Amid massive government bailouts of the nation’s banks, we speak to the Reverend Jesse Jackson about Reduce the Rate, his new campaign urging the Obama administration to slash the interest rates on crippling student loans. We also speak with Alan Collinge, founder of Student Loan Justice and author of The Student Loan Scam: The Most Oppressive Debt in U.S. History — and How We Can Fight Back. [includes rush transcript]
JUAN GONZALEZ: As the Obama administration continues to spend hundreds of billions of dollars to bail out the nation’s banking system, a growing movement is calling on the government to do more to help students struggling to pay for college.
According to the College Board, the average cost of four years at a private college is now a staggering $136,000. Four years at a public university, on average, will set you back $57,000. In order to pay for the rapidly increasing tuitions, students were forced to borrow a total of $85 billion during the last school year, up from $41 billion ten years ago. The average student now leaves college with $20,000 in debt.
This is an excerpt from the forthcoming documentary Default: The Student Loan Documentary, a film by Serge Bakalian and Aurora Meneghello.
FORMER STUDENT 1: The Citibank Student Loan Corporation would send me these notices, and they’d say, “This is just to notify you of your interest rates.” And then they started sending me ones saying, “This is just to notify you of a change in your interest rates.” And it was like — it was like watching the odometer on a car.
FORMER STUDENT 2: I remember thinking, “What happened to the nine percent? Where did this 17 percent come from?” and seeing the number, something like $900-something a month for my private student loan and immediately realizing that was more than I make in a month.
ALAN COLLINGE: The most recent estimate is that the amount of outstanding student loan debt in the country is approaching $40 billion, with a “b.” And that is only the federally guaranteed student — defaulted student loan debt that is out there. We’re not counting the private loans in that, which is probably another $5 billion to $10 billion, and growing quickly.
FORMER STUDENT 2: The original loan amount was $45,974. And this last statement I received on December 16, 2007, indicates that the outstanding balance is $73,789. So it has accrued just shy of $30,000 in interest.
FORMER STUDENT 1: If you look at it in the roundhouse figures, OK, it was $30,000 to go to UNR for three years. They now say that I owe about $90,000. So it’s tripled. They can seize Social Security. They can seize tax refunds. They can garnish your wages. Like if I get hit crossing the street by a bus and I end up in a wheelchair, they can seize my disability.
AMY GOODMAN: The documentary Default: The Student Loan Documentary. More information about the film is available at the website defaultthe movie.com.
We’re joined now by two guests who have been closely following this issue. The Reverend Jesse Jackson is with us in our firehouse studio, the founder of the Rainbow/PUSH Coalition, longtime civil rights activist, has launched a campaign called Reduce the Rate, urging the Obama administration to slash the interest rates on student loans. And Alan Collinge joins us from Seattle. He’s founder of studentloanjustice.org and author of the new book The Student Loan Scam: The Most Oppressive Debt in U.S. History — and How We Can Fight Back.
We welcome you both to Democracy Now!
Tell us about this campaign. It’s good to have you back, Reverend Jackson.
REV. JESSE JACKSON: Well, really we have made a fundamental shift from grants to loans. And these are very oppressive loans. The more you go to school, the worse off you are. Talking about students who are in $150,000 in debt, they marry a classmate, $300,000 in debt, and so you have the combined burden of the loan, and then you have compounded interest. If you don’t start paying back after six months, then you’re facing default and garnishment. If 20 percent of your school cannot pay back, it can face the loss of accreditation. It only gets worse.
And so, we feel that students should get the same deal banks are getting. If they can get, on the top, zero to one percent loans, students should get zero to one percent loans, and it is a transparent flow of the moneys. When you, in that sense, restructure the student loan process — more grants and less loans — it helps the student, it helps their parents, it helps the school, it helps community. I mean, the help just never stops coming.
And so, we have launched a website, reducetherate.org. Students should begin rebelling and marching across the country. Students have accepted this as like normal. It’s normal, but it is not right. And it is a point of rebellion. So we’re urging students across America who want to reduce the rate and have more grants and less loans, let’s begin to have marches, use last year’s energy in the presidential campaign, demand a new deal.
President Obama wants students, in fact, to get a better deal. Were it not for his hit book, we’d have a president today with a student loan. His hit book allowed — he and Michelle both, a presidential — Harvard Law School graduates — were still owing on their loan until two years ago. So think about those who are in a less fortuitous circumstance. So I’m anxious to urge students around America, don’t just sit there and take that hit. Let’s fight back.
JUAN GONZALEZ: And what about the role of the government in this? Sallie Mae, the organization that guarantees a lot of these loans, they apparently — as I understand it, their fee income, for Sallie Mae, went up about 228 percent, while their loan portfolio only increased by 78 percent in the early parts of the decade.
