The Student Debt Cliff
Learn more about the campaign | The Top 10 Things you Didn’t Know About Sallie Mae | Sallie Mae: Buying Influence at What Cost? | ALEC’s Legislative Agenda on Higher Education
The Crisis that brought us together
Student debt has passed the $1 trillion dollar mark. It has overtaken credit card debt and auto-loan debt. Two-thirds of students walk across the graduation stage with a diploma in one hand and a bill in the other, at an average of $26,600. When they get home, they’ll most likely be met with a call from a debt collector (whose wage is a dollar or two away from the minimum wage). For recent graduates who start making payments on their loans, nearly one in ten will enter default within two years. Imagine trying to save for a house with this burden on your shoulders.
But at a time when it seems like higher education is in complete crisis, there is still room for hope. Students have continued to organize and mobilize against tuition increases, winning tuition freezes and increased state funding. Adjuncts have successfully run unionization campaigns to protect wages and ensure that the quality of an education isn’t sacrificed. Community members have begun to think of creative and inspiring ways to stand with students, such as Rolling Jubilee or creating community scholarships.
All these fights show us that winning increased access to education and the American Dream is possible today.
A Passport to Broken Promises
Since the Reagan Era, a fundamental shift has taken place in how the public funds higher education at both the federal and state levels. When President Reagan entered office a Pell Grant could nearly cover three-fourths of the cost of a higher education, but today it covers less than a third of the cost for a student. Many students that receive the Pell Grant are additionally taking out private student loans to cover the cost of attending college.
At the same time, the burden of funding a public education is being shifted from the states onto the students and their families. In 2010 nearly half of four-year institutions depended more on student funds (via student fees and tuition) than state funds to operate for the first time ever. This shift has given University Presidents and Boards of Regents and Trustees the ability to use tuition increases as an alternative to having to lobby for more allocations of state funds, which have “strings attached” making state funds seem arduous. As tuition and class sizes increase, universities are attacking teachers unions by hiring more temporary professors and contracting out campus jobs.
The combination of stagnant financial aid and decreases in state funding of higher education has led to students to become more reliant on student loans than ever before. These changes have made it so that student debt doesn’t just impact students, but also their parents and grandparents who are co-signing their loans. What was created to be the great equalizer in ensuring everyone had a fair opportunity at a better life now perpetuates the cycle of poverty.
Turning Debt into a Lucrative Industry
In 1999, student debt was on the verge of exploding to levels that no one could predict except for one government sponsored enterprise that had begun heading down the path of privatization: Sallie Mae. Between 1999 and 2011, student debt grew 511% as the industry became less regulated and as Senator Elizabeth Warren put it: “Student-loan debt collectors have power that would make a mobster envious.”
By 2004, Sallie Mae was completely privatized and the industry leader in originating and servicing federal and private loans, as well as developing out their campus solutions package (electronic billing for over 1,100 campuses) and taking over states’ 529 College Saving Plans. Today they continue to be the largest profiteer off of student debt, and have begun expanding to K-12 family education loans and insurance plans. To truly illustrate Sallie Mae’s power in this industry, when they began offering fixed-rate loans to better compete with federal loans, Wells Fargo and Discover (their top two competitors) responded by offering their own fixed-rate loans within the same summer.
No stranger to controversy, Sallie Mae has faced class action lawsuits around violating the Telephone Consumer Protection Act and racial discrimination on predatory loans (both settled out of court). In the past three years, Sallie Mae has spent $15 million lobbying on federal issues that relate to student debt, higher education funding, and debt collection practices and have over 60 registered state lobbyists. In the past year they’ve joined the American Legislative Exchange Council, most recently presenting a workshop called “Best Practices for Debt Collection and Tax Amnesty.”
Truly defining the 1%, Sallie Mae has managed to turn the college experience into a gold mine off of the backs of students. CEO Albert Lord received a total compensation of $225 million between 1999 and 2004, which he used to build a private 18 hole golf course just outside of Washington, D.C. while claiming there was no student debt bubble.
Turning Individual Crisis into a Collective Fight Back
We have a vision on how we can re-frame the student debt crisis from one experienced solely by the individuals and families burdening the recklessness of the 1% to one that will take higher education out of the hands of private corporations and put it back in the hands of the public via our government.
Imagine students and community accessing the power of the Consumer Financial Protection Bureau to renegotiate their loans with Sallie Mae. Imagine the CEO of Sallie Mae having to take calls defending their business practices to University Presidents as students fight to have them removed from hundreds of campuses. Imagine the Department of Education creating thousands of new jobs and providing real student aid, ending the trend of privatization in higher education. Imagine private student loan lenders having to tell the damage they’ve done to states and public schools by disclosing their political lobbying and membership in groups like ALEC. Imagine the Federal Government passing a package of bills that makes higher education affordable and accessible to everyone, regardless of race, gender, documentation, sexual orientation, and socioeconomic status.
The power of this story is the students and families that create it. After being lied to and betrayed by these One Percenters, students always have an option: make payments and hope for the best or take on the corporations, the lobbyists, and the politicians. Students aren’t willing to be the victims of the story, instead choosing to be the heroes of it – connecting all the dots of those impacted by the misdeeds of a few along the way to build a future that includes us all.
We Can Win
We have an opportunity to right a wrong that has been placed on a generation of students, and impacted the lives of millions. By bringing together different sectors and different individuals impacted by this crisis, we can develop a movement that captures this transformational moment and build political power for working class families.
By targeting corporate actors like Sallie Mae and Wells Fargo, by calling on the Consumer Financial Protection Bureau and Department of Education, by “de-privatizing” college campuses, and engaging thousands of leaders in the streets and state capitals, we will win.