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
Pain Is The Price of Consciousness
by Max Moinian
September 17, 2019
This interview with Max Moinian was conducted and condensed by frank news. Max was the co-editor of our May 2018 issue on Urban Planning.
frank: Hi! Tell us about yourself and Future Earth.
Max: I am Max Moinian, I have a Master's in Urban Design from MIT, and Future Earth is a climate change education platform, right now just on Instagram. It’s a newborn baby I had with Steph Shepherd, who is a total social media and marketing genius. We think our combined brains are good parenting. Good information that is enticing and digestible.
This all happened because mutual friends told us we were both climate change crazy ladies. We met and finished each other’s sentences. She convinced me that more celebrities would engage in environmentalism if the cause was packaged for them. So we tried a rebranding exercise. Make it cool and sexy. Do for the treehugger what Gloria Steinem did for feminism, if you will. But also survey what’s out there and fill in the gaps.
What are the gaps?
I’m not mad at that, plastics are a gateway drug to environmentalism, but let’s take it a step further and talk about petrochemicals and how the same shit making those bottles is in your activewear and household products, and powering your car and house.
Basically what we're doing is trying to visually represent information we're reading, and make it enticing and clear for Instagram. I'll do the heavy lifting and read through the dense reports, make three-step guides, and report back on Instagram. Everything from science lessons, to consumer and lifestyle tips, ways you can get involved, and movies to watch. It’s imperative to me that we reflect on the psychological, personal aspect about learning about climate change. My own journey was so emotional and I found it hard to find a shoulder to lean on and people to have those conversations with.
How did you end up focusing on climate issues?
It's crazy to think that years of Ivy League education, undergrad at Barnard, Master's at MIT, and you know, private school before that – all of it – never touched on the very rudimentary and basic information about climate change that everyone needs to know. It was never presented to us, I read headlines but they never stuck, and somehow I got away with ignoring it all of those years.
via Max Moinian
Then there I was at MIT – the grand narrative is how do we design and protect cities from the coming environmental perils? So, sea level rise, temperature rise, extreme weather, pollution, deforestation…. All of it from a policy and design standpoint. I focused on design, so, seawalls and engineering systems to address the consequences of global warming. But what about the causes? Why can’t we start there? Why aren’t we talking about it?
In design studios, we were tasked to protect cities by building things.
It really bothered me. I felt like this world of mobilized urban designers and architects are at the end of a line that starts with the science, goes through technology and policy, and leaves us with a very limited, pathetic toolkit. Real innovation doesn’t happen at the end of the line, you know?
We're still that client-based discipline where you just have to do whatever the client says and not necessarily what you stand for. I busted my ass to get an internship at BIG because I wanted to work on the BIG U. I got disenchanted in three seconds. I remember one night I called my advisor and told him I was morally conflicted.
To be fair, the opportunities the firm had were completely restricted by policy and bureaucratic nonsense. But I wanted no part in it. He told me I had to make the choice of working within the system to change it, or go full radical. And I guess I’ve been testing the outlaw territory ever since.
via Max Moinian
What's the best way to a) begin your personal education in climate change, and b) retain information without feeling constantly overwhelmed and emotionally drained?
I know better than anyone how hard it is to commit time in your life to this topic. I didn’t do it until I had six months to research and write a thesis. I thought, I'm going to devote to learning about climate change now because when else can I do this? I wasn’t worried that climate science had no clear place in urban design. I knew I’d figure out a way to get away with it.
I spent most of those days making a matcha latte, getting back in bed, and reading a book for the morning. Then writing and drawing in the afternoon. It was a glorious time of ultimate brain activation. I loved being isolated in my little academic bubble. Not everyone can do that, not everyone wants to do that, no one has the time. So here’s a cheat sheet:
Step one: start with the basic facts. How does climate change and what does that mean for the future? But also, how do we get data and make projections? What are the main causes? What are our options? Your resource is the IPCC. Don't listen to what anyone else has to say except the IPCC and climate scientists. And don’t be ashamed if you need a refresh on middle school science. There's a textbook version of IPCC reports for young adults that I reference constantly.
Step two: a brief history of how climate science has been politicized. Seeing how the proof and solutions have been muzzled by Big Oil and politics is mindblowing.
It also made me hyper-skeptical but in a good way. I love Naomi Oreskes and Naomi Klein, two badass women who write clearly but also have documentaries and interviews you can watch.
Step three: take care of yourself. It took a few breakdowns for me to admit that I wasn’t invincible and this was seriously heavy shit. It’s emotional, and most people connect emotionally. I've read the facts, I know the projections. But it never registered for me. You know, but at the same time you don’t know.
This is the equivalent of the atom bomb. This is the environmental narrative of our time, and it's really hard to do anything when you know that the problem is so far beyond your little self, your community, your country. It's the entire world, with no silver-bullet solution, and no end in sight, and that's fucking scary.
Yes, it really is.
One time, when I was in the depths of knowing too much, like borderline depression, I was sitting with a professor who will probably never know how much she means to me. As I was talking I think she could just tell something was not right, and she put her arm on my shoulder and said, "Honey, you need to read some Rebecca Solnit." So I bought this book Hope in the Dark and I've gone back to it maybe five times already. It was the hug that I needed. I needed to know that there are people that know more than me and they are still fighting. And I needed to see that they had happy normal lives, or at least appeared to.
Another game-changing book is Living In Denial by Kari Norgaard. The psychology of inaction. She says,
No one wants to feel like that. Everyone has a threshold, a cap to how much of those kind of feelings you can harbor. And we're all maxing out on our personal issues, our family, our life. You know, millennial burnout or whatever.
Who wants to willingly experience that much pain?
Right.
To exist is painful enough.
Sometimes I get pissed off watching people go about their day, nonchalant, like parked with the engine running, A/C blasting with the windows down, watching TV on their iPhone. And I feel like this person doesn't care. And I’m almost jealous at how simple life seems to be in their mind, so guilt free and chill. But to Norgaard that's actually really difficult to do: “Apathy is the mask of suffering.” It's really hard to suppress all those existential thoughts and feelings, but because it's so much harder to actually deal with them, we lean towards denial.
Being hyper-aware is a massive burden. I've never sought out therapy in my life – I just started seeing a psychologist who specializes in climate anxiety. Being an activist and educator means I’m committing to VIP care for my mental health. Because that is my MVP!