REV. JESSE JACKSON: Well, they’re getting free and charging a fee. On the one hand, the TARP moneys, zero to one percent, they are — that should — students should get the same deal banks are getting. On the other hand, the federal government can borrow money at three percent and sell student loans at six. So they’re really scalping tickets, they’re scalping loans. The money that they make from that deal finances the Pell Grants. You would think the Pell Grant is some generous investment. The fact is, the Pell Grant money is the money made from the gap between what the federal government borrows for and what it does with students.
AMY GOODMAN: We’re going to go to break, and when we come back, we’ll also be joined by Alan Collinge, who is now devoting his life to this issue. Starting out simply with a student loan, now he’s written the book The Student Loan Scam What is Sallie Mae? How did it come to be? Who is profiting? And, of course, Reverend Jesse Jackson will stay with us. Stay with us, as well.
AMY GOODMAN: Just before we go back to our guests, some of the voices of the students in this discussion. The American News Project recently interviewed a group of young people working at Mother Bear’s Pizzeria in Bloomington, Indiana, home of Indiana University. This is what some of them had to say about the student debt.
FORMER STUDENT: I’m no longer in school. I ran into some issues, money issues, so I had to leave. And my original idea was to start working here and totally make enough money to go back to school, but it’s harder than you think, because you still have to pay for being alive.
I think that a lot of parents who were planning for their kids’ education didn’t save enough. The cost of tuition and books and all that stuff shot up. Like, you’re figuring, if you had a kid twenty years ago, and you were like, “Oh, well, I have to save this much plus a little extra for inflation,” and then you look at the prices of school, like now versus twenty, twenty-five years ago, it’s insane. It’s insane.
STUDENT: You know, you hear that — especially in an election year, you hear all this [expletive] about, you know, the American dream. Well, what’s the American dream when, you know, now I’m paying — I just was talking to my buddy about it — I think I’m paying $800 a month — yeah, $800 a month — in loans and debt just for school alone. And I manage a pizza place.
My little sister’s visiting. Hi, sister. I haven’t seen her —
STUDENT’S SISTER: Hi.
STUDENT: Good to see you. I haven’t seen her in a couple months. Actually, funny, haven’t seen her in a couple months, because she stopped going to college, moved back in with her parents because of the expenses of living down here. So, you make the decision. You can stick it out like me and be $60,000 in debt, give or take. Or you can just get a full-time job and then like get your education, you know, further down the line. I guess that’s the economics of going to college, is you’re damned if you do, you’re damned if you don’t.
And thanks to the American News Project for going to Bloomington, Indiana. Well, Alan Michael Collinge joins Reverend Jesse Jackson right now. He wrote The Student Loan Scam: The Most Oppressive Debt in U.S. History — and How We Can Fight Back. Alan’s joining us from Seattle.
Alan, what happened to you? And then tell us about your research.
Yeah, it’s good to be with you, Amy. I originally borrowed $38,000 for my undergraduate and graduate education at the University of Southern California. Upon graduation, I got a fairly prestigious but fairly low-paying job at California Institute of Technology. Well, I left that job just prior to September 11, 2001. I found myself briefly sort of unemployed, underemployed, about a year or so, and I applied for what’s known as a “hardship forbearance” through my lender, by which I would be able to withhold payments for six months or a year while I got on my feet financially. Well, unfortunately, instead of granting my forbearance, my lender, who happened to be Sallie Mae, put my loan into default. And so, very quickly, within a little over a year, my loans had ballooned to $80,000 with penalties and fees. And by 2005, I was being billed for well over $100,000.
And this is despite my best efforts through every step in the process to negotiate what I considered to be a fair and reasonable payment plan for the debt. And, I mean, this really caused me to wonder why I had such little power, as compared to other forms of consumer debt. And so, in researching the topic, I found out that, you know, nearly every standard consumer protection that we take for granted with every other type of loan in the nation is simply nonexistent for student loans. They used to exist, but thanks to the lobbying influence of Sallie Mae, Citibank, the Consumer Bankers Association and others, the most standard consumer —
Alan, can you explain what Sallie Mae is?
Yeah, you know, a lot of people are wrongly in the understanding that Sallie Mae’s a part of the federal government. They are not. They started in 1972 as a government-sponsored entity; that is true. However, Sallie Mae privatized starting in 1995. And today, they are a completely for-profit entity with no formal ties to the government.
And so, explain who profits? Continue with the story.
