By George Caffentzis
Debt has had a crushing impact on the lives of those who must take student loans to finance their university education in the US. For tuition fees that have been so notoriously high in private universities now are rising in public universities so quickly they are far out-pacing inflation. Student loan debt in the US has been much higher than in Europe (with the exception of Sweden), though recent developments there would indicate that this gap may soon no longer exist (Usher).
We should also take into account the fraudulent way in which the loans have been administered by the banks and the vindictiveness with which those who have been unable to pay back have been pursued by collection agents. The most frustrating aspect of student loan debt being the legally toothless position the debtor is in, because government policy has relentlessly vested all the bargaining power in the hands of the creditors.
But however agonizing the situation of the indebted, the debt is growing. As of September 2010 total student loan debt amounted to $850 billion, having just surpassed credit card debt by about $20 billion for the first time. And it is rising at a catastrophic rate, e.g., by 25% in 2009 to meet the rising cost of tuition and other college fees. Even the Great Recession has not put an end to this financial explosion. On the contrary, while credit card debt has leveled off, student borrowing has continued to grow to cover the rising costs of living as well as the tuition fees, especially by unemployed workers who are “going back to school” to get a “better,” or at least some, job in the future.
Logic, therefore, makes the remission and abolition of student loan debt a necessary demand for the university student movement, especially in an era when the need for “an educated work-force” has become an institutional axiom. However, student loan debt abolition (for instance) was not a focus or prominent issue in the student mobilization that peaked last spring, especially in California. This constitutes an impasse for the movement, since meeting after meeting it has become clear that refusing the blackmail of the debt and calling for abolition of tuition fees are pivotal to every form of struggle on our campuses. Students holding three jobs to repay (or avoid) loans or taking as many credits they can fit in their schedules to reduce the length and cost of schooling, can neither be active in campus protests against budget cuts and the commercialization of education nor can they engage in self-education and the creation of “knowledge commons.”
In this contribution to the Edu-factory network’s discussion of debt I think beyond this impasse, asking why an organized debt abolition movement does not exist in the US and what needs to be done to assist its formation.
A first consideration is that the very conditions that would call for mass student protest against indebtedness have so far contributed to preempt this possibility. Even before the time to pay back is upon them, the debt has profound disciplining effect on students, taylorizing their studies and undermining the sociality / and politicization that has traditionally been one of the main benefits of college life (Read).
An even more important consideration is the fact that student loans are constructed so that students do not pay them back while they are students. Student loans are time bombs, constructed to detonate when the debtor is away from the campus and the collectivity college provides is left behind. Once we recognize this we can also see that there is a hard-fought struggle around the student loan debt throughout the US, but (a) it operates in a non-communal, micro-social, serial way, mainly through default; (b) it is a struggle that involves subjects other than students, taking off precisely once students cease to be students, for only after they leave the campus do the debt collectors show up at their doorsteps. In other words, while the visible student movement has not so far made debt abolition its goal another movement with that goal has been growing to a large extent underground. One former student after another is rejecting loan payments through default, but they are not publicly announcing it. “For fiscal year 2008 the default rate increased to 7.2 percent, compared with 6.7 percent in 2007 and 5.2 percent in 2006” after a long period of decline from 1990, when it hit a peak of 22.4%, and 2003, when it hit a trough of 4.5%. (NB: These somewhat misleading statistics are calculated according to “cohort” years. For example, the 2007 cohort default rate is the proportion of federal loan borrowers who began loan repayments between October 2006 and September 2007, and who had defaulted on their loans by the end of September 2008. Therefore, they dramatically underestimate the true default rate) (Lederman).
As typical of “invisible” movements, statistics fail us in drawing its proportions. We have no estimate, for instance, of how many have been driven to suicide or how many have been forced to go into exile due to their student debts. Nor do we have a measure of the social impact of the growing de-legitimation of the student debt machine. We can only speculate about the consequences of disclosures concerning the collusion between the university administrations (especially in the case of “for profit” institutions) and the banks, now commonly acknowledged in the media as well as in congressional investigations. For sure, blogs and web-groups are forming to share experiences and voice anger about student loan companies like the biggest one, the Student Loan Marketing Association (nicknamed “Sallie Mae”). On Google alone, there are about 9,000 entries under the rubric “Sallie Mae Sucks,” and another 9,000 under “Fuck Sallie Mae.” Browsing through the chat rooms, with their harrowing stories of wrecked lives and mounting frustration against the operations of Sallie Mae, makes it clear that the potential for a debt abolition movement is high. So far, however, most attempts that have been made to give an organizational form to this anger have largely demanded the application of consumer protection norms to the management of the debt.
