Majorityrights News > Category: Education

Student Debt Slavery II: Time to Level the Playing Field

2018 by Ellen Brown

This is the second in a two-part article on the debt burden America’s students face. Read Part 1 here.

The lending business is heavily stacked against student borrowers. Bigger players can borrow for almost nothing, and if their investments don’t work out, they can put their corporate shells through bankruptcy and walk away. Not so with students. Their loan rates are high and if they cannot pay, their debts are not normally dischargeable in bankruptcy. Rather, the debts compound and can dog them for life, compromising not only their own futures but the economy itself.

“Students should not be asked to pay more on their debt than they can afford,” said Donald Trump on the presidential campaign trail in October 2016. “And the debt should not be an albatross around their necks for the rest of their lives.” But as Matt Taibbi points out in a December 15 article, a number of proposed federal changes will make it harder, not easier, for students to escape their debts, including wiping out some existing income-based repayment plans, harsher terms for graduate student loans, ending a program to cancel the debt of students defrauded by ripoff diploma mills, and strengthening “loan rehabilitation” – the recycling of defaulted loans into new, much larger loans on which the borrower usually winds up paying only interest and never touching the principal. The agents arranging these loans can get fat commissions of up to 16 percent, an example of the perverse incentives created in the lucrative student loan market. Servicers often profit more when borrowers default than when they pay smaller amounts over a longer time, so they have an incentive to encourage delinquencies, pushing students into default rather than rescheduling their loans. It has been estimated that the government spends $38 for every $1 it recovers from defaulted debt. The other $37 goes to the debt collectors.

The securitization of student debt has compounded these problems. Like mortgages, student loans have been pooled and packaged into new financial products that are sold as student loan asset-backed securities (SLABS). Although a 2010 bill largely eliminated private banks and lenders from the federal student loan business, the “student loan industrial complex” has created a $200 billion market that allows banks to cash in on student loans without issuing them. About 80 percent of SLABS are government-guaranteed. Banks can sell, trade or bet on these securities, just as they did with mortgage-backed securities; and they create the same sort of twisted incentives for loan servicing that occurred with mortgages.

According to the Consumer Financial Protection Bureau (CFPB), virtually all borrowers with federal student loans are currently eligible to make monthly payments indexed to their earnings. That means there should be no defaults among student borrowers. Yet one in four borrowers is now in default or struggling to stay current. Why? Student borrowers are reporting widespread mishandling of accounts, unexplained exorbitant fees, and outright deception as they are bullied into default, tactics similar to those that homeowners faced in the foreclosure crisis. The reports reveal a repeat of the abuses of the foreclosure fraud era: many borrowers are unable to obtain basic information about their accounts, are frequently misled, are surprised with unexpected late fees, and often are pushed into default. Servicers lose paperwork or misapply payments. When errors arise, borrowers find it difficult to have them corrected.

Abuses and fraud in handling student loans have brought the Education Department’s loan contractors under fire. In January 2017, the Consumer Financial Protection Bureau sued Navient, one of the largest contractors, alleging that the company “systematically and illegally [failed] borrowers at every stage of [student loan] repayment.”

Getting a Fair Deal

The federal government could relieve these debt burdens, given the political will. A stated goal of the changes being proposed by the Trump Administration is to simplify the rules. The simplest solution to the student debt crisis is to make tuition free for qualified applicants at public colleges and universities, as it is in many European countries and was in some US states until the 1970s. If the federal government has the money to lend to students, it has the money to spend on their tuition (capped to curb tuition hikes). It would not only save on defaults and collections but could turn a profit on the investment, as demonstrated by the seven-fold return from the G.I. Bill. (See Part 1 of this article.)

Alternatively, the government could fund tuition costs and debtor relief with a form of “QE for the people.” Instead of buying mortgage-backed securities, as in QE1, the Fed could buy SLABS and return the interest to students, making the loans effectively interest-free (as were the $16+ trillion in loans made to the largest banks after the 2008 crisis). QE that targeted the real economy could address many other budget issues as well, including the infrastructure crisis and the federal debt crisis; and this could be done without triggering hyperinflation. See my earlier articles here, here and here.

Needless to say, however, the government is not moving in that direction. While waiting for the government to act, there are things students can do; but first they need to learn their rights. According to a new survey reported in November 2017, students are often in the dark about key details of their student loan debt and the repayment options available to them. To get started, see here and here.

Under the Borrower’s Defense to Repayment program, you can get your loans completely discharged if you can prove they were based on deception or fraud. That is one of the alternatives the Administration wants to take away, so haste is advised; but even if it is taken away, fraud remains legal grounds for contract rescission. A class action for treble damages against offending institutions could provide significant financial relief.