Yes. Well, in the absence of bankruptcy protections, for example, statutes of limitations, truth in lending requirements, refinancing rights, fair debt collection practices, in many cases, and also state usury laws, the industry finds that it can be far more profitable when a loan defaults rather than a loan remaining in good stead. And this is also due to congressionally mandated collection powers that, in the words of Harvard Professor Elizabeth Warren, would make a mobster envious.
So they — and I think this was mentioned earlier in the trailer for the documentary —- they can garnish wage, tax return, Social Security, disability income, all without a court order. Not only that, but they can suspend professional licenses. They can have—- well, this causes security clearances to be denied. And this is in addition to all the sort of pain that a delinquent borrower would face with any other type of debt.
So, under the current system, lenders like Sallie Mae make a lot of money if you can pay your loan and everything goes smoothly. However, they can make a lot more money, particularly the large lenders like Sallie Mae, Nelnet and others, when a student defaults on his or her loan. And the reason is that they sort of get a second bite of the apple. So when a loan defaults, the lenders are paid nearly full book value, principal and interest, but upon default, the loan is literally exploded with just massive penalties and fees. And so, lenders like Sallie Mae, who also conveniently own collection companies, can come back for a second bite of a much larger apple.
Does Sallie Mae function like Fannie Mae and Freddie Mac? Are they basically buying up loans that others originally make, or do they originate their own loans? How does that work?
Yeah, they’re very similar. And Sallie Mae began as simply a warehouse of loans, much like Fannie Mae and Freddie Mac. However, over time, they sort of took over the industry, both vertically and horizontally, frankly, to where they were not only sort of repurchasing loans, but also originating loans, consolidating loans, and most recently, Sallie Mae has, and others have, begun to take advantage of what’s known as the private student loan market. Private student loans are not guaranteed by the federal government and typically are used as a bridge between what the universities are charging now and what the federal loan limits allow. These loans typically have very high interest, on par with credit cards.
But again, not only are federally guaranteed student loans astonishingly absent of bankruptcy protections, but in 2005, the industry convinced Congress — how, I don’t know — to remove bankruptcy protections from private loans. So, these private loans are very dangerous, and we have the student loan industry and Congress to thank.
Reverend Jackson, talk more about the bankruptcy issue.
REV. JESSE JACKSON:
Well, the students, you know, really are seduced into the loans. I was talking to students from Northwestern last week, and they’re just kind of signing off, you know, assuming when they get out of law school, they can kind of pay it back. But now, I mean, those jobs don’t exist, so they can’t pay it back. And they marry each other, which doubles the burden and their compounded interest, and so that’s a big piece of this.
And then, of course, if you don’t pay it back, you can use bankruptcy laws to get out of your foreclosed house, but not out of the federal loan. So there’s more stringent standards on students who are trying to pursue an education even than those that face the home forfeiture crisis. And students, I have found, accept this as kind of the price I pay for pursuing education.
Not long ago, you could be a first-generation student in college and marry and mate, combine a bank account and buy a home first generation. Now you marry into debt. You’re worse off by getting an education than by not getting one. It makes more sense, in this sense, to get an associate degree at a community college and have a trade — sewing, laying line for Verizon — than it does to go to a four-year university.
And so, our basic appeal is, let students have the same deal banks get. And that alone would be a massive cut. Cut the middle person out, and let students have direct access to the money, and have some civilized — and, for example, if you become a doctor and you have a big loan, if, when you graduate, you serve in some indigent community, you can work it off in that way. If you become a lawyer — because now if they’re going to law school or med school, it’s just prohibitive. You come out wearing $250,000 worth of debt.
Reverend Jackson, I’d like to ask about the responsibility of the colleges and schools which these students are attending to counsel them on this whole loan process, because my understanding is that in interviews with some college students that basically they’re encouraged to take out as much money, sometimes even more than just the tuition for the school. They’re basically encouraged to take out huge loans. And what is the responsibility of the colleges?
REV. JESSE JACKSON:
Part of this — a lot. Part of the scandal that Andrew Cuomo unveiled was this kind of university manipulation with the banks, for example. That has to be dealt with, as well.
But it’s now time for a comprehensive look at this. The President asked for students to pursue an education, come out and do community service. You cannot afford to do community service, unless you tie in working off the loan with community service, for example. But I think most Americans have no idea.
I’m looking at teachers who are paying off student loans, whose children are now paying off student loans, intergenerational student loan debt, mortgaged student education, as opposed to even a house. Children are the future. And so, why would one go to med school or go to law school or pursue an MBA? You come out with a debt that you cannot afford to pay. And the chances are that you will default, are so great, you end up with a low credit score, and you’re working from a hole the rest of your life just because you pursued an education.
Alan Collinge, you write that Sallie Mae operatives troll the blogosphere to go after students?