A well-known example is StudentLoanJustice.org (SLJ.org) that systematically compiles testimonials on the subject, organized state-by-state, revealing in graphic detail the dread, disgust, and humiliation indebtedness generates. These testimonies also reveal why, despite their anger and despair, debtors hesitate to join in an open debt abolition movement. As the founder of SLJ.org, Alan Michael Collinge, points out that there are many obstacles to such course of action:
Even now, the barriers to inciting meaningful political action at the grassroots level are daunting, For one thing, facing large –often insurmountable– student debt is a highly personal matter. Many debtors are too embarrassed or humiliated even to tell their immediate family members and close friends about their situation, let alone join in a grassroots effort challenging the injustice of student lending laws.” (Collinge: 93)
The Kantian imperative that debts ought to be repaid cost what may is also weighing on the minds of the debtors despite the fact that the conditions imposed by student loans companies are often fraudulent and generally unfair. As mentioned, many of the developing student debtor organizations refuse to speak of “abolition.” What fuels their indignation is the arbitrariness and arrogance of the creditors’ management of the debt, not the debt itself. As the “content author” of the SallieMaeBeef.com web-site writes:
Allow me to make one thing clear. This site is not for people who chose not to make their payments. Choosing not to pay a debt is one’s own fault. Sallie Mae, like many companies, makes mistakes. I don’t fault them for that. What matters is how they resolve the problems. They did a terrible job resolving the mistakes they made with my account, and I found out that I was far from being the only person suffering because of THEIR mistakes. I also found that they allegedly prey on borrowers, trapping people into paying 2 to 3 times (sometimes significantly more) what they borrowed. There is simply no excuse for it. (www.SallieMaeBeef.com).
The very choice of the term “Beef” in the title of the organization suggests a complaint or a private dispute, not a demand or a public arraignment. SLJ.org, one of the most publicized student loan protest organizations, also rejects both individual or collective refusals to pay– witness what its founder writes of one of SLJ.org’s members, Robert, whose $35,000 debt became $155,000 through the ploys of the financial company which held his debt : “like most SLJ.org members, Robert absolutely agrees that he should pay what he owes, but he simply cannot deal with a debt of this magnitude” (Collinge: 19).
In other words, prominent anti-student loan debtors organizations re-affirm the principle of the student debt. They believe that the safeguards and regulatory oversight that apply to other consumer loans –mortgages, auto loans, and credit card charges–should be applied to student loans as well, which presently is not the case because of the repeated governmental actions taken to block this option.
*In 1998 Congress made the student loan “the only type of loan in US history non-dischargeable in bankruptcy” (Collinge: 14). This means that presently even after filing for bankruptcy and been reduced to the status of a pauper, a debtor is still deemed responsible for payment on student loans, cost what it may, perhaps even facing a charge of fraud and imprisonment, if some politicians have their ways.
*In 1998 all statutes of limitations for the collection of student loan debt were eliminated.
*Since the beginning of the federal student loan program in 1965, the freedom to change lenders in order to find better terms for a loan has been denied.
Once the commodity approach to education is accepted, the political strategy adopted becomes predictable. According to Collinge, “it is imperative that standard consumer protections be returned to student loans” (Collinge: 20). This means, for a start, that student loans should be made dischargeable in bankruptcy, should have a statute of limitations apply to them, and it should be possible to refinance them with other lenders. These are the demands put forward by SLJ.org since its formation in 2005, supported in varying degrees by a number of liberal politicians like Hillary Clinton, Ted Kennedy, Dick Durbin, and Congressmen George Miller and Danny Davis (see the Acknowledgements section of (Collinge: 151)).
