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Examining the Student Loan Debt Crisis

Remarks of Seth Frotman (as delivered)
before the Community Service Society of New York
Thursday, January 31, 2019
New York, NY

Thank you so much, David, for that kind introduction, and for your steadfast leadership in this city. You are a true visionary, and we all benefit from your efforts. I also want to thank the entire staff at the Community Service Society of New York for putting on this critically important event, and also the amazing work you do every day. From fighting to protect workers’ rights to increasing access to healthcare, and everything in between, CSS has spent the last 175 years devoted to building a more just and equitable New York. Its effectiveness at incorporating student debt into this mission is a model more of us should follow.

Over the last 20 years, I have had the opportunity to serve at all levels of government. I’ve worked on everything from military consumer protections to LGBTQ rights, and somewhere along the way, I became “the student loan guy.” So how did that happen? At the end of that long, winding road, the simple answer was that 44 million people needed someone on their side.

I have traveled all across this country talking to these people. I have spent countless hours reading thousands of complaints. I have heard firsthand the horror stories of how student debt wrecks lives; how thousands of dollars in debt grows into hundreds of thousands, all because someone wanted to go to college. Across all of these stories, there is one unifying theme: how could this have happened when everything they did was everything they were supposed to do.

These people were—are—just like you and me. These are people we have known our whole lives—people who are simply trying to get ahead, earn a better life for their family, by doing exactly what society has asked of them: go to school, get the degree, regardless of the cost—only to have their lives and livelihoods—and often their families and communities—ruined in the process.

I’m sure you’ve heard the numbers before, but I think they are worth repeating.

Today, more than 44 million student loan borrowers owe more than $1.5 trillion in student loan debt. Eight million of them are in default. Three million more are on their way. Last year, more than one million borrowers defaulted on their loan, joining the million plus who defaulted the year before that, and the year before that, and the year before that. In fact, every 28 seconds, another student loan borrower defaults on their loan—that’s every 28 seconds of every hour, every day, every year.

And it’s not just those in default. It’s also millions of folks making their payments while barely scraping by. This is about real people—real people with ruined lives and wrecked financial futures, all suffering because of the system we built—a system built on the notion that higher education is always the great equalizer, regardless of cost; a system where there is seemingly no price too high and no burden too heavy for the millions of students we churn through its gears; a system that seems to explain away any data point that begins to dismantle its wobbly foundation.

This flawed system is premised on a single and singularly misguided myth. And it goes like this—

Maria works hard her entire life to go to college. She applies to a public university, in state. She is thrilled when she gets in. A few weeks later, she checks her mailbox and sees her financial aid letter.

As Maria scans this letter, she realizes that the future she strove for, the future that we insisted was the best path for her—the only path for her—would require her to take on debt. And not just a little debt—$30,000 in debt.

Like most of her peers, Maria signs on the dotted line because without these loans, she can’t go to school. She has no other choice. This is not some teachable moment. This is not some opportunity for her to cut corners or tighten some hypothetical belt in order to pay her tuition. For Maria, the choice is binary: take on an unfathomable amount of debt to go to school, or don’t go to school at all.

This isn’t about her personal responsibility—it’s about the collective decisions we all made that led Maria to this point, where her only choice is no choice at all. 

Now, five years after she opened that letter in her mailbox, Maria walks across the stage, throws her cap in the air, all with $30,931 awaiting repayment.

And sadly, Maria’s story is not unique. It is replicated hundreds of thousands of times, year after year, all across this country. In big cities like New York and Los Angeles, and in all of the small towns in between.

“But wait,” you say. “Maria is now a college graduate. So what if she owes $30,000 in debt? She’s going to make ‘a million more dollars’ in her lifetime compared to a non-college graduate because of that degree—because of that debt.”

That supposed justification—that mythical million dollars—is the sole factor we use in evaluating Maria’s success. How much more does she make compared to the barista she grabs coffee from on the way to her job?

For too many in the higher education policy world—that’s the only thing that matters. This is the only metric by which we gauge whether public policy works. It’s irrelevant to them that this spread exists not because Maria’s life has gotten better, but because for those without a degree, life has gotten worse. None of that matters to them. Maria—and her mythical million dollars—is a resounding policy success. 

These people tell those of us worried about the fallout from student debt—folks like me, and I am guessing folks like you—that we need to back off. That this is what success looks like. They say that, in fact, we should be encouraging more Maria’s—regardless of the cost.  

They are wrong. Dangerously wrong. 

Because Maria’s story doesn’t end when she throws her cap in the air. 

Far from it. 

The reality is, Maria is working at a job that hasn’t seen real wage growth in over a decade, after leaving an apartment with rent that increases 10 percent per year. She does this while juggling child care costs and health care premiums that grow exponentially. And on top of all of that, she must find a way to pay her $350 student loan payment each month.

And speaking of those student loans, statistically, Maria will struggle to pay them back. As a borrower of color, a decade into repayment, she is likely to still owe more than she took out. In fact, her chances of defaulting on her student debt and having her financial future destroyed in the process, is five times higher than her white peers.