Yeah, you know, since I’ve started this as a grassroots effort, I’ve met a lot of sort of anonymous resistance on the internet. And it’s a little disturbing. You know, these people come up, and they’ll print all manner of misinformation, untruths. And it’s really disconcerting. But I think it’s important to note that, you know, for instance, there was a 60 Minutes episode on precisely this issue a couple of years ago. Sallie Mae refused to show up for the interview, and so I think that really says it all right there.
And I also would like to say that, you know, Reverend Jackson hits the nail on the head. You know, this is a debt burden that no other generation has had to face. You know, thirty years ago, Reverend Jackson rightly pointed out that people could pay for college, you know, working an odd job over a couple of summers. Well, those days are long gone. You know, as a nation, we owe $600 billion in student loan debt. And so, in the absence of a draft, what else, what other compelling issue is there more compelling to get the students out there and fighting for their economic future?
REV. JESSE JACKSON:
We can lose a greedy bank more than we can lose a generation of needy students. I mean, the banks are self-inflicted wounds. Students, in their innocence, are trying to borrow money, are trying to get a scholarship, to do the right thing. They want to be productive, and this is a very counterproductive measure.
And I would think students who are listening might contact us at reducetherate.org. Let’s begin to mobilize campus by campus, turning our agony, our protest, our votes, into demanding that there be a complete restructuring of access to student loans, and I might add, less loans and more grants in the first place.
And, Alan Collinge, what’s been the response? You’ve called yourself the complaint box of the student loan movement. What’s been the response to your exposés in recent years?
Well, it’s been tremendous. And, you know, the most powerful thing that I can point to is really the thousands of stories that I’ve received from people from age eighteen to age eighty who have been — I mean, literally, their lives have been literally destroyed by their student loans. It’s amazing, but, in fact, you know, we’ve documented dozens, many dozens, of people who have literally fled the country as a result of this debt, people whose family members have committed suicide and so on. I mean, it’s been tremendous. And it’s just a shame that the students don’t really get this issue until it’s too late, frankly. And so, I’m hoping that shows like this and others in the future will serve to alert the students while there’s still time to change the system, while they’re still in school, before they take out the loans.
REV. JESSE JACKSON:
Alan, I’m meeting you for the first time on this program, anxious for us to connect today and expand the base. I met with students from Northwestern last week, 150,000, 170,000 in a common place. And many of them want to do public service law. They cannot afford to do it. Others thought they were going to get a law job; they’re not going to get that job. But the good news is, when we fight together, we can win these battles. And so, I’m anxious for us to meet together when this session’s over. And so, thank you for being the link today, Amy.
JUAN GONZALEZ: The facilitator.
REV. JESSE JACKSON:
Some of the facts are absolutely amazing. Just looking at studentloanjustice.org, when you see that between ’95 and 2005, Sallie Mae set aside $3.6 billion in stock for its employees. The Sallie Mae CEO bragged to shareholders in 2003 annual report their record profits that year were attributable to collections on defaulted loans, and other student loan companies report similar trends. The student loan industry has grown to rival the credit card industry?
REV. JESSE JACKSON:
As bad as that is, the federal government itself borrows money at three. It sells to — the students — the money made from a student loan interest pays for the Pell Grant. So it’s like, you know, you give me $1,000, and I buy you a ring. I’m not doing anything. You bought the ring with the money you gave me. So in many ways that we think the Pell Grant is something generous set aside to invest in students, it is a result of a for-profit deal between the federal government and the Federal Reserve.
What has Obama done about this? Have you talked to him about it?
REV. JESSE JACKSON:
Well, I have not talked to him. He has made some steps in this direction. But I am convinced that a mass action movement by students across the nation, congressional district by district, senate by senate, will have the massive impact. I think these are his inclinations. He is just coming out from under the burden of a student loan debt himself, so I think he gets it. But I think our massive protest and mass education — I mean, parents who are under this burden — the Speaker of the House in California, Karen Bass, her daughter and son-in-law were killed in a car accident. They are now trying to force her to pay that loan off, and she is in that burden. I mean, the stories just get more draconian the more you get into it. And so, I think that a massive student movement will be the dose, the medicine we need to change the environment, to educate people about just how wrong this is, and it can be changed. And the propitious moment is, if you can bail out AIG and bail out the big banks, why not invest in our students now?
Alan Collinge, we want to thank you for being with us. The Student Loan Scam is the name of his book, The Most Oppressive Debt in U.S. History — and How We Can Fight Back.
REV. JESSE JACKSON:
He must autograph my book. I want — this is my book now, you know.
It’s his book. But Reverend Jackson, I’d like you to stay with us.