Student loan debt is out of control and now some students are fighting back by conducting a “debt strike.”
“Fifteen former students of the failing for-profit giant Corinthian Colleges are refusing to repay their federal student loans in a protest designed to pressure the government into forgiving their debt,” reports The Washington Post. Most often at for-profit colleges, African-American and Hispanic undergraduates are urged to take out student loans. In fact they are more than three times as likely to take out private, high-interest rate education loans as their counterparts at other colleges.
Corinthian runs Everest Institute, Wyotech, and Heald College and has a high number of loan defaults along with allegations of deceptive marketing and even misleading the government over its graduation rates. Because of all of this, Corinthian lost its access to federal funds in 2014, and this forced the company to either sell or close its schools. Feeling they did not get their money’s worth due to the upheaval, 15 current and former students of the for-profit schools have asked the Department of Education to erase debt they say Corinthian pressured them into taking. And they have some powerful political support. Sen. Elizabeth Warren (D-Mass) as well as other Senate Democrats wrote Education Secretary Arne Duncan in December pushing for him to erase at least some of the loans because Corinthian broke the law and “failed to hold up their end of the bargain.”
“Corinthian took advantage of our dreams and targeted us to make a profit,” the so-called Corinthian 15 wrote in a letter to Duncan. “You let it happen, and now you cash in. We paid dearly for degrees that have led to unemployment or to jobs that don’t pay a living wage. We can’t and won’t pay any longer.”
Of course, not paying the student loans could result in their paychecks being garnished, tax refunds withheld, or even a portion of their Social Security taken from them. But the students are willing to take that risk in their fight.
The 15 student protesters have partnered with an offshoot of the Occupy Wall Street movement known as the Debt Collective. Last year the group organized a program called Rolling Jubilee through which they buy student loans from debt buyers for cents on the dollar and wipe out the debt. So far, the campaign has wiped out more than $30 million in medical and education debt, including $13 million in private student loans for Everest students. It was Debt Collective that reached out to Corinthian students when the for-profit schools started to go under, and for several months tried to get the Education Department to forgive the federal loans to no avail. Hence the strike.
After the strike was launched more than 100 borrowers wanted to join. Before doing so Debt Collective insists they attend a financial literacy workshop on the consequences of not repaying their debt.
The Education Department has broad authority to cancel federal student loans when colleges violate students’ rights and state law. Already the department has worked with ECMC, the student debt collector which bought more than half of Corinthian’s campuses, to forgive many of the private loans in Corinthian’s Genesis program. Those students will get an immediate 40 percent reduction in the principal balances on their loans. The remainder is to be forgiven over the next few years. But this deal does not apply to students who took out federal loans; it’s only valid for private loans.
Word is still out on if a deal can be reached for the federal loan holders.