Look Who’s Talking About Canceling Debt

Nine years ago, Occupy Wall Street activists in Zuccotti Park made an ambitious demand that was met with laughter and scorn: They called, for the first time ever in an organized way, for mass student-debt cancellation.

Thomas Gokey stood in the New York City park with a “cap and gown” made of a trash bag. Duct tape draped over him represented the chains of indebtedness, the six-figure student debt that he and his wife owed that dominated his life. He was joined in receiving a “diploma of debt” by fellow “graduates” with names like “Owen Lots” and “Penny Less.”

They got a bit of attention. Passersby on open-air tour buses snapped photos of the curious display. But a revolution it was not. Activists aimed to gather one million signatures from student debtors pledging to stop paying their student loans once the threshold was met.

They fell nearly a million signatures short.

“We were told we were crazy,” Gokey says. “Serious higher-ed policy wonks told us this was a laughable idea.”

Some still think it’s crazy. But they’re not laughing anymore.

The image of the lender offering a helping hand to people seeking a college degree has been displaced by a picture of predatory greed. Recent polls have shown popular support for the idea of widespread debt cancellation. Progressive legislators have introduced bills that would wipe out student debt. Student-debt cancellation has emerged as a flash point in the Democratic primary, with two major contenders for the nomination making the idea central to their platforms. One version, from Sen. Bernie Sanders of Vermont, would eliminate all $1.6 trillion in student-loan debt, “no questions asked.”

Such an ambitious move faces major hurdles. Any mass debt-relief plan that relies on Congressional approval would meet intense Republican opposition, and Democrats themselves are split. It’s bad politics, some argue. It sets perverse incentives for parents not to save. It’s fundamentally unfair to people who scraped to pay off their loans.

But a remarkable shift has unfolded in just a few years: A once-fringe idea is now part of mainstream political debate.

Powerful forces have helped move the idea of debt cancellation into the realm of legitimate discourse. Tuition and fee increases for many years have outpaced inflation. The amount of student debt held by Americans has exploded in the past 15 years. A problem that for decades hurt mostly the poor is now also strangling the middle class, that all-important political demographic.

But the idea’s ascendance can’t be fully explained without the central role of grass-roots debt activists like Gokey.

Last summer he was again decrying the horrors of student debt. He’d traded his trash bag for a suit jacket. Penny Less and Owen Lots were gone. Instead, his fellow travelers on this day were Sanders, Rep. Alexandria Ocasio-Cortez, and Rep. Ilhan Omar. Gokey was speaking at the unveiling of the College for All Act, which would abolish student debt and make public colleges free.

How the debt activists took a marginal idea into the mainstream underscores the power of grass-roots activism, shifting public opinion about the worth of a college degree, and a changing higher-education landscape.

Their end goal is not total cancellation of student-loan debt. It’s widespread acceptance of the idea that education in the 21st century is a basic need, and that it’s immoral to force people to go into debt to attain it.

Mark Abramson for The Chronicle

To stay dry, Thomas Gokey wrapped himself up in a tarp, “like a burrito.” It didn’t work.

“Every morning,” he says, “I couldn’t have been more wet than if you had thrown me in the ocean.”

This was the life of an Occupy Wall Street activist in late 2011: cold, endless rain. Gokey skipped activist working groups each morning so he could dry his clothes at a laundromat in Chinatown.

His baptism as a debt activist came at a moment of equal parts dread and hope for populists rising up against economic inequality, a moment that would define the next decade of progressive American politics. Amid the protesters in New York’s financial district was a small group that started thinking about the role of debt in American life.

Like-minded people coalesced around debt resistance, and the student-debt cancellation movement was born.

But Gokey’s path to Occupy had started years earlier, with his own tale of crushing student debt.

He had been indoctrinated in the American dream: Work hard. Get an education. Get ahead. It’s that simple. His parents’ lives seemed to attest to that. They came from working-class families but went to college. His mom had a science background; his dad was an engineer. College is the path to financial security, was the mantra from parents, teachers, and everyone else. He now thinks that’s bunk.

“Education,” Gokey says, “is an effect, not a cause, of economic prosperity.”

Gokey earned a master’s in sculpture from the School of the Art Institute of Chicago before entering a Ph.D. program in media studies. All told, he and his wife, who had earned a master’s in library science, were stuck with six-figure debt and bleak prospects of paying it off with his job as an adjunct at Syracuse University.

