interviews
Who Profits from Your Student Loans?
by Cody Hounanian
September 27, 2020
This interview with Cody Hounanian, the Program Director of Student Debt Crisis, was conducted and condensed by franknews.
frank | What does the student debt crisis look like today?
Cody | I think statistics can tell part of the story. For example, in the seventies, you could use a Pell Grant to cover most of your college expenses, now you can’t. Anecdotes tell another part of the story. In the past, a part-time job over summer could be used to cover the cost of college. That is not enough anymore. We hear from borrowers every day who work many, many hours while going to school, and that still doesn't cover even a fraction of what higher education costs today.
As a society, we used to be much more willing to invest in covering the cost of education. Over the years, and particularly since the Great Recession, investment at the state, local and federal levels has decreased. As a society, we pulled back from investing in students and left families and individuals to pick up that burden. It's an investment issue. It's also a cost issue.
Can you speak more to the cost issue — why is college so expensive?
There are expenses to operate a major modern higher education institution — especially at the level that we have in the United States. But our political leaders have decided to not invest money into our higher education system, and, as a result, families and students have to pick up the slack and borrow to pay for college.
It is a vicious cycle — the more that colleges increase the cost of college, the more student loans will be taken out to fund those educations. The more that we open up the opportunity for borrowers to finance their education, the more room there is for institutions to increase their costs.
That is why at Student Debt Crisis we support a two-pronged solution. One, we need to cancel a broad amount of the student debt that exists. Two, we need to make many colleges, certainly public institutions, free for students. That is critical to creating a future where the student debt crisis that we see today can’t be recreated.
Do you think that canceling student debt is politically and fiscally possible?
If you accept the premise that our higher education and student loan system are broken, then you have to accept the fact that much of the $1.7 trillion in student loan debt is unethical, immoral, and, frankly, shouldn't exist.
Since the COVID crisis, canceling student debt has gone from a rallying cry of borrowers and advocates to something that is growing in its legitimacy. It has the support of many people in Congress, including Senator Elizabeth Warren, and even presidential candidate, Joe Biden.
But there are other common-sense solutions we should look to, as well. For example, there needs to be a federal refinancing option.
Because of predatory interest rates, many people have loans where they have paid back more than they originally borrowed.
Refinancing is not a new idea — people can refinance their mortgage or auto loans.
Let’s back up — what does refinancing look like for student loans?
Anyone that takes out a traditional lending product for their home or their car, can take advantage of a lower interest rate in the future. That helps them to lower their monthly payments and the total amount of debt that they have to pay back during the lifetime of the loan.
People who have federal student loans are not given that option. Importantly, federal student loan interest rates have fluctuated wildly over the years. There are millions of people that have very high interest rates, very high monthly payments, and no option to lower their interest rates.
With the support of folks like Senator Elizabeth Warren, there have been several attempts to pass common-sense refinancing. It came within two votes of passing in Congress several years ago but did not pass.
How many people are defaulting on their student loans?
A million people each year that default on their student loans. And that does not include a large portion of borrowers who are seriously delinquent on their student loans — these are borrowers who are between 90 and 270 days past due on their payments.
Unfortunately, we see that student loan defaults follow the inequity lines that we see in our society. Black student loan borrowers default at a much higher rate than their white peers.
We also know those who attend predatory for-profit colleges, often single parents, disabled veterans, and other vulnerable communities default at a much higher rate as well.
What happens when you default on your loans?
The consequences of default can be really catastrophic. It can mean huge fees. In many states, you can have your driver's license or your professional license revoked. It can mean that you can't complete your program or access financial aid. It can even mean you can't serve in the military, law enforcement positions, or other jobs that require credit checks. It can disrupt people's lives significantly.
As with other forms of debt, defaulting on your student loans also means that you're likely going to face relentless harassment from debt collectors. These are people that call at all hours of the day, they contact your friends and family, and sometimes they reach out to you on social media accounts. Defaulting can lead to a serious encroachment of your privacy.
Right. And there are repayment options to pay off student loans in an effective way — but no one seems to know?
Nobody with a federal student loan should default. There are affordable repayment options that are available to student loan borrowers through the federal government. The problem is, no one knows that these programs exist.
For example, if you are a low-income borrower or if you are unemployed, you can qualify for a monthly payment that's as low as $0 per month, and still be considered current on your loans. But your loan servicer has to tell you about that option and they have to help you enroll properly. For years, they have failed to do that. There's been a myriad of lawsuits against these companies, but that doesn't fix the problem.
California just passed a student loan borrower “bill of rights” to create enforceable standards. These companies have to give you your options, and they have to educate you on the best options for your situation, not the options best for their bottom line.
