Are you prepared for the invasion of Zombie debt? Everyone knows there is a foreclosure crisis – but are we prepared for the unfolding crises of education and medical debt?
In his recent NY Times blog, Student Debt and the Crushing of the American Dream, economist Joseph Stiglitz notes some astounding facts:
“According to the Federal Reserve Bank of New York, almost 13 percent of student-loan borrowers of all ages owe more than $50,000, and nearly 4 percent owe more than $100,000. These debts are beyond students’ ability to repay, (especially in our nearly jobless recovery); this is demonstrated by the fact that delinquency and default rates are soaring. Some 17 percent of student-loan borrowers were 90 days or more behind in payments at the end of 2012. When only those in repayment were counted — in other words, not including borrowers who were in loan deferment or forbearance — more than 30 percent were 90 days or more behind. For federal loans taken out in the 2009 fiscal year, three-year default rates exceeded 13 percent.”
The high cost of higher education, interest rates, laws governing student loans that make them ineligible for bankruptcy and other debt relief programs, and relatively high unemployment all contribute to lowering economic and social opportunity/mobility.
Contributing to the crisis are predatory practices by for-profit colleges, with high default and low graduation rates. However, default rates are only one aspect of the student debt problem; we must also contend with the broader economic reality. Increased student debt and higher unemployment lowers consumption, and in a consumer economy, this creates a circular problem. Stiglitz’s main point is that the looming student debt crisis is not a failure of students, it is a failure of our public commitment to education and social mobility (something he has written about extensively).
Despite this, there is still clear“value added” by a college degree. Stiglitz notes the numbers:
“College graduates earn $12,000 more per year than those without college degrees; the gap has almost tripled just since 1980. Our economy is increasingly reliant on knowledge-related industries. No matter what happens with currency wars and trade balances, the United States is not going to return to making textiles. Unemployment rates among college graduates are much lower than among those with only a high school diploma.”
So a college degree is still clearly a good investment. However, one can no longer afford to ignore the questions of how much debt one can or should take on in pursuing a bachelors, masters, law or medical degree. The options one has upon graduation are constrained by the level of debt one has accumulated.
~A college graduate with a full time job may no longer be able to afford to live on his or her own. Even living with roommates may be outside of reach, given anxiety concerning student debt. More and more young adults are moving back home with their parents after graduation because they cannot afford both rent and student loan payments (this is especially true of graduates who have only been able to find part time work, due to high youth unemployment). Many young adults are intentionally delaying marriage and children because of student loans. Whether that is smart or not, it is the growing reality.
~Our society has plenty of graduates in the legal, medical, and other professional fields, and yet we cannot fill these positions in low income communities. High student debt contributes to our inability to get teachers, doctors, lawyers, and other professionals in these communities. Few go into general medicine because, in part, paying off loans is easier in high cost specialties. (Money-Driven Medicine is an excellent POV documentary on this).
~ Many young college graduates will opt for a year or two of volunteer work. However, student debt provides an intimidating barrier to graduates who hope to pursue a career dedicated to social welfare. Those hoping to work in Catholic schools, as a social worker, as a community organizer, or for a non-profit can’t unless they have been fortunate enough to have very little or no student loan debt. These jobs, which are so important, do not pay enough to allow an independent adult to pay back the loans.
There is a structural injustice at the root of this problem. Banking fraud and illegal foreclosures continue (without any real threat of punishment). A culture of fraud extends beyond the foreclosure crisis into medical and education debt. (On the education side, this fraud is perpetuated by for-profit institutions with high loans, low graduation/completion rates, and high probability of default). This structural injustice lies in stark contrast to the biblical jubilee and justice tradition, which calls for the forgiveness of debts.
Invoking the biblical tradition, a group of people are fighting back. Rolling Jubilee by Strike Debt continues its campaign to cancel the debts of individuals by linking the jubilee traditions in Judaism, Islam and Christianity.
“Strike Debt is an offshoot of Occupy Wall Street. First started in New York City, but inspired by movements around the globe, Strike Debt now has affiliates across the country. We believe people should not go into debt for basic necessities like education, healthcare and housing.”
Beginning with medical and housing debt, Strike Debt buys individual debt and cancels or “forgives the debt.” How do they do this?
What most people do not know is that defaulted debt is sold on a secondary market – bundled together and sold at auction.
“Banks sell debt for pennies on the dollar on a shadowy speculative market of debt buyers who then turn around and try to collect the full amount from debtors. The Rolling Jubilee intervenes by buying debt, keeping it out of the hands of collectors, and then abolishing it. We’re going into this market not to make a profit but to help each other out and highlight how the predatory debt system affects our families and communities. Think of it as a bailout of the 99% by the 99%”
In many of these cases, the patients are haunted by Zombie Debt, or debts they thought were paid off.
“Logsdon, the first of those debtors to publicly identify herself, said she thought her delinquent $983 bill for back pain care had been paid by Medicare last year. That’s what her doctor told her, she said, after a 2011 dispute during which the bill had gone to a collection agency.”
Strike Debt has forgiven 1.1 million in medical loans and they are now investigating ways they can buy and cancel student loans. Federally backed student loans do not get sold on a secondary market, but an increasing number of defaulted private loans are making their way to the secondary market.
In Luke’s Gospel, Jesus stands up and reads from Isaiah and explains his purpose:
“The Spirit of the Lord is upon me, because he has anointed me to bring glad tidings to the poor. He has sent me to proclaim liberty to captives and recovery of sight to the blind, to let the oppressed go free, and to proclaim a year acceptable to the Lord.” (Luke 4:16-19)
Deeply embedded in the Biblical tradition is the concept of Jubilee – what does it mean to set people free and proclaim a year acceptable to the Lord?
The Jubilee tradition understands biblical justice to include the forgiveness of debts. Rolling Jubilee is following the legacy of Jubilee 2000. During the Millennium, Pope John Paul II, Bono and others mobilized the world around the Jubilee 2000 Campaign and the forgiveness of crippling loans to developing countries. While the fight for debt relief for developing countries goes on, it has already accomplished a lot of good for the citizens of developing countries by freeing up money for investment in public goods. Jubilee is necessary to proclaim a year acceptable to the Lord. There is strong theological support for Rolling Jubilee’s forgiveness of medical debt and perhaps it is time to call for a Jubilee for student debt as well.
Imagine, for example, if we as a nation made a public commitment to double the number of public defenders? Or provide significant loan forgiveness for those who work for Legal Aid? If we put into practice the medical school loan forgiveness ideas President Obama mentioned back at the beginning of the healthcare reform debate – and did it on a large scale to reward doctors who serve in underserved areas? And, given the manipulation and structural injustice, what if we provided for loan forgiveness for those taken advantage of by for-profit higher education? All of these would lessen the burden on young adults, allow for social mobility, and provide significant contributions to the common good. The real question is: Do we have the public will to do so? And as Christians, we must remember that setting the captives free is a pre-req for proclaiming a year acceptable to the Lord.