Maria’s student debt also means she is less likely to get an advanced degree. She is less likely to pursue a career she actually wants. She is less likely to serve in her community.

Maria’s debt also means that she will earn less over the course of her life than someone without student debt. She will have a worse credit profile, meaning that all the other things she needs to live—a car loan, a mortgage, credit cards—will be more expensive. 

And it’s not limited to her monthly budget. Maria will invest less into her retirement account. She will be less likely to buy a home. And if she ever does, she is likely to have a smaller down payment, meaning more of her already-small paycheck will be siphoned off as interest and insurance to some Wall Street bank. 

And it’s not limited to Maria’s life. Maria’s student debt means she is less likely to get married or start a family.

And if she does, the burden doubles if her spouse also has student debt. Their collective debt means they will accrue nearly a quarter of a million dollars less in wealth than the family down the street without it.

But it’s not just them. It’s not even just their generation that will be impacted. Maria will be less likely to save for her own child’s education. And when Maria’s child goes to college, she will need to take out her own loans, and the cycle starts again.

Now take Maria’s story, and multiply it 44 million times. That is where this gets scary.

A growing body of evidence suggests that millions of Americans are experiencing crises just like Maria’s. Individual lives are disrupted. Families become buried under the financial consequences of unmanageable student debt. And this devastation ripples across their communities.

Your community. My community. Maria’s community.

What we are doing to Maria, and to the millions more just like her—what we are doing to this nation in the form of debt-fueled higher education—is driving the systemic racial and economic inequality that is tearing this country apart. That is why those who argue that Maria is a success story are more than short-sighted—they are dangerously and deceptively wrong.

I want to be clear about one thing: taking each prospective college student individually, I know that we would all look at that financial aid letter and tell that student to take the same path and take on that same debt. 

But that is not the point. That is a tired argument from an increasingly irrelevant crowd.

We need to be better than that.

It is our job as policymakers and as advocates to be better than that.

We cannot continue to judge success by pitting Maria and her debt burden against the horrific outcomes of the non-college educated labor force. We cannot tell Maria that she should be content, or worse, grateful, that she is not like “that guy over there”—that somehow, despite all of the struggles she will be forced to endure, and the impact on her family and her community—her outcome is something that she should embrace, and others should emulate.

It is our job to ensure that millions of people do not need to take the least-worst option.

It is our job to see the bigger picture, the totality of these actions—where the collective weight of the burden we have pushed on millions is tearing at the fabric of our society

It is our job to understand that we have failed Maria, and we have failed millions just like her.

And it is our job to do better.

And the first way we do this is by ending the dangerous notion that student debt is unavoidable—a necessary precondition to reap the benefits of higher education. Through a trillion-dollar sleight of hand, we have created a world where the benefits of higher education are only accessible through debt.

But student debt is not a given. It is not a necessary evil.

We cannot succumb to the wishes of those who have not only resigned themselves to this broken system but have also asked us to accept this as the new normal.

It is not.

We cannot listen to those who explicitly or implicitly think that this is the only way. That this is the best that Maria and those like her can hope for.

It is not.

We cannot believe that the only way for Maria to achieve theAmerican dream is through a debt-fueled education.

It is not.

We must find ways to end this cycle. We cannot accept the struggles we know will befall Maria. That will befall this state and this country. We cannot accept that there is no will for the investment that allows her to get a degree without a mountain of debt and decades of despair. 

Because there most certainly is.

Which brings me to my second point.

Some of the most powerful and important voices for change are nowhere to be found. And their absence is striking.

We cannot claim to be using privilege to fight inequality without attacking the disparate and devastating burden of student debt. We cannot claim to care about poverty and ignore how student debt is destroying our most vulnerable communities. We cannot claim to see equal value in all lives without demanding better for the generation we forced this crisis upon.

We can no longer tout access without considering the aftermath. The fallout from the student debt crisis doesn’t have boundaries, so neither can we.

Which brings me to my last point: there is a generational reckoning coming. Both to Congress and to statehouses. And this is what the fierce defenders of the status quo don’t understand.

Those entering the halls of Congress and statehouses are younger and more diverse than ever before. And they know Maria. They know intuitively what student debt does to her, to her family, and to her community

They know her because many of them are her. 

And they are not resigned to accepting the least-worst option. They do not define success by comparing their lives to the barista down the street. They do not tolerate the notion of student debt as a necessary evil. Simply put, the days of student debt as good debt are over.

But getting there won’t be easy.

It’s etched into American lore that the torch gets passed between generations. But that’s not true. To paraphrase one of my favorite books:

Make no mistake. Power is won, grasped; it is never handed over willingly. It is wrestled away by organizational force and political skill.

And that is true now more than ever.

It must be wrestled away from those who have not been forced to bear the scars; from those who have made a career urging us to accept the new normal, using a degree paid for with pocket change a lifetime ago; from those who spend their days in spreadsheets and debate forums, but haven’t actually talked to a person like Maria in decades.

And that is why your work matters. That is why the organizing matters. That is why making student debt part of your mission matters.

For the organizational force. For the political skill. To grasp the torch, for Maria, and for the millions more like her.

Now, let’s get to work.

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