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
BIGHT: COASTAL URBANISM
by Susannah Drake & Rafi Segal
May 26, 2018
This interview with Susannah Drake & Rafi Segal was conducted and condensed by frank news. Bight’s project team is Rafi Segal & DLANDstudio (Susannah Drake), Sarah Williams, Greg Lindsay, Brent Ryan, Benjamin Albrecht.
Susannah: My name is Susannah Drake, I'm an architect and landscape architect, and I'm the principal of DLANDstudio. Also, I've taught at various schools including the Cooper Union, which is where Rafi and I met, teaching an Urban Design Studio.
Rafi: I’m Rafi. I’m an architect. I run a practice under my name and I teach at MIT, primarily around the questions of the city, or the future city. I guess you can say I’m an urbanist. The courses bring architects and planners together, which hasn’t been the case in this country since the 1960’s.
How has it been working together?
Rafi: We know where to come together and where to split. This is how we cover ground: we converge and then split.
Susannah: It's respectful but not conciliatory.
Rafi: My work concentrates on urban architecture: the reading, or understanding of the city. How context informs project. Susannah has a broader scope of of dealing with landscape and the environment.
Susannah: The fabric of the city, but also the ecological systems that impact it. Infrastructure acknowledging geology, hydrology, or ecology - to integrate architectural and engineered systems with natural systems.
What is BIGHT?
Rafi: Have you ever heard the term “BIGHT” before?
No.
Rafi: No one has!
Susannah: It could be quite provocative! We should step back and talk about the Regional Plan Association (RPA) and the origins of all of this. The BIGHT project is a component of the Fourth Regional Plan for the future of the metropolitan region: Connecticut, New York, and New Jersey. The first plan was about concentric circles of development around Manhattan.
Rafi: This is in 1929.
Susannah: The fourth plan is a dramatic shift: from circles to corridors.
Rafi: The Bight is the waterfronts of Long Island, New York and New Jersey. The barrier islands, harbors, constructed and naturalized landscapes. It comes with a set of issues: climate change, sea level rise, flooding...
How long is it?
Rafi: 600 Miles or so. It’s very big. Let's backtrack for a second to give you a bigger picture. I mean, why do we need such an institution? Why does the RPA exist? The premise back then was, ok, NYC is growing and designing itself, but who's looking at the region? So RPA initially came in to fill the gap with research in urban planning.
Susannah: It’s a national competition, funded by the Rockefeller Foundation.
Rafi: The prompt was, how do you approach urban design of the future? What are the main issues? Who do you engage? What’s the narrative?
Bight City, Jamaica Bay 2067, view across lagoon: ‘wet city’ housing along the lagoon’s edges protects the ‘dry city’ behind it.
Susannah: They wanted to look at different scales of of issues happening in the region. So we looked at a little barrier island, a small community. The we looked at a second area, Jamaica Bay, which is very complex: multi-jurisdictional, also a national park, you know, just about as complex as you can get. And the third area is a post-war suburban community, on a waterfront, but not the same as affluent waterfront areas in Long Island.
THE SITES TODAY
Existing elevated rail, Rockaways, 2017 Sea Bright, New Jersey, 2017: a barrier island flooded from both ocean- and bay sides. The sea wall and elevated beach clubs will remain as the island disappears under water.
PROJECTED VULNERABILITY AND ADAPTATION PLAN
New Mastic, 2050: projected flooding (left), proposed plan for future development (right), densifying high, dry ground while permitting some homes to remain in wet areas as they evolve into a new elevated neighborhood built along docks.
What are the primary climate related issues happening to all of these areas?
Susannah: Sea level rise. They're all in vulnerable areas. Some of them are built on barrier islands, where there really should never have been any development.
It's a dynamic landscape that changes. That is influenced by winds, and currents, and the cycles in the environment, the shifting tides changing the water table. No one should ever build a house there that's permanent, but we have, for recreational purposes or for pleasure. Initially there was a more realistic relationship to the environment in these places. A summerhouse might have been a cottage. It wouldn't be used in the winter. A much lighter touch on the environment. But over time we've changed our relationship to the environment. As people we feel like we're much more invincible. We built hardened structures. But the nature of climate has gotten stronger as our architecture has gotten stronger. And nature's winning now.
Rafi: So we identify a pattern here: that we're building more and more along the coastline, in an area increasingly prone to risk.
How do we work with that and begin a process that requires change? Change is difficult for people to grasp. This was, in a sense, the challenge: not the planning itself, coming up with a smart plan is one thing, but finding a way to communicate and frame an issue is another.
Susannah: We tried to valorize or make positive the idea of retreat. The whole notion of retreat is seen as a pejorative term. It's seen as being fearful, or weak. But look at military strategy. There are times when you need to retreat so you can go back and fight again. You can look at it as poker, sometimes you fold to save resources. So you can keep playing and win.
We came up with a term for a project, a different RPA: receive, protect, adapt. To change the idea of retreat we say received. It’s a proactive development approach to attract people away from the water's edge.
Rafi: To identify areas that can grow, and then use them as anchors.
Sending and receiving blocks: a strategy of switching people and densities over time from high risk areas to dry ground.
Jamaica Bay: projected flooding proposed plan for future development. Flooded ground becomes parks and open water, while dry areas such as JFK are protected and intensified. The result: a new square-toothed “Bight City” comprised of waterside neighborhoods.
