Why student debt forgiveness should be a universal benefit

Two major stories of student debt have hit the headlines in recent days. First, the Department of Education announced it was canceling $58 billion in loans held by 560,000 former students at Corinthian Colleges, Inc, a for-profit college chain that lied to and defrauded low-income students. . Second, news outlets have reported that President Biden is set to announce a plan to forgive $10,000 in student loans for individual borrowers to deal with the $1.7 trillion crisis. This relief will likely be means-tested and available only to those earning less than $150,000 a year.

What most people don’t know is that these stories are intertwined. As a co-founder of the Debt Collective, a debtors’ union, I worked with former Corinthian students to launch the first student debt strike in US history in 2015. The strikers refused to repay their loans and submitted requests for relief through a then-obscure law called Refund Defense that paved the way for cancellation for borrowers whose schools had broken the law. The strikers demanded that the federal government eliminate their debts, close for-profit schools and make public colleges free for all. They forced Obama’s Education Department to cancel some loans and proved such formidable adversaries of Trump Education Secretary Betsy Devos that a judge scorned her for continuing to collect their debts. If Biden cancels student loans this year, it will largely be because the Corinthian campaign has put the issue on the national map.

But there is another lesson to be learned from the connection between two titles. The story of how two former Corinthian students fought for relief with starkly different results shows how the attempt to target social policy at the “truly” deserving often disproportionately harms those for whom the benefit is meant to help.

After graduating from high school in 2008, Nathan Hornes moved to Los Angeles to start a music career. Instead, he got stuck in fast food jobs. He saw an advertisement for Everest College, a subsidiary of Corinthian. One day, he and his sister, Natasha, took the bus to the Ontario campus where a recruiter convinced them to apply right away.

Almost from the start, the pair suspected something was wrong. Even though the school was nationally accredited by two organizations recognized by the Ministry of Education, the lessons did not seem serious and college officials pressured them to sign documents they did not understand. Soon the reality of the situation hit like a punch in the face. NOTeither were able to find a job in their field after graduation, because the school had a bad reputation and employers knew it did not provide students with a real education. Nathan, who now owed $60,000 for a business degree, went back to fast food, and Natasha, who owed $28,000 for a paralegal degree, worked at a grocery store in their home state, Missouri. Determined to fight, the pair went on a debt strike as members of the Corinthian 15.

The Hornes had reason to hope that the Corinthian debts would be cleared through their activism, which was supported by mountains of evidence that the school was corrupt. The Senate, which had been investigating the school since at least 2012, documented numerous violations of federal regulations, including exaggerating job placement rates and falsifying graduate employment records. In 2013, California Attorney General Kamala Harris sued the school for false advertising.

Other federal and state agencies have investigated Corinthian for aggressive recruiting practices and for altering student grades and attendance records to keep federal money flowing. In 2014, the Ministry of Education began threatening the school with closure. Once the strike began, federal officials said they were on the side of the borrowers. Education Secretary Arne Duncan said he was committed to doing good for former students. Instead, his office placed a series of obstacles in their way, including appointing a “special master” to review debtors’ claims one by one. For borrowers, it was a baffling response to a fraud that had affected hundreds of thousands of people from coast to coast.

The damage caused by the delay was immense. Government debt collectors can garnish wages, offset tax returns, and ruin credit scores. Collectors can even seize a portion of a debtor’s disability or social security benefits.

Obama administration officials imposed another hurdle when new fraud charges forced colleges to close permanently. Individuals were required to complete documentation affirmatively attesting that they were attending the school when it closed. Those who didn’t complete the form because they didn’t know it or didn’t have access to a computer ended up in debt.

Borrowers who left Corinthian before the shutdown were also burdened with bizarre demands. For example, the Department determined that a branch of Corinthian lied to students enrolled in a criminal justice program in West Los Angeles. But only those enrolled from July 2013 to September 2014 were eligible for loan relief. There have been many similar cases of annulment granted to some and not to others. Through it all, Corinthian activists demanded the only practical solution: an immediate, automatic, group-wide discharge of all Corinthian debts, with no demand required. They were told that this sensible solution was a pie in the sky.

Then Trump won the election. Betsy DeVos refused to cancel the debts of borrowers who had already been deemed worthy of relief. Lawyers for the Predatory Student Loans Project sued the department to ensure that the handful of waivers approved in the final days of the Obama administration were actually being processed. In 2018, Nathan Hornes learned that his loans had disappeared. His sister was not so lucky. Inexplicably, Natasha continued to receive collection calls and her taxes were offset to pay her outstanding debts.

The Hornes siblings’ varying results show how individualized, app-dependent programs can feel to the people they’re meant to serve. Requiring people to meet arbitrary requirements, fill out forms and prove their eligibility is incredibly difficult and demoralizing. For every Nathan who accesses an advantage, there is a Natasha who does not. The reasons are rarely clear.

To make matters worse, these administrative barriers are often justified by the moral language of helping the most vulnerable. Although Corinthian borrowers experienced the process of proving their eligibility as unfair and punitive, they continued to fight. Enrollees at the for-profit institution ultimately completed more than 150,000 relief requests by 2019. The recent news that the department finally granted automatic discharges with no request requirement shows that the strikers had been right since the beginning.

There are lessons here for the larger issue of student debt forgiveness. If President Biden keeps his campaign promise and cancels at least some debt for regular borrowers, it should be done without blowing debtors through hoops. Biden must drop any plans to impose an income cap on those receiving relief. (By law, the Ministry of Education does not have access to borrowers’ tax data, and so any attempt to provide resource relief will require borrowers to submit an application and prove their income, in practice ensuring that millions people will not get the debt forgiveness to which they are legally entitled.)

Canceling student debt as a universal benefit is good policy as well as good policy. Broad-based loan relief will dramatically narrow the racial wealth gap and disproportionately help women who hold two-thirds of student debt. There is no reason to ensure that young people, many of whom polls show, soured on the Biden administration – rush for debt relief. Unions have also come out in favor of canceling loans with no income limit.

The smart move is for Biden to follow the lead of the debt strikers, learn from the Corinthian fiasco, and not repeat the mistakes of previous administrations. He should use his executive power to cancel student loans for everyone with the stroke of a pen. Then he should ask Congress to pass a law making public colleges free, so that future generations won’t be burdened with unpaid loans. Simple and very effective. Imagine that.