Over the last five years this “consumer protections” strategy has produced significant legislative results addressing some of the grievances listed above. These include the passage of three major acts: The College Cost Reduction Act of 2007 (that halves the interest rate on federally subsidized loans and cuts lender subsidies and collection fees slightly), The Student Loan Sunshine Act of 2007 (that requires university officials to fully disclose any special arrangements between them and lending companies), and in 2010 the Student Aid and Fiscal Responsibility Act (SAFRA) (described below). For all these cautious legislative efforts however, SLJ.org and similar organizations have not achieved any of their major objectives. If we add the return to power, as Speaker of the House, of John Boehner, “by far the largest recipient of campaign contributions from student loan interests” (like Sallie Mae) and their most aggressive watchdog, we can conclude that the “consumer protection” approach to student debt has reached its limit. Indeed, when Boehner speaks of repealing the Health Care Bill (whose complete name is the “Health and Education Reconciliation Act”), he certainly alludes also to the education rider hidden in it, as much as to the parts of the bill dealing with health care.
What then are the prospects for the struggle against student loan indebtedness?
Clearly a premise for the rise of an openly organized student loan debt abolition movement is that the organized campus student movement and the student loan debtor movement off the campuses meet. Indeed, they need each other and will be in crisis as long as they remain separated. On the one side, the student movement activists cannot call for the liberation of education without confronting the debt peonage waiting for them and their fellows, and on the other, the student loan debtors movement must go beyond the limits of its stalemated “consumer protections” approach. The sense that a limit has been reached in this regard is indicated by the enormous interest generated in early 2009 by Robert Applebaum’s Keynesian proposal, “Cancel Student Loan Debt to Stimulate the Economy,” where he called for the government to forgive government student loans and pay back to banks and finance companies the outstanding private student loans (Applebaum).
The combination of an underground struggle involving millions of loan defaulters, intensified by mass unemployment and cuts in social spending, and the exodus of thousands of debtors fleeing the debt collectors hounding them, just as the campuses are becoming again places of mass, open agitation, has set the stage for a student loan debt abolition movement that Edu-factory network, for one, has been calling for.
It is the possibility of this encounter, I believe, that prompted Congress to pass SAFRA that was signed into law by President Obama on March 30, 2010. George Miller, the archetypal East San Francisco Bay liberal, surely had a sense of the political winds that were blowing when he introduced the bill into Congress in July 2009, just as the occupations at the UCAL campuses of Santa Cruz and Berkeley were being planned and a 32% tuition fee increase was being discussed by UCAL’s trustees. But he was certainly looking as well at the rates of defaulting loans and what they expressed in political terms, for I could not otherwise understand why its buffering attempt would take the form of a student loan debt reduction bill, when the student movement on the campuses was not openly calling for it.
SAFRA is full of diversionary and ameliorating moves in the struggle between debtors and creditors that attempt to cushion the impact of the Crisis on student debtors.
(i) it replaces the private institutions with the federal government as the creditor, by halting loan-guarantees to the banks –a major source of interest revenue for the latter at no risk to themselves. The billions of dollars that will be “saved” would be used to increase scholarships for low-income students (Pell grants);
(ii) it provides for a reduction of debt payments, from 15% to 10% of discretionary income;
(iii) it provides for more debtor-friendly “forgiveness” conditions (viz., the debt would be “forgiven” for those working in the “private” sector–if payments were made on time–in 20 years instead of the previous 25 years, and in 10 years for those in “public service,” including teaching and the military).
These more favorable conditions are meant to forestall an increase in default rates–for if the “crisis” continues and unemployment rates remain high, the student debt machine is bound to collapse and will force a “bail out” of student loan debtors similar to Applebaum’s “Cancel Student Loan Debt to Stimulate the Economy” proposal. They are also meant to prevent an escalation of student activism on the campuses and above all to keep the two movements divided. Whether SAFRA will succeed in doing this is not something we can foresee at this stage. We can, however, see some steps that appear necessary to build an abolition movement besides the obvious one of bringing both movements together in a national student loan abolition convention.
Building a student loan debt abolition movement also requires that we reframe the question of the debt itself. A first step must be a political house cleaning to dispel the smell of sanctity and rationality surrounding debt repayment regardless of the conditions in which it has been contracted and the ability of the debtor to do so. Most important, however, from the viewpoint of building a movement is to redefine student loans and debts as involving wage and work issues that go to the heart of the power relation between workers and capital. Student debt does not arise from the sphere of consumption (it is not like a credit card loan or even a mortgage). To treat student loans as consumer loans (i.e., deferred payment in exchange for immediate consumption of a desired commodity) is to misrepresent their content, making invisible their class dimension and the potential allies in the struggle against them.