There are a lot of maps in the project...
Susannah:
One of the critical discoveries we made along the way happened through mapping. And a recognition of the things we draw and how we draw them.
For instance, Sarah Williams did a tremendous amount of GIS [geographic information system]. She overlaid these maps, and we discovered these development corridors on higher ground. Places with existing right of ways that we could build upon. That didn't get flooded. They were an existing strength... potentially expandable and valuable.
Densifying high ground for New Mastic.
We also mapped infrastructure systems. They were completely disconnected, highlighting the vulnerability of waterfront areas to periodic storm surge, or even longer-term issues like sea level rise. To show a vulnerability but also this opportunity we conceived receive, protect, adapt.
Rafi: There were areas that required protection in terms of the economy or jobs. It’s a very rational approach, also with many strategies.
Of course the communities are considered, but are they directly involved?
Rafi: On various scales. You wouldn’t bring in a community to do large-scale mapping. But you come to that point, and the plan strategies for that.
Susannah: The RPA reached out and engaged with the communities in advance. We had information but limited contact...we did end up giving presentations to some of the mayors.
Who can afford to leave a place like the Rockaways? Some people can’t afford it, and other people might not want to. Their homes are fairly valuable, but they might lose money if they leave. We mapped vulnerability social vulnerability to think about the true definition of afford. To locate housing projects, older people, and those who can’t escape another big storm.
Rafi: And there's only so much one can do on the community scale. Resolution is really at the scale of the city, or the region. When you have risk coming from the ocean, there must be lessons to learn from one town to another.
Who is to bringing all these voices, considerations, and issues together to project a path forward?
You asked what planners and architects do. The urban project is a very difficult one. What will be can really change the city without changing ourselves. We resist change. We are attached to our city our home in an irrational way. Even when risk is evident. It's right in front of our doorstep. You walk out and there’s water instead of land. Even at that point.
So a change in the narrative is key. This country developed from strong narratives. We work on the story now as we go to the future. Whether you believe in climate change or not, the ways we communicate, energy, transportation -- are all changing, and all impact how cities take shape.
Susannah: RPA prompted that Kennedy airport would be strengthened. Elevated and reinforced. An economic hub for the region. And our work should support that.
Rafi: It's a gateway to the country, it’s huge.
View of proposed Gateway Station from the ocean side.
Susannah: The nature and economics of being in the urban center or on the water’s edge have changed. Historically this region depended on trade by water, but the dynamics of trade shifted, and shipping and exchange moved from Lower Manhattan to the periphery.
We transform that line of the water’s edge-- which used to support a physical exchange of goods-- into a zone. Ecological exchange can’t operate along lines, they require these zones.
Gateway Station, Jamaica Bay 2050: a series of plazas and beaches form an intermodal station and recreation center built along the existing elevated rail of the Rockaways.
Rafi: History puts things in perspective. The city is in a constant crisis of change. Are we going to be smarter today then we were in the past? I don’t know.
Why does the average person who doesn’t deal with this every day need to know?
Rafi: That's a great question. You can say that people don't need to know, and government will decide. But that’s not going to happen. Knowing is our strongest ally in a way.
Susannah: It’s important to understand vulnerability but also a way out. To find opportunity in the complexity of retreat.
Is it the government's job to incentivize retreat?
Susannah: Not necessarily with buyouts. We designed an economic development zone. It's upland from of the waterfront zone. You rezone and start development there now, so that in the future city planning and government create incentive just through zoning and shifting development patterns.
“Elevation-Based Zoning” proposes different zoning- and building regulations based on grade elevation to address the risks of storm surges and flooding.
Rafi: In the end it’s our money. You say government, but it’s our money being spent to address issues of flooding.
Susannah: My feeling is that FEMA should be eliminated. FEMA was not intended to be a flood insurance program initially.
Rafi: It will continue like this until they go bankrupt. More hurricanes, more flooding.
It is what it is. But we shouldn’t accept all of these rules. How it always was, isn’t how it has to be.
Rafi: The systems are in place why change.
Susannah: Some of the systems shaped our country in positive ways, some not.
Look at the waterfront in 1982, when Reagan got the Coastal Waters Act signed. If you developed a greenfield on the waterfront, you would not be insured. But if you redevelop land that already has property on it, you got insured. The tax areas were already there.
The Clean Water Act, the Clean Air Act, both signed by Nixon, have been fundamental to the work I do on water quality and climate resilience. Go back further to 1965, when Lyndon B Johnson signed the Highway Beautification Act. It was meant to create more beautiful plantings, but also created better ecologies along those highways.
So this evolution in thinking and perception has actually been positive. But sometimes not particularly altruistic.
The Land Ordinance Grid was a big development scheme to run the country. Gridding completely transformed the American landscape in perpetuity.
To get them to go live in suburban developments. Look at the amount of money made in developing suburbs. They are political decisions that fueled engineering and construction companies.
It’s a big real estate scheme. You want the population to start producing children again, so you get women out of the way. And by the way you can make a shitload of money at the same time. And then...the antidepressant industry.
Bight is currently featured at the Venice Architecture Biennale in the exhibit “Time, Space, Existence,” at the Palazzo Mora.