He felt hopeless. He toyed with the idea of rewriting Arthur Miller’s Death of A Salesman to be about student debt. Thinking about his own debt, and that of his parents, who helped finance his education, he’s still haunted by Willy Loman’s line that a person is “worth more dead than alive.” He often feels that way.

“My debt was the first thing I thought about when I woke up in the morning, and the last thing I thought about when I went to sleep,” Gokey says. “It controlled every decision I made throughout the day.” Today he still has about $37,000 left in student loans. “It’s this cloud. I don’t even know what it would feel like to not have it. My adult life has been completely transformed by it.”

Perhaps as emotionally draining was the toll inflicted on his art students at Syracuse, who were going into more debt than him. Education was supposed to be a liberating experience, he thought. This didn’t feel liberating.

“It felt like I was taking these fresh-faced kids out of high school and shackling them to a lifetime of crushing debt and spitting them out into an economy that was treating them like they were fresh batteries,” Gokey says. “They would be totally depleted.”

“I didn’t understand how this worked. How is it that my students are paying $50,000 a year, and I’m getting paid $16,000 a year? Where does all that money go? How does this all work? I felt like a wild animal that stepped into a trap, and now I had to become an engineer to understand how that trap is designed so I can defuse it.”

After the occupation started, he hopped on a Greyhound bus from Syracuse with nothing more than a backpack.

Tina Fineberg, The New York Times, Redux

Nathan Hornes, a graduate of Everest College, holds a letter from Federal Student Aid that approved his claim for forgiveness of his federal student loans. (Gerik Parmele for The Chronicle)

Meanwhile, one of the Corinthian students, Nathan Hornes, was having his own epiphany. He had known for a while that something didn’t seem right with Everest, ever since he had tried to transfer to other colleges and was told that his Everest credits wouldn’t be accepted. But it wasn’t until graduation day, in 2014, that dread washed over the aspiring musician.

He and other students were about to walk into their ceremony, for which Hornes’s mother had flown from Missouri to California. They were told by a Corinthian employee that they had to sign a document that stated they would not sue the college if they didn’t land a job — and that if they didn’t sign the document, he could not participate in the ceremony.

It became clear to Hornes: The college knew students’ vulnerabilities and had based its business model on them. He had a feeling his business-management degree was worthless, and he soon had those fears confirmed when he tried applying for jobs, including at Wells Fargo, and was told a degree from Everest was more or less worthless. Wells Fargo was a key investor in Corinthian.

So within weeks of graduating, Hornes started organizing fellow students who also felt defrauded. The protests were small: mostly handing out fliers at Corinthian campuses and trying to figure out how to legally fight back. That’s when the Debt Collective, a new group created by Strike Debt veterans to organize debtors for collective action, approached them with a novel idea.

The federal student loans held by the students were illegal, the activists argued. The government had failed to protect students from Corinthian’s vast and predatory empire. And an obscure, virtually untested mechanism buried deep inside the Higher Education Act could wipe away the debt.

The mechanism was called borrower defense to repayment. The 1990s-era provision allows for relief from federal loans borrowed through misleading or illegal claims by institutions. The group learned about the law from conversations with debt experts to identify weak points in the system and how to weaponize them, Gokey says.

When the group called around to loan servicers and found that no one had heard of the mechanism, they decided to surprise Ted Mitchell, an under secretary of education at the time, with a red box filled with hundreds of such claims from Corinthian borrowers.

The action was accompanied by a “debt strike,” in which first a few Corinthian borrowers, then hundreds, publicly refused to pay their student loans in 2015. The strike went viral.

These were students like Jessica King, who enrolled at Everest in 2007. She went $33,000 in debt and earned a certificate in medical assisting, which she soon learned was worthless on the job market. At the time of the debt strike, she was waiting tables for a living, with ruined credit.

Or Jessica Madison, who enrolled in Everest with the hope of becoming a paralegal and racked up about $19,000 in student debt. She struggled to make her car payments and electric bills as her wages were garnished.

“These were borrowers from predatory schools who were low-income folks,” says Ann Larson, an organizer with the Debt Collective. “We built on this idea that debt is a problem — a crisis — and it shouldn’t be this way, and turned it into a formal demand: The debt should be canceled, and you should do it now.”