Student debt is a work issue in at least three ways:
i. Schoolwork is work; it is the source of an enormous amount of new knowledge, wealth and social creativity presumably benefiting “society” but in reality providing a source of capital accumulation. Thus, paying for education is for students paying twice, with their work and with the money they provide.
ii. A certificate, diploma, or degree of some sort is now being posed as indispensable condition for obtaining employment. Thus the decision to take on a debt cannot be treated as an individual choice similar to the choosing to buy a particular brand of soap. Paying for one’s education then is a toll imposed on workers in exchange for the possibility, not even the certainty, of employment. In this sense, it is a collective wage-cut.
iii. Student debt is a work-discipline issue because it represents a way of mortgaging many workers’ future, deciding which jobs and wages they will seek, and their ability to resist exploitation and/or to fight for better conditions (Williams).
The overarching goal of capital with respect to student loan debt is to shift the costs of socially necessary education to the workers themselves at a time when a world market for cognitive labor-power is forming and a tremendous competition is already developing between workers. Employers’ refusal to massively invest in education in the US is not, in fact, a misreading of its class interests as theorists like Michael Hardt maintain (Hardt). It is the result of a clear-cut assessment of the new possibilities opened up by globalization, starting with the harvesting of educated brains as well as muscles from every part of the world. Capital’s strategic use of student loan debts to enforce a harsher work-discipline and force workers to take on more of the cost of their reproduction makes the struggle for debt abolition one that necessarily affects all workers. Accepting the student debt is accepting a class defeat, for it is certainly marks a major set back with respect to the 1970s when education was still largely financed by the state.
Certainly university teachers (like myself and many readers) and our unions and associations must take an active role in the abolition of student loan debt. For we are on the frontline, but in a compromised position, because we must “save the appearances” and pretend that for the university, cultural formation is of the essence, while we know that the student loan money is the source of much of the university’s budget and that the future debt peonage of many of our students “pays” our wages today (Federici). Just as, hopefully, most professors would object to be paid by a university whose revenue was the product of slave labor, so too must we object to having our students pay us at the cost of their post-graduation bondage.
Finally, debt in general is constructed to humiliate and isolate the debtor (Caffentzis). But demands for its abolition can be unifying, because it is everybody’s condition in the working class worldwide. Student loan debt, credit card debt, mortgage debt, medical debt: across the world, for decades now, every cut in people’s wages and entitlements has been made in the name of a “debt crisis” of one sort or another. Debt abolition, therefore, can be the ground of political re-composition among workers. If this is the path it takes with respect to student loan debt, the student movement in the US will experience a decisive turning point and opening out to many allies beyond the campus.
Applebaum, Robert (2009). Cancel Student Loan Debt to Stimulate the Economy. www.forgivestudentloandebt.com. Accessed December 10, 2010.
Caffentzis, George (2007). Workers Against Debt Slavery and Torture: An Ancient Tale with a Modern Moral. UE Newspaper (July).
Collinge, Alan Michael (2009). The Student Loan Scam: The Most Oppressive Debt in U.S. History–and How We Can Fight Back. Boston: Beacon Press.
Federici, Silvia (2010). Political Work with Women and as Women in the Present Conditions: Interview with Silvia Federici. Maya Gonzalez and Caitlin Manning. Reclamations. Issue 3 (December). www.reclamations.org. Accessed on Dec. 10, 2010
Hardt, Michael (2010). US education and the crisis. Liberation (Dec. 2).
Lederman, Doug (2009). Economy Sinks, Default Rates Rise. Inside Higher Education. September 15. www.insidehigheredu.com/news. Accessed December 10, 2010.
Read, Jason (2009). University Experience: Neoliberalism Against the Commons. In Towards a Global Autonomous University: Cognitive Labor, The Production of Knowledge, and Exodus from the Education Factory. Edited by the Edu-factory Collective. New York: Autonomedia.
Usher, A. (2005). Global Debt Patterns: An International Comparison of Student Loan Burdens and Repayment Conditions. Toronto, ON: Educational Policy Institute.
Williams, Jeffrey (2009). The Pedagogy of Debt. In Towards a Global Autonomous University: Cognitive Labor, The Production of Knowledge, and Exodus from the Education Factory. Edited by the Edu-factory Collective. New York: Autonomedia.