Saving the Debt Generation

By Ethan Earle
Flickr/Leon Fishman

Image: Leon Fishman/Flickr

Early presidential runs often act as good litmus tests for the dominant public concerns of a given moment. That some vaguely sinister half-apology about “the way Washington works” will later be invoked is a near certainty; one can only hope that the proverbial cat will have already been let out of the bag. Right now that cat is student debt, and the three main Democratic challengers—frontrunner Hillary Clinton, spoiler Bernie Sanders, and already-has-run Martin O’Malley—are tripping over each other to propose solutions to a crisis that is threatening to produce a lost generation in the United States.

The numbers are oft reported but nonetheless worth revisiting. There is around $1.3 trillion in U.S. student debt (and rising fast), which is more than total credit card debt, auto debt, and the external debts of some forty countries. As shocking as this number is, it doesn’t tell the full story about the havoc student debt is wreaking, as it excludes borrowing by parents, funds diverted from retirement savings, and education-related credit card debt. More than half of all student debtors are in deferral status and around eight million are in default. More worrisome still is that almost 60% of this debt is held by families whose total net worth is less than $8,500.

In response to growing public clamor, Mr. Sanders has proposed $47 billion a year (with another $23 billion to come from the states) to end public college tuition entirely. Mr. O’Malley has remained vague about the specifics but also given lip service to a debt-free plan. Ms. Clinton, for her part, has floated a “more politically palatable” $350 billion ten-year plan.

Almost 60% of student debt is held by families whose total net worth is less than $8,500.

Not so long ago, student debt wasn’t really such a big problem in the U.S. As recently as 2003 it stood at a “mere” $240 billion, five times less than it is today. So what happened? Not surprisingly, one important factor has been a sharp rise in the cost of attending college. Over the past thirty years college costs have more than tripled when adjusted for inflation, and just between the 2008–09 and 2013–14 academic years, tuition and fees at public four-year institutions rose by 27%. This most recent price explosion has coincided with the worst economic downturn since the Great Depression, further hindering students’ ability to either pay for their schooling outright or afterward get the sorts of jobs that would enable them to repay their debts.

This skyrocketing cost of education has been driven in part by universities seeking to reinvent themselves as corporate entities in the neoliberal mold. If you live in the New York area you’ve likely heard about NYU’s exploits: from violating labor conditions for 10,000 migrant workers building their newest campus in Abu Dhabi, to becoming a new real estate baron in Manhattan, all while fighting tooth and nail to keep many of their professors working in poverty conditions. But across the country there are now an estimated eighty-eight universities with endowments greater than $1 billion, up from around thirty-eight universities ten years ago. These huge investment pools, often managed using hedge-fund techniques and other such Wall Street “innovations,” are increasingly driving the logic of university administration toward the maximization of capital accumulation.

However, the student debt crisis is far from all the fault of the university. The corporatization of the university system has been widely encouraged by the public sector, which has forced through a series of education funding, pushing the percentage of total expenses paid through student tuition up from 35% in 2001 to over half in 2011. More perversely, not only has the government deprioritized the funding of higher education, it is actually making a killing off the suffering of debt-laden students.

Image: Frankie Leon

Image: Frankie Leon/Flickr

More statistics, these not quite so widely known: more than $1 trillion of outstanding student debt is in the form of federal student loans. And even worse, between 2007 and 2012 these loans made an estimated $66 billion in profit (as opposed to revenue) for the U.S. government. Moreover, while other types of loans can be refinanced when interest rates fall, the government doesn’t allow adjustments to federal student-loan rates, for the simple reason that they’ve actually already spent the money. As pointed out by Senator Elizabeth Warren, who has been fighting to introduce legislation to curb this practice, many former students struggling with debt “took out loans at 6%, 8%, 10%, even higher”—far above the rate they would have otherwise been able to negotiate during the recent period of low interest rates. Meanwhile, as Jon Stewart reminded Senator Warren in an exchange on the issue, our big banks are at the same time using the Fed discount window to borrow huge sums from the very same government at interest rates of literally 0%.

This is one of those areas in which much of the rest of the world thinks Americans are totally nuts. Germany, for instance—which if you’ve been following recent world events you’ll know is not averse to austere debt-service imposition—has a free public education system. So does the decidedly middle-income nation of Argentina. In both countries, you can actually get a free education, even if you’re not from the country. (Take note, my fellow Americans, if things don’t get better up here…) In dozens of countries across the world, university education is either free or nominal in cost, and these systems are not surprisingly defended tooth-and-nail by the populations who benefit from them.

In 2012, when government officials in Quebec, Canada, tried to raise annual public school tuition from $2,168 to $3,793 (still a socialist dream by U.S. standards), a broad coalition led by students initiated a 100-day strike that repeatedly brought hundreds of thousands into the streets and successfully fought off the rate hike. Between 2011 and 2013, students in Chile led a social movement against a largely privatized educational system that was in some ways more similar to that of the U.S., occupying hundreds of schools on their way to forcing a change of government that also brought a number of their representatives into prominent positions.