The federal student loan system is so complex that it makes it hard for students to navigate — you essentially have to be an expert. What's really important to know is that student loan borrowers are constantly hounded by what we call debt relief companies. These are people that prey on your inability to find any information. Any company offering to enroll you in a federal program with a fee is unnecessary - you can enroll in any federal program at the Department of Education's website at no cost.
But it's not just the private companies or organizations making a profit, right? In 2013, the Department of Education made over $41.3 billion on student loans. How are they making that money?
Yeah, you're right. Hundreds of millions of dollars every year go to the Department of Education through our student loan system.
Most of that comes from the interest on student loans. I think it is important to circle back to the conversation around the lack of refinancing here — we know that the longer that student loan borrowers are stuck with high interest rates, the more the Department of Education reaps in return. That is a perverse incentive.
Those funds go towards funding other government programs. To that extent, I think this is a question about balancing our books as a country and reprioritizing what we want to spend our money on. We need to think about different means of funding that doesn't happen off of the backs of student loan borrowers.
There's literally money on the table to be used to reinvest in education that instead is just being given as a fund generator for the Department of Education.
Can you talk more about the spread between what banks are borrowing and what the interest rates are there and how that differs from private loans?
Yeah. When you think of what a bank can lend money for, you're talking about single digits a — 1% to 0.5% of an interest rate. When a student loan is written by the federal government, it can be anywhere from about 3.5%, today's rate, to 6.5%, which was the rate that it was for me when I attended college in 2013. In the private market, student loan interest rates can be in the double digits — they can be as high as 15% or more.
Federal student loan borrowers, and those with private student loans from banks, are paying much more to finance their own education than what institutions pay to buy financial products. There is a huge spread. Again, I think that is a societal ill.
What does our society prioritize? Is it more important to keep banks afloat or to help young people afford education and make the future better and more bright for our entire country?
Why is the federal system profiting off of this system and these high interest rates rather than acting as a protector against predatory private institutions?
That's a great question. About a decade ago, when a student loan borrower went to the Department of Education for a student loan, the Department of Education would help facilitate that process, but the funds came from a private bank.
During the Great Recession, the banks unloaded this portfolio, they no longer wanted these loans. A lot of the loans were sold back to the Department of Education. From then on, throughout and after the Obama administration, all new federal student loans were not only facilitated by the Department of Education, but the funds themselves came from the government through the Department of Education.
The Department of Education shifted from being a regulatory agency, to essentially acting as one of the largest banking operations within the government.
They have a portfolio of trillions of dollars in student loans. Instead of acting as an institution meant to look out for the interests of student loan borrowers, they are now incentivized to look out for their large portfolio of student loans.
Was the transition of the government towards acting as a bank a partisan led movement?
The Obama administration felt strongly that borrowers needed an easy way to finance their education, or we would have a future where the future economy was void of high skilled labor and job opportunities.
We were also coming out of the recession, and there were deficit issues. So another motivating factor was also the idea of funding — the Department of Education could process these loans and create a revenue stream that could fund other programming in the government.
Do you think the move was well-intentioned?
I would say up until recently, these programs were well-intentioned. I think there were obstacles in making substantive change. But, since Betsy DeVos has become the Secretary of Education, we've seen more of what looks like overt attempts to make sure the system is as broken as possible.
I'll give you an example, there is something called the Public Service Loan Forgiveness Program. It started under the Bush administration, and the goal of the program was to motivate college graduates to work in public service by forgiving their student loan debt after 10 years of service. The current administration has proactively created roadblocks that have denied 99% of applicants to the program. There has been much more of an explicit attempt to prevent borrowers from accessing relief from the federal government — the likes of which we have never seen before.
Does the failure of the Department of Education lend itself to the idea that the government can't be in charge of things?
To those that look at the broken student loan system and say that is a great example of government failure, I would say, look to the other side of the coin — the exploitative private student loan system.
The federal government and the federal student loan system is not perfect by any means. It has created a lot of problems for student loan borrowers. However, the private student loan system that has no consumer protections when it comes to affordable payment plans. They have higher interest rates, they engage in profiteering, and a whole host of other issues that you don't see at the governmental level.
We look at the student loan system within the federal government and think that this is a bloated, broken system that can be corrected. It should be limited in size — meaning we should lower the cost of college and cancel a ton of the student debt to make this program more manageable. But we don't want borrowers to go to the private student loan industry where they lack the affordable options and consumer protections that are afforded to federal student loan borrowers. So the grass ain't greener in the private industry for student loan borrowers by any means.
Why do you think there's so much political resistance to embrace education as a public good?
This is where things are more insidious and, frankly, shameful. It comes down to the fact that there are partisan politics at play. There are some on one side of the aisle that treat a college education as something that should be reserved for the elites rather than as a public good and something that really benefits our society. At the Student Debt Crisis, we believe that America needs highly educated and highly skilled citizens who can compete globally for modern jobs.
interviews
The Center for Urban Pedagogy
by CUP
May 22, 2018
This interview with the Center for Urban Pedagogy (CUP), was conducted and condensed by frank news.
