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Student debt strikers grow in number and in power

(Debt Collective)

(Debt Collective)

Just over a month ago, Waging Nonviolence reported that 15 former students of Corinthian Colleges — the beleaguered, notorious for-profit higher education system — were going on strike; not from their jobs, or from class, but from their debt. Today, there are over 100 debt strikers. Their goal is to ramp up pressure on the Department of Education to relieve not just the debt they incurred, but all Corinthian students’ loans and declare that for-profit colleges are not, in fact, too big to fail.

“We had hundreds and hundreds of requests to join the strike,” said Debt Collective organizer Ann Larson. With the initial announcement, the group invited potential strikers to sign up on their website to become part of the Corinthian Collective. A team of dozens of volunteers then sorted through strike requests in a “rigorous process,” informing debtors about the consequences of striking, reading over bills from their lenders and asking them to write up brief biographies and statements about why they were striking.

The Debt Collective, which the 106 strikers belong to, is a product of the Occupy offshoot Strike Debt, which has made headlines over the last several years for buying up private debt on the market for low prices and promptly absolving it. The $13 million in Corinthian students’ debt that the group purchased back in February cost just $1.

The Consumer Financial Protection Bureau, or CFPB, which is suing Corinthian for $570 million in predatory lending damages, has invited the strikers to a meeting in Washington, D.C., set to take place tomorrow. The Department of Education has further granted the collective’s request for a meeting on Tuesday while they are in the nation’s capital.

Ann Bowers, a 54-year old striker from Fort Myers, Fla., is in Washington, D.C., today for the meeting, and has been excited to see the response last month’s announcement has generated. “People are taking notice, and that’s very encouraging,” she said. “People are paying attention.”

Beyond the CFPB, the Corinthian system has been subject to some 200 lawsuits at the state and federal level, and delisted from Nasdaq for failing to file regularly with the Securities and Exchange Commission. Perhaps most deviously, Corinthian is charged with inflating its tuition to collect more money from students, encouraging them to take out additional private loans to fill in the gaps left by federal grants. By law, for-profit colleges are only allowed to get 90 percent of their budgets from federal funds, meaning that pumping students for other loans — either through the GI Bill, third party or in-house lending — is a veritable gold mine for companies that leaves students with outrageous debt burdens.

Adding insult to injury, Larson said that 30 percent of Corinthian students come from families making less than $10,000. “The people that suffer,” she added, “are the people at the very bottom of the income scale.”

The Corinthian 106, as they are now known, will also use a new legal strategy in dealing with the Department of Education. Under a little-known regulation called the Defense of Repayment law, students are eligible for a full discharge on their loans and refund of money paid if the schools they attended have violated state consumer protection laws. To date, 300 people have filed Defense of Repayment forms under the Debt Collective banner, which will be turned into the Department of Education in advance of the strikers’ meeting on Tuesday. The department will have 30 days to respond.

“If they delay, we will push them,” said Debt Collective organizer Luke Herrine. “We will protest, we send in more applications, we will add more people to the ranks of the strikers, we will make life hard for them.”

That said, even without the Defense of Repayment filings, the Department of Education has the statutory power to wipe out Corinthian students’ loans, as Larson pointed out. Since its founding, the Debt Collective has called on the Department of Education to do just that. “They’re supposed to regulate education,” Bowers noted, “and I feel they did not do their job correctly.”

The department has threatened to remove Corinthian’s funding before, but instead chose to broker a controversial deal between the system and the Educational Credit Management Corporation, or ECMC, a federal debt collection contractor. Under the agreement, ECMC would buy-out half of Corinthian’s campuses and all of its student loans, with the government and the company essentially handing over the keys. In turn, the campuses will remain open and ECMC will forgive $480 million of Corinthian students’ debt, reducing principal loan amounts by 40 percent over “an unspecified amount of years.”

Critics of the deal have raised concerns that a collection agency has no business running an educational institution. Borrowers with federal and private loans, as well, will see little benefit from the agreement, as their debt is not held by Corinthian itself, but by either the Department of Education or private lenders such as Navient, formerly known as Sallie Mae. Therefore, even if Corinthian crumbles and loses its already scant accreditation under ECMC’s inexperienced management, the Department of Education and companies like Navient will continue to collect on former students’ loans by any means necessary. Also worth noting is that ECMC has played a crucial role in making student debt harder to escape, lobbying extensively for more stringent definitions of “undue hardship,” a factor that needs to be proven in order for loan recipients to declare bankruptcy — now virtually impossible for most student loan borrowers.

“Where was the Department of Education when Corinthian began preying on students?” striker Mallory Heiney asked in a Washington Post op-ed earlier this month. Heiney, who said she sold plasma to buy groceries and make interest-only payments, added, “Corinthian Colleges had the option to threaten bankruptcy, sell its campuses and wash its hands of its financial problems. But students are stuck with their debt.”