CHICAGO – Saying that America’s current $1.3 trillion in student debt is a sword of Damocles hanging over the entire economy, many of the young workers gathered at the 2015 AFL-CIO Next Up summit here last week called for radical steps to solve the problem – steps that include cancellation of all student debt.
Outspoken among those young workers is Sarah Ann Lewis, 32, the Senior Lead Researcher in the AFL-CIO’s Policy Department.
“We have a student debt amount that is more than what the government spends in a year on all its programs put together and debt at that level threatens the very existence of the American dream, the middle class and the future of the U.S. economy,” she said, in an interview during a break in proceedings at the summit.
“Some 40 million people have put off getting married, put off having children and put off making any and all major purchases including the buying of any kind of home,” Lewis added.
Making matters worse, people fighting for major student debt reform say, is the fact that an entire generation of debtors is entering an economy where good jobs are scarce and wages are either flat or falling.
Lewis and others involved in the fight to reduce or eliminate student debt say that there is much more involved here than just dealing with individuals who took on more than they could handle when they first borrowed to go to school.
“Unless you think education is a right reserved only for the rich you have to see that it is impossible for the majority to get an education these days without borrowing. In response to this situation an entire profit-making debt industry has sprung up that depends for its existence on its ability to lure millions and millions into the trap of lifetime indebtedness.”
In many ways student debt is worse than other forms of debt. Unlike most other forms of debt student loans cannot be refinanced. The borrower is locked into an interest rate from the day he or she signs a promissory note – usually as a teenager – until the debt is paid in full. Unlike most forms of debt borrowers have been unable to take advantage of lower interest rates to reduce their monthly payments and total amount of interest owed.
“The question we need an answer to is who benefits from trapping millions into debt and keeping them unable to buy homes and cars?,” Lewis asked. “Here’s only one answer: The government itself is profiting from the federal student loan program. It’s raking in more than a billion dollars a year. The Congressional Budget Office estimates that by 2015, $127 billion in profit will be made off the backs of working families just from the interest they are paying on student loans. A year ago you even had some Republicans saying these profits could be used to pay off the deficit.”
Lawmakers who vote to defend corporate and bank profits and allow overseas tax shelters are frequently the same ones who want to keep student loan rates high, tying them to the so-called market rates, activists here said.
“A total cancellation of student debt across America is not too radical a step, really,” said Lewis. “The boost to the economy from freeing millions of debtors so that the skills they have accumulated from their educations can benefit everyone would far outweigh any losses in revenue.”
Lewis and the others gathered here at the summit are realists, however, and they know there won’t be total cancellation of student debt any time soon. In the meantime, they are supporting Democratic Sen. Elizabeth Warren’s bill to allow refinancing of student debt.
The bill, which allows borrowers to refinance their student loans puts them “a step closer,” Lewis said, toward achieving the American Dream, enabling many to make a down payment on a home, buy or lease a car or start a small retirement fund.
“Another great feature of the bill,” she said, “is that in increases funding for public college, allowing them to lower some of their costs.”
“We have a long way to go to solving the problem of student debt but we will get there,” Lewis said. “I’m unwilling to accept a future reality that includes this is how it has to be. I don’t accept that. We are going to change things. And we are taking the first important step – getting the word out about how student debt is everyone’s problem.”
Image: AFL-CIO Now Blog