Students also have greater bankruptcy options than they know. While current bankruptcy law exempts education loans and obligations from eligibility for discharge, an exception is made for “undue hardship.” The test normally used is that paying the loan will prevent the borrower from sustaining a minimum standard of living, his financial situation is unlikely to change in the future, and he has made a good faith effort to pay his loans. According to a 2011 study, at least 40 percent of borrowers who included their student loans in their bankruptcy filings got some or all of their student debt discharged. But because they think there is no chance, they rarely try. Only about 0.1 percent of consumers with student loans attempted to include them in their bankruptcy proceedings. (Getting a knowledgeable attorney is advised.)

For relief as a class, students need to get the attention of legislators, which means getting organized. Along with degree mill fraud and contract fraud, a cause of action ripe for a class action is the student exclusion from bankruptcy protection, a blatant violation of the “equal protection” clause of the Fourteenth Amendment. If enough students filed for bankruptcy under the “undue hardship” exception, just the administrative burden might motivate legislators to change the law.

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“Slavery by debt has continued to this day, and it is particularly evident in the plight of students.” (Photo: Michael Fleshman/cc)

Common Dreams:

“Student Debt Slavery: Bankrolling Financiers On The Backs Of The Young”, by Ellen Brown

Higher education has been financialized, transformed from a public service into a lucrative cash cow for private investors.

The advantages of slavery by debt over “chattel” slavery – ownership of humans as a property right – were set out in an infamous document called the Hazard Circular, reportedly circulated by British banking interests among their American banking counterparts during the American Civil War. It read in part:

Slavery is likely to be abolished by the war power and chattel slavery destroyed. This, I and my European friends are glad of, for slavery is but the owning of labor and carries with it the care of the laborers, while the European plan, led by England, is that capital shall control labor by controlling wages.

Slaves had to be housed, fed and cared for. “Free” men housed and fed themselves. For the more dangerous jobs, such as mining, Irish immigrants were used rather than black slaves, because the Irish were expendable. Free men could be kept enslaved by debt, by paying them wages that were insufficient to meet their costs of living. On how to control wages, the Hazard Circular went on:

This can be done by controlling the money. The great debt that capitalists will see to it is made out of the war, must be used as a means to control the volume of money. . . . It will not do to allow the greenback, as it is called, to circulate as money any length of time, as we cannot control that.

The government, too, had to be enslaved by debt. It could not be allowed to simply issue the money it needed to meet its budget, as Lincoln’s government did with its greenbacks (government-issued US Notes). The greenback program was terminated after the war, forcing the government to borrow from banks – banks that created the money themselves, just as the government had been doing. Only about 10% of the “banknotes” then issued by banks were actually backed by gold. The rest were effectively counterfeit. The difference between government-created and bank-created money was that the government issued it and spent it on the federal budget, creating demand and stimulating the economy. Banks issued money and lent it, at interest. More had to be paid back than was lent, keeping the supply of money tight and keeping both workers and the government in debt.

Student Debt Peonage

Slavery by debt has continued to this day, and it is particularly evident in the plight of students. Graduates leave college with a diploma and a massive debt on their backs, averaging over $37,000 in 2016. The government’s student loan portfolio now totals $1.37 trillion, making it the second highest consumer debt category behind only mortgage debt. Student debt has risen nearly 164% in 25 years, while median wages have increased only 1.6%.

Unlike mortgage debt, student debt must be paid. Students cannot just turn in their diplomas and walk away, as homeowners can with their keys. Wages, unemployment benefits, tax refunds and even Social Security checks can be tapped to ensure repayment. In 1998, Sallie Mae (the Student Loan Marketing Association) was privatized, and Congress removed the dischargeabilility of federal student debt in bankruptcy, absent exceptional circumstances. In 2005, this lender protection was extended to private student loans. Because lenders know that their debts cannot be discharged, they have little incentive to consider a student borrower’s ability to repay. Most students are granted a nearly unlimited line of credit. This, in turn, has led to skyrocketing tuition rates, since universities know the money is available to pay them; and that has created the need for students to borrow even more.

Students take on a huge debt load with the promise that their degrees will be the doorway to jobs allowing them to pay it back, but for many the jobs are not there or not sufficient to meet expenses. Today nearly one-third of borrowers have made no headway in paying down their loans five years after leaving school, although many of these borrowers are not in default. They make payments month after month consisting only of interest, while they continue to owe the full amount they borrowed. This can mean a lifetime of tribute to the lenders, while the loan is never paid off, a classic form of debt peonage to the lender class.

