In a news article titled, "A Revolt Is Growing As More People Refuse to Pay Back Student Loans," the Washington Post reported about a loan repayment strike by students of Corinthian Colleges:
"Remember those 15 people who refused to repay their federal student loans? Their “debt strike” has picked up 85 more disgruntled borrowers..."
What led up to the strike by students:
"... they would not pay a dime of their student loans because the school broke the law. Corinthian, which runs Everest Institute, Wyotech and Heald College, has become the poster child for the worst practices in the for-profit education sector... Clouded by allegations of deceptive marketing and lying to the government about its graduation rates, Corinthian lost its access to federal funds last year, forcing the company to sell or close its schools."
The students organized into a group called Debt Collective. They already approached the U.S. Department of Education (DOE). The Washington Post reported that some of the striking students met today with the Consumer Financial Protection Bureau (CFPB) seeking cancellation of their student loans:
"Although the CFPB doesn’t have the power to grant that request, the agency’s overture shows that the strike is being taken seriously."
The strike should be taken seriously. Students are future human capital for businesses. They are future leaders and workers. There seem to be four distinct issues, all of which are important and must be addressed:
- Deceptive advertising by for-profit schools,
- Holding schools and their executives accountable when they violate deceptive marketing laws without penalizing students who had no role in the violations,
- The increasing delinquency rate on repayments of student loans (which threatens the economy), and
- How appropriate it is to treat student loan debt differently than other types of consumer debt.
Last month, Forbes reported about student loan debt:
"... the New York Federal Reserve released its Quarterly Report on Household Debt and Credit for the fourth quarter of 2014... While most forms of household debt saw improvements in borrowers making on-time payments, a big exception was student loan debt. Student loan debt saw delinquencies (debt that has not had a payment made in 90+ days) rise to 11.3% of outstanding debt. The report also shows that student loan debt has the highest amount of delinquent debt compared to all other forms of household debt (mortgages, auto loans, and credit cards)."
Why student loan delinquency rate is increasing:
"While most other forms of household debt can be discharged in bankruptcy, student loan debt cannot – which means that past delinquencies compound onto new delinquencies, and until borrowers as a whole start bringing their loans current, the delinquency rate will continue to rise. What many student loan borrowers forget is that student loan debt is basically a secured debt – it’s secured on the borrowers future earnings... recent graduates who have struggled to make even their first payment on their student loan debt, or who simply don’t know how to go about making their student repayment plan affordable given their current situation."
False and deceptive advertising by for-profit schools is also a problem. It robs students of the educational benefits they are paying for, and expect to use both to land future jobs and pay off their loans. When deceptive marketing happens, taxpayer money (federal and state) is wasted for students and for veterans' education. According to the Center For Investigative Reporting:
"... $600 million dollars in GI bill money had gone to hundreds of for-profit schools in California with low graduation rates and high rates of student loan default."
And, that's just the State of California. The students' frustration is understandable. They rightly feel deceived by the school, and didn't get the education they paid for.
It will be interesting to watch what happens. What are your opinions of the strike? Is it a revolt?