The strike, and the then-obscure regulation, further pushed the idea that the system was a bureaucratic nightmare, and that wiping it all out and starting fresh made sense. Here was a law that protected borrowers from predatory institutions, and the Education Department didn’t know what to do with it until the activists confronted officials, Gokey says.

Others seeking relief were finding the same pattern. The Public Service Loan Forgiveness program, for example, was meant to attract Americans to essential but low-paying careers like teaching and social work with the promise of forgiving their debt after a certain duration of loan payments.

In reality, according to federal data from September, only about 1 percent of applications for relief under the program are deemed eligible. The blame was broad: shoddy guidance by loan servicers, a maze of confusing requirements by lawmakers, and the Education Department’s unwillingness or inability to fix any of it.

Though the activists started their protests against the for-profit sector, it was easy to blur the lines between it and the nonprofit sector. They argued that the same ginning up of false hope could be found everywhere in traditional nonprofit education. Just consider the humanities Ph.D. with six-figure student debt and poor prospects of a tenure-track job.

The for-profit sector, says Andrew Ross, a professor of social and cultural analysis at New York University, “was the most immoral and predatory, but if anything, the difference is one of degree and not of kind.”

“Nonprofit colleges make all kinds of promises in the course of student recruitment,” he says, “and they recruit very hard.”

As states began disinvesting in public education, the for-profit industry expanded in the 1980s. From 1990 to 2010, the percentage of bachelor’s degrees coming from the for-profit sector increased sevenfold, according to a report from the Roosevelt Institute, the Century Foundation, and Demos. With the predatory behavior of many for-profit colleges gaining more awareness, it became harder to argue student debt was always the result of irresponsible borrowers making poor choices.

To the activists, the for-profit sector was just a symptom of the failure of the larger higher-ed system, and the startling ways in which it was changing.

While Gokey and the debt activists kept elevating mass debt cancellation, American higher education was undergoing a tectonic shift. How the U.S. financed higher education, and who footed the bill, was changing.

In 2004, a few years before the economic collapse, Americans held about $250 billion in federal student-loan debt, according to data from the New York Fed Consumer Credit Panel/Equifax. In 2019, that figure exploded sixfold, to $1.5 trillion.

And the effects are tearing at America’s social fabric. As they struggle to meet basic expenses, people are delaying decisions about purchasing first homes and having children. The effects hurt women and people of color in particular, says Cody Hounanian, a program director at Student Debt Crisis, a group that tries to strengthen borrower protections.

Women account for 56 percent of enrolled college students but hold 65 percent of outstanding student-loan debt, according to a 2018 analysis of federal data by the American Association of University Women. Black women graduate with the most debt, on average: $30,400, compared with $22,000 for white women and $19,500 for white men.

“We are hearing from more and more borrowers who are facing dire situations,” Hounanian says. “They are homeless. They are unable to pay for their health care. They are retired and living in poverty.”

While the new debt was disproportionately hitting students of color, it also began to strangle the middle class in ways it had not before, says Sara Goldrick-Rab, a sociologist at Temple University who studies college affordability.

“Things become voting issues in this country when the middle class decides they’re a voting issue,” she says. The federal financial-aid system “was built at a time when the entire theory was that only a relatively small number of people who went to college would need help paying for it. We’re the complete opposite now. What percentage of people don’t need help paying for college?”

The role of the Great Recession in the student-debt crisis can’t be overstated, several scholars and debt experts say. It simultaneously encouraged people to go to college while further gutting public support for higher education, shifting the burden of who pays for a higher education precisely when more minority and low-income students were enrolling in college.

Robb Willer, a social psychologist at Stanford University, says debt cancellation became a major political issue because of the rapid increase in student-loan debt and the pain associated with it. People were slow to react to wealth inequality because it became just a bit worse each year. Student-loan debt, meanwhile, rose fast.

And the people facing it have political power. “It disproportionately affects, obviously, people with a college education,” Willer says. “These folks have outsized political influence. They’re pretty regular voters. They’re very engaged in social media. And they’re overrepresented in the professional journalist class.”

Saul Loeb, AFP, Getty Images

If there’s any doubt that college affordability is having its moment, consider the recent political calculation of a prominent Republican. The politician mused about the populist appeal of some Democrats’ debt-cancellation and free-college plans. He wanted one of his own.

That politician was Donald Trump.