All of this has made student debt a very attractive asset for investors. Student loans are pooled and repackaged into student loan asset-backed securities (SLABS), similar to the notorious mortgage-backed securities through which home buyers were caught in a massive debt trap in 2008-09. The nameless, faceless investors want their payments when due, and the strict terms of the loans make it more profitable to force a default than to negotiate terms the borrower can actually meet. About 80% of SLABS are backed by government-insured loans, guaranteeing that the investors will get paid even if the borrower defaults. The onerous federal bankruptcy laws also make SLABS particularly safe and desirable investments.

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In West Virginia, teachers ended their historic strike after state officials agreed to raise the pay of all state workers 5%.

“Who made history? We made history! Who made history? We made history!”...a group of West Virginia teachers chanted.

The strike began on February 22nd and shut-down every public school in the state. It was the longest teachers strike in West Virginia history.

Majorityrights readers should observe that this is a group of White people, albeit implicit, unionized against the state/ goverment. The implications of the model demonstrate possibilities for “White community” organizing against state and other elite position oppression of group interest.

Apologies again for the anti-White source. Note that I will use them when I see news sources that are both pro-White and are not duped into being “anti-left”, against its concepts such as unionization to fight oppressive government policies and other elite position exploitation; when I see them, I will use those other sources. Until then, we have to make use of feedback from sources like Democracy Now, picking out the bits and pieces that we need - note that you can scarcely see a non-White teacher in this story, and that West Virginia is one of the Whitest states in America.

TV: postmortem on passivity induced runaway destruction, including speculation on zombie effects despite the new dawn of interactive media. It’s being a retrospective gives me an excuse to post this older show which I’ve only seen today for the first time. It’s funny as hell. Charlie Brooker is clever. I don’t vouch for his politics, am unfamiliar with that.

But as we say goodbye to the hegemonic days of television and the passive acceptance of its audiences of a world they could not interact with nor hope to change, it is worthwhile to take another look back on the days of how the Televitz shaped and manipulated our attention; and to speculate on some of its lingering effects, both on runaway systems in a world unchallenged, and its parallel tropisms in the computer screen, exponentially better though it is in the choice and interaction the mechanisms attached may provide…

“How Television Ruined Your Life”

Parts 1-6, BBC production, 2012, under Youtube license:

Episode 1 - Fear

Episode 2 - Life Cycle

Episode 3 - Aspiration

Episode 4 - Love

Episode 5 - Progress

Episode 6 - Knowledge

People from outside the United States frequently take a cavalier attitude toward the problem of blacks being imposed upon Whites (and others). They are not able to appreciate that even where you are able to escape temporarily in physical terms, you are still subject to the same rule structures. They are not able to appreciate its one-way reverse discrimination on behalf of a people who you should be able to discriminate against (blacks) for your safety and well being. They get caught up in (((media portrayals))) of your supposed responsibility to compensate for historical discrimination. They tend to add, “well, if you don’t like blacks, you can just move to another place in The US.” They are ignoring the fact discrimination, freedom of association and movement works one way - on behalf of blacks: absent the capacity to discriminate, i.e. with the anti-freedom from association rule structures of “The Civil Rights Act”, its reverse discriminatory provisions of The Consent Decrees and Fair Housing Act will combine with the base bio-power of blacks, their hyper-assertiveness and prolific birthrates to put them everywhere - there is no sufficient White flight. And even where one can physically escape to some White enclave for a while, these right wing and YKW rule-structures and the (((media))) remain looming to leave you no recourse and no peace, ultimately, from the imposition of blacks.

New Observer, “Teachers Flee PA’s Nonwhite Schools”, 21 Nov 2017:

Around 50 teachers have resigned in the last three months from schools in the Harrisburg, PA, school district, after being forced to flee massed group violence from “students” in the 97 percent nonwhite schools—a portend of what will happen as whites are ethnically cleansed from towns and cities across the country.

According to a report in the Philadelphia CBS Local—which of course ignores the school district’s racial make-up—the “teachers in Pennsylvania’s capital city are asking for support after a series of violent altercations with students has led to multiple resignations.”

Quoting the Harrisburg Education Association President Jody Barksdale, the report says that at least 45 teachers have resigned since July and October, and “more have resigned since then.”

Speaking at a school board meeting on Monday evening this week, first-grade teacher Amanda Sheaffer said she “had been hit and kicked by her students.”

