African Americans are hit particularly hard by student loan debt. Ten years ago, it was found that blacks are five times more likely to default on student loans than typical borrowers. Since that time, the horrible, for-profit colleges that we’ve all been hearing about have greatly increased their marketing to the African American community (just turn on your TV for 15 minutes, and you will be compelled to agree). These colleges, cumulatively, have a lifetime default rate of something like 60 percent, so it is safe to assume that the default rate for African Americans attending these colleges is higher, even, than this.
Remember: There are no bankruptcy protections for the vast majority of student borrowers. There are also no statutes of limitations for the debt. A penalty and fee structure that can increase the debt by many multiples, and a collection regime that has powers that would make a mobster envious (Sen. Elizabeth Warren’s words, not mine) combine to make a borrower with defaulted student loans stuck in what is often a lifelong trap, stuck in a marginalized state with greatly diminished prospects, and no recourse.
{mosads}I am reminded of a fellow I met in 2007. A black man, he went to medical school in the 70’s and graduated with a degree in ophthalmology. Because of his defaulted student loans, he was never able to practice in his field (he was barred from billing medicare/medicaid due to his student loans and thus could find no employment in his field under this penalty). By the time I met him, he was of retirement age, and his loan balance had increased ten-fold over what he originally borrowed.
When the Democrats gained a super-majority in Congress in 2006, returning bankruptcy protections to private loans (bankruptcy was removed from private loans as a part of the 2005 bankruptcy bill) was at the top of their agenda, so they claimed. When Obama took the presidency in 2008, it was assumed that he would fight successfully for the return of bankruptcy protections to student loans.
Neither of those things happened. Congress actually put the return of bankruptcy protections to private loans to a vote in 2007, but it was killed due to the student loan industry convincing the “Blue Dog Democrats” to kill the legislation. Obama has not so much as mentioned “bankruptcy” and “student loans” in the same sentence the entire time he has been in office!
Make no mistake: The Department of Education not only rakes in some $50 billion per year in interest, it also makes a significant profit, not loss on defaulted loans, and has been going to great lengths to protect this predatory cash cow year after year. Department attorneys fight tooth-and-nail behind the scenes to keep standard bankruptcy protections away from student loans.
Don’t be fooled into thinking that the various repayment programs the President and the democrats are touting are any solution. In fact the opposite is true- the Department is kicking as many people as possible out of the loan repayment programs that Obama touts. My best estimate is that fewer than 15 percent of the people hoping to make it through these programs actually will- the rest will be booted (or have already been booted) from the program owing far, far more than when they entered.
At a minimum, returning standard bankruptcy protections to student loans should be a no-brainer for a Constitutional Law Professor like Obama. Over his first 7 years in office, however, he never quite got around it. Judging from his final State of the Union Address, he has no intentions of ever getting around to it- this despite the fact that there are currently three good bills in the House (one with bipartisan support, even) that would quickly solve this problem by repealing the section of U.S. code- 11 USC 523(a)(8).
The democratic presidential candidates, similarly, have been completely neglecting this larger problem, and instead are pointing to various schemes to make college cheaper for future students, leaving the 44 million people of all races who are already shackled with $1.4 trillion in debt out in the cold.
Obama was quick to invite activists from Black Lives Matter to attend the State of the Union Speech. On the student loan issue, however, Obama and the democrats invited the massively overpaid chancellor for the University of Maryland, Robert Caret, whose university has profited tremendously from the predatory student lending system. The universities, collectively, have managed to squirrel away hundreds of billions in so-called “tuition reserves” since 2008, despite their “crying poor” (led by Harvard University) during the same time period.
Black lives matter to Obama and the Democrats, ostensibly. Black livelihoods, however, clearly do not.
Collinge is founder of StudentLoanJustice.Org and author of The Student Loan Scam (Beacon Press).