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
Evaluating Debates From Experience
by David Vincent Kimel
December 7, 2019
This interview with David Vincent Kimel was conducted and condensed by frank news. It was originally published in March 2019.
Mr. Kimel is a Yale Graduate Student in Roman History, Debate Coach Emeritus of the Yale Debate Association, two-time winner of Harvard's Coolidge Debating Prize, and Founder of the Transhumanist Society.
How has your history as an experienced debater informed your opinion on the subject?
I was privileged to be a member of the top ranked debate team in the country as an undergraduate at Harvard and the coach of the Yale Debate Association for six years. I also did some interviews with CNN and the Washington Post concerning political debates and served as an advisor for several campaigns. Insofar as this is true, I perhaps tend to watch and evaluate debates differently than many others do; for example, I am sensitive to tactics like dropping points, pivoting away from the questions at hand, delivering talking points instead of clear answers, etc. Unfortunately these all tend to be hallmarks of public political debates.
Why is debate as a medium so important?
Debate as a medium is important because at its best, it compels participants to see the world through the eyes of those who feel differently about the world than they do; at least this is true in competitive debate, where you can find yourself arguing any side of an issue in spite of your personal beliefs. In the realm of politics, debates compel candidates to try to articulate answers to difficult questions and to defend their perspectives using hard evidence, which is one indicator of what kind of a leader they might be if elected. Academically, the ability to debate respectfully is essential to progress in the arts and sciences, since debates can poke holes in existing theories and force advocates to diligently defend their beliefs and intuitions.
Do you think public debate should have a larger role in our national discourse?
I certainly believe that debate should have a larger role in our national discourse; when I turn on the news, depending on the channel I choose, I often feel like the priest is preaching to the choir; when I surf online, I can find “evidence” to support any cockamamie theory out there; when I visit Facebook, I see an avalanche of posts affirming my intuitions, and I disagree with my friends at the risk of losing them.
Debate fosters tolerance for difference of opinion, and this is too often sorely lacking in our current political climate. Of course, however, certain issues should not be debatable, and there are limits to the usefulness of arguments divorced from consensus building.
Do you believe debate is crucial to democracy?
At its best, debate is crucial to democracy because it empowers voters to make up their minds after hearing the most articulate arguments for and against various positions rather than going to the ballot box inspired by one sided narratives and propaganda for your favorite candidate. People treat politics like team sports when they should really approach it more like a jury-trial.
How would you adjust or change the current political debate format?
Insofar as this is true, certain steps can be taken to improve the quality of discourse. For example, I see no need for rowdy television audiences distracting viewers from the candidates’ ideas. There should be written debates instead of just oral ones, allowing for deeper levels of analysis. Moderators should be able to stop candidates when they veer into talking points. At the same time, politicians should be challenged more thoroughly on where they disagree with their party’s common platform. There should be more specific situational debates (what would you do if...) rather than just generalizing queries. Candidates should sometimes be asked to judge debates and evaluate expert opinions rather than just arguing among themselves. In some debates, candidates should engage with experts in the field rather than bickering with their opponents. There should be topical debates on issues like climate change and tax policy, and with great frequency too; this would be better than lumping every issue together in three or four events. Finally, perhaps there should be impartial judges who grade the candidates according to various metrics (poise, truthfulness, originality, etc), at least sometimes. Otherwise there’s no accountability for what’s said.
Who is the ideal moderator and what is the moderators role?
The ideal moderator should be a respected and impartial figure. However, much depends on the format. For example, in a debate about specialized topics, I’d like to see experts weigh in with their opinions and even debate the candidates. I’d also like to see more panels of moderators representing not only centrist positions, but a range of political intuitions. The problem now is that our formats for debates are not diverse enough. Sometimes, for example, the candidates themselves should be the moderators and be asked to synthesize and evaluate the opinions of others; we might learn more from how they judge debates than how they participate in them.
You coach collegiate debate – what makes for an effective debater?
There are great qualities which both effective collegiate and political debaters share in common: poise, eloquence, confidence, warmth, and truthfulness. Unfortunately, good college debaters are also experts at flattering judges into voting for them by playing up to their intuitions and exaggerating the flaws of the other side, and effective political debaters can preach to their base and drum up support by avoiding controversy instead of seeking truth.
There also needs to be more questions about compromise and consensus building and how candidates differ from cookie cutter stereotypes of their party’s common platforms.
How can we move beyond argument and bickering towards more effective debate?
For debate to be more than bickering, there needs to be a process after the debate takes place for a judge or jury to weigh arguments instead of pitting them against each other. This is one reason why I think candidates should sometimes be asked to judge debates instead of only participating in them. To democratize debate, there can be formats in which viewers from home can tell their stories and participate, etc.