According to the 2010 Census—which is already nearly seven years old—Harrisburg’s white population had dwindled to 30.65 percent,  with blacks making up 52.4 percent, Hispanics 18 percent, and others the rest.

However, the school demographic is far more revealing about the ethnic cleansing taking place in that state’s capital.

According to the official “Harrisburg School District, 2012 – 2013 District Profile” (which is also four years old), there are a total of 6,311 students at Elementary, Secondary, and High School level in that district.

The breakdown by “Race/Ethnicity,” the statistics continue, are as follows:

“African American 64.09%

“Hispanic 26.27%

“Caucasian 3.45%

“Asian 5.36%

“Multi-Racial/Other 0.78%

“American Indian 0.05%”

Even given that “Caucasian” could mean (such as North African, or Arab—or white), it is thus fair to assume that the actual white element of the school population is around three percent.

The official statistics reveal further that there are students from 23 countries enrolled in the district’s schools, and that they speak “over 18” languages.

Significantly, the official statistics reveal that the “Adequate Yearly Progress” (AYP—a measurement defined by the United States federal No Child Left Behind Act that allows the U.S. Department of Education to determine how every public school and school district in the country is performing academically) of the Harrisburg school district is sub-standard.

According to the official “Assessment Data: District 2011-12 AYP Status,” report, overall the Harrisburg School district has an AYP status of 35 percent in mathematics, 34 percent in reading, 23 percent in science, and 41 percent in writing.

Finally, the official statistics reveal that 57 percent of all the employees in the Harrisburg School District are “Caucasian,” 36 percent are “African American,” 5 percent are Hispanic, and one percent are Asian and “Multiracial/Other.”

The collapse of Harrisburg School District—a decline mirrored in other cities across America after whites had been ethnically cleansed out of those regions—is the latest clear indication of what will happen unless the displacement of white people is not only halted, but reversed.

 

         
            ...It has been said that Greg is rather nondescript.

Greg Johnson discusses Heidegger’s Black Notebooks, which include Heidegger’s most clear statements on the Jewish question.

RevealNews, “Trump no longer appears sympathetic to student debtors”, by Lance Willams, 14 April 2017:

On the campaign trail, Donald Trump said he sympathized with America’s 44 million student debtors and vowed to make their burdens easier.

The federal government should not be profiteering on the interest students pay on their federal loans, candidate Trump declared. (The U.S. will reap $66 billion in profit from student loans issued between 2007 and 2012, the Government Accounting Office says.)

Trump also promised to ensure that debt loads would be limited by students’ ability to repay. Student loans shouldn’t be “an albatross” hung for life around their necks, he said.

But since the election, the president has been quiet on student debt. And two recent moves suggest the administration is headed in the opposite direction, helping the student loan industry at the expense of borrowers. 

The most recent move came Tuesday, when Education Secretary Betsy DeVos scrapped a set of rules intended to shield borrowers from some of the worst abuses of the student debt collection industry.

Today, America’s student debt load is upward of $1.3 trillion – more than the nation’s credit card debt. As an investigation by Reveal from The Center for Investigative Reporting concluded last year, student loans have become the worst kind of debt for Americans – and the best kind for banks and debt collectors.

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I may have sold Gauguin short in terms of his ethnographic conscientiousness. I’d been citing him as an example of the “artistic genius” who wasn’t worth it for his moral failing. There is still a good measure of truth to that, but he may not have been quite as heinous and without effort to be considerate as I had thought in terms of concern for what is important to other people - at least those of Tahiti and their culture. My line had been that as an artist he is as satisfying as any to me, nevertheless as a man who infected who knows how many native girls with syphilis, he was a killer. His art, no matter how good, not worth that behavior.

         
                Gauguin in Tahiti: Search for Paradise (1967)

Even so, as I watch this biography, a couple of mitigating facts are revealed. True, he still would have infected at least one native girl with syphilis. However, he married her and apparently did not know that he had the disease when he infected her. Still bad, of course, as there was no effective treatment for the disease even with French civilization settled there.  Add to that his knowledge of the risks of his own promiscuity beforehand along with his ultimate abandonment of his first wife, French wife and kids back in France.

However, the biography reveals that before he fell ill, he was really concerned to find and help preserve the authentic Tahitian people and culture. With that, he was dismayed by the impact of French civilization and missionaries, how they’d already by his time begun to destroy the native culture. He was particularly bothered by the imposition of Christian schooling upon the native children that had by then caused them to lose their native religion. He would actually go to the children and their parents with a French law book - reading them their rights so that they would know that they did not have to go to the missionary school. Finally, he went so far as to try to recreate their native religious stories in writing and in his paintings…