Citing six anonymous officials of the Trump administration, The Washington Post last month described a haphazard White House effort to cobble together a plan ordered up by the president. If such a plan ever materializes, his imprimatur could piece together a weird coalition of progressives and Trump loyalists.

It’s Gokey’s nightmare. He worries that Trump, with his instinct for populism, will snatch college affordability from the Democrats because he recognizes it as a political winner and so cement his re-election. That’s why Gokey is frustrated that Democrats don’t put their full weight behind the idea. He is convinced that it’s both doable and good politics.

Is it? Either the Sanders plan, which calls for total student-debt cancellation, or Sen. Elizabeth Warren’s, which promises elimination of up to $50,000 in student loans for people in households making less than $100,000 a year, and a smaller amount for those making up to $250,000, would come with a big price tag. Sanders’s plan would cost $1.6 trillion, Warren’s $640 billion.

The impressive growth in support for student-debt cancellation doesn’t mean clear sailing for any ambitious plan.

Beyond concerns about price, many Democrats argue that it’s regressive, that it would help the middle class more than the poor, and that it’s not as redistributive as other progressive policies, like a minimum-wage increase, stronger union protections, and Medicare for all.

“That’s why it splits the left,” says Willer, the social psychologist. “So in some ways debt cancellation’s future lies in being one of a suite of economic progressive policies that could be viable in the next two or three years, depending on who wins the presidency.”

Moreover, if Democrats win, they would have to identify what’s most important to them, and there’s no guarantee that the proceeds of even a Warren-style wealth tax would go toward higher education instead of another priority, says Robert Kelchen, an associate professor at Seton Hall University who studies higher-education finance.

“Unless this is the one big thing that Democrats want to do, it would take 60 votes in the Senate to survive a filibuster,” Kelchen says. “They can essentially do one thing a year through reconciliation — getting it through with just 51 votes — but it’s not even clear Democrats will have the Senate next year.”

Warren this month released a plan that aims to work around the congressional hurdle. She says the president already has the authority to direct the secretary of education to modify or eliminate federal student-loan debt. The source of the idea? Research by the Debt Collective. A member of the group published a paper in December outlining the plan’s legal authority.

“I’m not a lawyer, but there is authority for the secretary to grant limited debt forgiveness, usually in the case of fraud,” Kelchen says. “But whether the secretary can do this type of unilateral, potentially $600-billion policy decision is up in the air.”

The Corinthian campaign, on one level, was about second chances. Hornes, the student who wanted to be a musician, had all $68,000 of his loans discharged three years ago on February 17 — his birthday. Jessica King, who ended up having to wait tables, and Jessica Madison, who wanted to be a paralegal, also had their debts discharged.

The debt strike was successful “beyond my wildest dreams,” says Gokey. The data back him up. According to the Education Department, the mechanism identified by the activists, the borrower-defense rule, has resulted in the discharge of $535 million in student-loan debt through 2018. An additional $500 million owed to ITT Technical Institute was discharged as part of a bankruptcy settlement after former students filed thousands of borrower defense applications.

But the story is also a tragedy. “Our 20s are just gone. I’ll be 30 next month,” Hornes says. “I’m embarrassed to even say that I went to that school.”

Some student debtors lost more. Though Madison, one of the original 15 Corinthian debt strikers, had her debt discharged, the Educational Credit Management Corporation, a student-debt collector that had bought many Corinthian campuses, continued to garnish her wages, Gokey says. She fell ill, with severe pain, but couldn’t afford to get it checked out. When the pain became bad enough for her to see a doctor, he says, she learned that she had cancer. Madison died in October.

Gokey blames her student-loan debt, along with the bureaucratic maze that borrowers have to navigate. In Gokey’s home, in upstate New York, he has a file several inches thick on Madison’s case. He spends countless hours trying to get the department to return $11,000 to her wife.

“If the Department of Education is willing to collect a debt they know is fraudulent, to garnish wages they know are fraudulent, in violation of the law,” he says, “we should start treating the entire $1.6 trillion in student debt the way we would treat a debt to the mob. It’s not a legitimate debt.”

Gokey doesn’t know, of course, who will win the 2020 election. But the outcome of the fight for student-debt cancellation and free public college, he says, is not in question. Only the timing.

“We’re going to win,” he says. “The $1.6 trillion in student debt will be zero.”