art librarian from New York City, who donated $50 to the campaign. “From a theoretical perspective, too, it shows that debt is … kind of not real, you know?”
Unlike Padilla, Taylor is more than familiar with the plight of debt. It will be years yet before she is debt free.
Starting out with more than $55,000 in combined medical and student debt, Taylor was paying as much as $650 a month in loan payments. After making a dent in her debt, she now pays about $443.86 a month towards her student loans. She tracks how much she owes to the cent.
“I have a $26,211.09 left of my student loans, $8,663.06 from undergrad with an interest rate of 1.62% and $17,548.03 from grad school – I have a master’s of library science – with an interest rate of 6.55%,” she says.
Rolling Jubilee’s search for a student debt portfolio began as early as January of this year.
At first the movement considered buying loans held by Sallie Mae, the largest lender of private student loans.
“Sallie Mae is just a Bogeyman that is haunting so many people of our generation,” says Gokey.
After multiple attempts to reach someone at Sallie Mae, Gokey says he was finally put through to Douglas St Peters, currently the vice president of portfolio management at Sallie Mae spinoff Navient.
Prior to April of 2014, Navient was a loan management, servicing and asset recovery business within Sallie Mae.
The campaign claims that St Peters confirmed that Sallie Mae sells its private loans to two large debt buying companies for as little as 15 cents on the dollar. According to Gokey, as soon as St Peters found out who he was speaking with, he shut down and declined their offer to purchase any of Navient’s portfolios.
“It was like talking to a politician caught in a sex scandal. No matter what I said he, like a robot, was just repeating: ‘I am not going to answer this question or any other questions’,” says Gokey.
“The only reason that they wouldn’t sell it to us is because we aren’t going to collect it. We are the anti-Navient. We are the anti-Sallie Mae.”
“We are regularly approached by entities seeking to purchase loans, and do not disclose the reasons we do or do not sell,” a Navient spokeswoman told the Guardian.
Unable to purchase a portfolio of Sallie Mae issued loans, the campaign chose to target another symbolic entity: Corinthian Colleges.
Stuck in the middle of a tug-of-war between Corinthian and US Department of Education, Corinthian students were left out of the room as decisions about their education and their lives were being made, say Rolling Jubilee organizers.
“The Department of Education needs to stop acting as a debt collector for a predator lender, and start discharging the debt of these students,” Luke Herrine, a Rolling Jubilee member, said in a statement.
The private loans taken out by Everest students were sold to a debt buyer, who in turn sold it to the campaign. As part of the purchase agreement, the campaign signed a nondisclosure agreement and was not able to disclose who the debt buyer in questions was.
On 16 September, day before the Rolling Jubilee announced that it abolished debt of the 2,761 Everest students, Consumer Financial Protection Bureau announced that it was suing Corinthian Colleges for “predatory lending scheme”. It is seeking more than $500m for borrowers who took on its private student loans.