What is CUP?
The Center for Urban Pedagogy, or CUP, is a non-profit organization that uses the power of design and art to increase meaningful civic engagement, particularly among underrepresented communities. There are many barriers to civic engagement, but the one we focus on is the barrier to how hard it is to understand the policy and planning issues that impact peoples' lives. In order to address that, we partner with community-based organizations. We're trying to reach people where they live, work, or go to school, and help create tools that break down those complex policy and planning issues so that they can have a voice in the decision making on the issues that impact their communities.
Can you talk about the Toolkits you make?
For most of our projects, community organizations apply to work with us, and they tell us what issues they’re having a hard time explaining to their constituents. What policy or planning process they're having a hard time explaining, and why that's creating injustice in their community.
For the Envisioning Development Toolkits, we were finding from our community partners that there were certain land-use processes that organizations were having to spend a long time explaining to their constituents. Every time they'd have a meeting to organize around a particular issue, they would have to go back and re-explain these complex issues, such as how affordable housing actually works, how zoning works, and so on.
They were looking for a tool that would help people understand those complex concepts so they didn't have to go back into it from the very beginning every time. That's what the toolkits grew out of. We spent a long time working with a steering committee of community-based organizations to work on land-use issues to understand what tools they needed, what concepts they needed to explain, and testing with them.
These are hands-on workshop-based tools. They're very interactive, and we spent a long time, at least a year of research, and developing the mechanics of how the workshop will work and extensive testing with those community organizations, with their constituents to make sure that the workshop is actually explaining information they need, and in an accessible way.
We also interview a lot of stakeholders and many decision makers to create an accompanying guidebook as part of the toolkits. The ULURP guidebook includes detailed information about the ULURP process, who is involved, case studies, and how to run workshops on your own.
Which particular communities are engaging with the toolkits?
All over New York City! Just a few of the organizations that we've worked with for quite a long time include Fifth Avenue Committee, which is based here in Gowanus. They do a lot of affordable housing development, and they've been a partner of ours for many years. They're actually going through a rezoning right now. The neighborhood is going through a rezoning, so we're also working with them on doing affordable housing, zoning, and ULURP because each piece of that is really critical to understanding rezoning overall and how they can be involved in the rezoning process.
Other organizations include Community Voices Heard in East Harlem and GOLES, which is an organization on Lower East Side, those are some of the organizations that are really on the ground on land-use issues.
What is ULURP?
ULURP is the main public review process that New York City has for major developments, rezoning, large scale land use changes. They have to go through this very specific process, and there are a variety of players throughout the city, and there is a very specific timeline. A lot of people find the process very hard to understand and intentionally or unintentionally opaque. This process really impacts people across the city, and most people don't know how to engage in it.
The interactive workshop lets people learn about the ULURP process, the different players involved, and the role they can play in decision-making. We actually use a sandwich metaphor for the workshop (instead of reviewing a decision about a building, players are reviewing a proposal for a new sandwich) and each participant plays the role of a different stakeholder or decision maker in the ULURP process, so they really learn the process by being a part of it.
Has it been tested with community members directly already? Are people able to engage with it in an effective way?
Yes. We've been testing it for over two years. Doing workshops with community organizations who are going through a ULURP process, communities that haven't gone through ULURP yet, but know that it is going to happen in their community at some point. But really just getting extensive feedback about what works and what doesn’t.
When we do the workshops, we do pre and post evaluations in terms of, do people know what ULURP is at the beginning of the workshop, how comfortable are they at talking about it, how comfortable are they about the concepts? And then, having them do a survey at the end of the workshop to really make sure they're feeling confident in understanding this very complex process and these concepts.
What are CUPs long-term goals? What else do we need to know about CUP as an organization?
People are dealing with this on a daily basis. No neighborhood is not going through something. We have had so much interest in these tools and making sure people have this information.
We’ve created other tools, including an online affordable housing map, so if you live in New York City, you can go online and look at the income levels for your neighborhood to see who really lives there and what is truly affordable for that neighborhood. As a companion for the Zoning Toolkit we did an online component called, "What is FAR" which stands for Floor Area Ratio. The online tool lets users build out a neighborhood and understand how buildings get built, the sizes of the lots, and their setbacks. It lets you understand how zoning shapes buildings and neighborhoods.
CUP works on all kinds of other issues too, from projects that explain the rights of immigrants to how to navigate complex processes in the legal system. People can learn more at welcometocup.org!
More information on What Is ULURP? can be found here!
The Center for Urban Pedagogy (CUP) officially launched their What Is ULURP? Toolkit on May 2nd, with a weeklong series of free workshops for community organizers, community board members, and neighborhood advocates.