This is one of those areas in which much of the rest of the world thinks Americans are totally nuts.

While we haven’t seen anywhere near this level of mobilization in the United States, recently there has been movement to give us hope (and I’m not talking about dubious promises made by a Clinton 15 months out from a general election). An Occupy Wall Street initiative called Strike Debt launched a Rolling Jubilee campaign, raising over $700,000 to abolish almost $32 million in debt. Strike Debt started with emergency-room debt but has since taken student debt into its sights, most prominently through a Debt Collective, “a membership organization that leverages collective power by offering debtors a shared platform for organization, advocacy, and direct action.” Through its membership, the Debt Collective currently represents more than $182 million in debt.

The most visible action supported by the Debt Collective has been that of the Corinthian 100, a group of former students of schools owned by Corinthian Colleges Inc. Until recently, Corinthian was one of the nation’s largest owners of for-profit educational chains. In February 2015, 15 former Corinthian students launched what has been described as our country’s first student-debt strike. Corinthian was forced to file for bankruptcy in May, and now the Department of Education has announced a debt cancellation plan for some of these students. It’s a huge victory—both precedent setting and imagination inspiring—which gives credibility to the confrontational tactic of flat-out debt refusal.

Image: Graeme Law

Image: Graeme Law/Flickr

Sadly but unsurprisingly, the Education Department is largely to blame for the problem of these for-profit schools. As Astra Taylor, a founding member of the Debt Collective, wrote in an LA Times op-ed, “for decades, the government has funded billions of dollars in grants, loans and G.I. Bill benefits to students at these institutions. A 2012 Senate Committee found that 86% of the revenue at 15 of these publicly traded schools came from taxpayers. Corinthian alone got $1.4 billion a year.” It’s worth noting that Corinthian was getting filthy rich while at the same time one third of its students were coming from families that earned less than $10,000 per year.

In most discussions about debt we often find a moral argument. Debtors have nobody to blame but themselves, goes the argument. It’s a simple question of personal responsibility. To choose not to repay one’s debts is to fall into dishonor, to shirk one’s responsibility to society. But there’s also a powerful moral counter-argument to be made, and not without cultural precedent.

Financing and debt has become the largest single tool for the extraction of wealth and its upward redistribution.

Jubilee is a practice first described in the Book of Leviticus, detailing that every fiftieth year slaves and prisoners should be freed and all debts should be forgiven. The first of many confirmed mass Christian Jubilees was declared by Pope Boniface VIII in 1300. Elsewhere, Torah laws, as first outlined in the Book of Deuteronomy, advocate for Shmita, or debt forgiveness, where debts are abolished and slaves freed, every seven years. The purpose of Shmita was stability, with the idea that debtors and landless farmers would ultimately lead to social and political unrest. These are just two examples, but we find others of debt forgiveness as a foundation for ethical human relations, with the needs of a community and society placed above those of individual wealth accumulation.

This question of placing the needs of society as a whole over those of individuals also has a strong basis in economic and political reasoning. Financing and debt has become the largest single tool for the extraction of wealth and its upward redistribution. We’re talking about extraction from our poorest and most vulnerable, and especially from immigrants and people of color. In the United States, African-Americans have lost more than 50% of total collective wealth since 2007, and this money has quite straightforwardly been redirected to banks and supporting services through debt and subsequent financial manipulation. For another illustration, the most important study yet conducted on interest payments shows that an average of 80% of the population pays around twice as much as it receives in interest. The amount redistributed from that 80% to the top 10% amounted to nearly $700 million per day.

Image: Francisco Osorio

Image: Francisco Osorio/Flickr

The fight against the student debt crisis is indeed a fight to save a generation. It’s also part of a broader fight against an onslaught of upward wealth redistribution through debt instruments currently taking place in the United States. Clinton, Sanders, O’Malley & Co. seem to grasp that people are catching on to this, and that they’re mad about it. But to start fighting back will take much more than vague promises from campaigning politicians. It will also take much more than just voting for the right politician (though, to be clear, Sanders would make a substantial difference as opposed to his competitors, at least in this author’s opinion).

What’s needed is for those impacted by unjust debt to take a cue from the Debt Collective and the Corinthian 100 and start looking for inventive ways to make it clear that this is not okay. Talk to your neighbors, to your classmates, form into debtors’ unions and other political expressions of collective will. Don’t let this become just an election-cycle issue, but rather ensure that it’s an everyday issue reflecting the everyday impact that it’s having on millions of people in this country. We can make the politicians talk, but can we make them really listen?

th_8b8404c5292eba1ffc29fac909b4a9ff_ethan19Ethan Earle is Project Manager North America/United Nations for Rosa Luxemburg Stiftung’s New York office. He used to work for The Working World in Buenos Aires and New York City. His M.A. thesis in International Relations examined U.S. foreign policy towards Bolivia under Evo Morales. Ethan speaks English, Spanish, French, and is currently learning German.


For more on how to fight back, visit the Debt Collective website, or read the Debt Resisters’ Operations Manual at



Join the Conversation