Judith Linhoss was hoping to become a certified paralegal. “I had worked in law offices since I was 17 and I’m 68 now,” Linhoss said in an interview. But there was a catch: “It was extremely expensive. It took every dime of my student loans. I got a Pell Grant at the time and it took that too.” Linhoss decided to stop attending Everest College online after four ten-week terms, having already spent $27,000 in federal loan and grant money to buy her way into redundant coursework.
“But they have an automatic re-enroll you plan,” Linhoss said, and “about a month later I got a bill for $930.” Months of phone tag with Everest College staff didn’t produce any resolution, and with Linhoss determined not to pay for classes she hadn’t enrolled in, the two parties were in a stand-off.
Then a letter from the Strike Debt campaign arrived at her Memphis-area home, and she learned that her $930 debt had been canceled.
On Wednesday, a group born out of the Occupy Wall Street protests in 2011 announced that it had canceled nearly $4 million in private student loans taken out by students at for-profit colleges — including Linhoss’. The activists spent about $100,000 to purchase student loan debt owed to Corinthian Colleges, the parent company of Everest. The debt was ostensibly worth $3.8 million. Once the group owned the debt, it simply voided loans. That means the debts were actually worth roughly 3 cents for every dollar that students like Judith Linhoss would’ve been forced to repay. (The money came from a campaign called Rolling Jubilee, but the activists call their new effort The Debt Collective and are also known as Strike Debt.)
Before Corinthian went bankrupt this summer amid mounting federal scrutiny of its business practices, Everest College commonly initiated private-market student loans like these for students like Linhoss. Such debts are commonly resold for pennies on the dollar on a secondary market to debt collectors who then press the Linhosses of the world for full repayment in order to turn a profit, Strike Debt and Rolling Jubilee organizer Thomas Gokey explained by phone. His group is looking to upend that dynamic.
“A debt collector will call you up and say you owe 100 percent of this debt, but behind closed doors that debt collector is working for an investor who bought that same debt for on average 4 cents on the dollar,” Gokey said. DebtCollective.org, the digital platform the Occupy offshoot is launching alongside the student loan cancellation announcement, carries the slogan “You are not a loan.” The campaign intends not only to expose the real value of debts but also to reverse the traditional power dynamic between those who owe and those who collect. “Rolling Jubilee is really good at is punching through the phony morality around debt,” Gokey said.
“It feels almost like a magic trick”
Wednesday’s announcement has distant roots in the 2011 protests in New York’s financial district. That’s where Strike Debt organizer and assistant UCLA professor Hannah Appel first connected with Occupy Wall Street. A year later, the Rolling Jubilee campaign started raising money to buy and cancel various types of debt. In 2013, it announced it had erased almost $15 million in outstanding medical debts at an actual cost of just $400,000, and shortly after that the focus shifted to student debt.
“Rolling Jubilee was a spark,” Appel said in an interview. “It’s a tactic to really change people’s ideas about what debt is, how it can work, what the potentials are around debt, that it’s not only potentially profitable to creditors but it’s also this potential platform for collective action.”
The trick for The Debt Collective (and the nesting-doll sequence of differently branded groups that have launched it) will be turning the initial thrill of canceled debts into a sustained movement. “It feels almost like a magic trick. It’s an exciting magic trick, and one that hopefully opens people’s imaginations,” Appel said. “The Debt Collective, there’s a lot that’s magical about it, but it’s not a magic trick. It doesn’t happen overnight, it really is about hard organizing over time.”
She likened the effort to labor organizing in the early 20th century before unions had succeeded in channeling workers’ voices into a political force that could win legal protections on the jobsite. Unlike workers organizing with colleagues in the same factory, though, “debtors don’t share a place of work. Debtors often don’t share the same state, let alone the same factory floor.” Appel, Gokey, and their colleagues hope that DebtCollective.org will provide an organizing platform for people to exercise the same kind of mass movement power that rewrote the social contract between employer and employee decades ago.
“If you owe the bank $1,000, the bank owns you. But if you owe the bank a million dollars, you own the bank,” Appel said. “What we want to do is say, wait a minute, student debtors alone owe $1.3 trillion. If we could start acting together, we could think a lot bigger than interest rates.”
The vast majority of that $1.3 trillion can’t be bought up and canceled for cents on the dollar, however, because it is guaranteed by the federal government and essentially impossible to escape through bankruptcy or any of the other borrower protections that apply to other forms of debt. That’s why Debt Collective was only able to cancel $930 of Judith Linhoss’ nearly $15,000 in outstanding debt from her four terms at Everest Online.
Debt Collective originally tried to buy some of Sallie Mae’s debts. Sallie Mae, the primary private company that handles student lending for the government, also issues billions of dollars in private loans to aspiring students. Like Corinthian’s private loans, Sallie Mae’s non-taxpayer lending is a more expensive financing option for students, and is sold to collectors in secondary markets. This lending is not attached to taxpayer money, and the company touted the growth in its private lending line as the primary source of its improved profit outlook in a recent investor report. “Net interest income increased 35 percent from the year-ago quarter to $144 million, as a result of a $1.8 billion increase in average private education loans outstanding,” a press release on second-quarter profits said, boasting of a 40 percent jump in the company’s private lending from the year before.
The group was rebuffed, Gokey said, once Sallie Mae Vice President Doug St. Peters realized they intended to void the debts.
“Sallie Mae is for my generation sort of the Voldemort”
“We started by going after Sallie Mae debt because Sallie Mae is for my generation sort of the Voldemort, this cosmic level of evil out there,” Gokey said. But after suggesting that Sallie Mae typically sells those debts for 15 cents on the dollar, St. Peters abruptly changed course and refused to deal with Gokey and Debt Collective, he said. (St. Peters did not return a call seeking comment.)
At that point, the organizers refocused their energy on the for-profit education sector and Corinthian Colleges. That company’s chains are notorious for falsifying statistics about graduation rates and job market success for alumni, and even bribing companies to hire graduates for temporary make-work jobs so that they can inflate their numbers. They also aggressively market themselves to people who have not successfully accessed traditional higher education options — which tends to mean hunting down would-be strivers from low-income communities of color, Gokey said.
“We’ve created at two-tiered system in which middle-class predominantly white students go to these legitimate schools where they’re offered a real education,” Gokey said. “Yes it’s too expensive, and people are graduating with massive amounts of debt even if they’re going to a school like UCLA, but it’s a real education. And then we’ve set up this second tier where the education itself is fake, but it costs significantly more.”
Though Wednesday’s announcement canceled just a sliver of the debt Corinthian has ginned up for its students, the group’s effort to beat back those debts is getting an assist from the feds. The Consumer Financial Protection Bureau, which has stepped up its oversight of for-profit schools under its power to police debt markets on behalf of borrowers, announced a half-billion-dollar lawsuit against Corinthian this week seeking to overturn illegitimate loan debts.
Organizers acknowledge that Rolling Jubilee’s tactics can only chip away at the edges of a $1.3 trillion problem. Gokey and Appel each suggested that public education should be free, and pointed out that it would cost less to make public universities and community colleges tuition-free than it does to finance the current debt-financed system of higher education.
But they also want to see a fundamental shift in the American economy, “away from the way that credit and debt need to be used for the most basic things in life,” Appel said, and toward an economy where “you do not have to go into crippling debt simply to access health care, housing, and education.” That more aggressive labor-style campaign against the status quo of how debt markets operate will mean risking major credit report complications and potentially even arrest. Despite those challenges and risks, Appel sees “a lot more possibilities than we imagine right now.”
“Live and learn, right?”
“We don’t even know what would happen if 100,000 Sallie Mae debtors with $100,000 of Sallie Mae debt each were to go on coordinated strikes with a bunch of media attention, with a bunch of legal attention. Would they all be thrown in jail? Or would there be too much pressure, too much public opinion?” she said. “I think we have some wiggle room here.”
And the flood of emails that come in in response to Rolling Jubilee’s victories gives Appel reason to hope. “It suggests to us that if that person knew they were not alone and not a loan, they would say wait a minute, there are this many people in this circumstance?”
“I think there’s a real desire out there for this,” she said. “People feel like this is something I need to get involved in. And I understand that it’s not going to buy my debt tomorrow. I understand that it is asking something of me. And this is something that I’m willing to do.”
Judith Linhoss is one person who might be willing to get involved in that kind of movement. She certainly has the time for it these days. She lost her job as a legal assistant with the county school system in August. “I had a job in a law firm and this job came open online and the pay was double for me so I took it,” she explained. “Now I wish I hadn’t.”
“Live and learn, right?”
This story originally misidentified Hannah Appel as an associate professor at UCLA. She is actually an assistant professor.