Student Debtors Put Pressure on the Department of Education

Sec. Arne Duncan in March 2013 (U.S. Department of Education, Wikimedia Commons)

On March 15, a group of over 200 student activists from across the country gathered outside the Department of Education for one of the most effective uses of direct action tactics I have ever been a part of. The group stood, single file, and presented DOE education officials with signed letters asking for a meeting between Secretary of Education Arne Duncan and members of the United States Student Association to discuss the relationship between the DOE and Sallie Mae, the largest private owner of student debt in the country.

Students have good reason to be concerned about the fact that the Department of Education hires Sallie Mae and other private corporations to process federal student loans. The 2010 Student Aid and Fiscal Responsibility Act (SAFRA)was supposed to remove the middleman from federal student loans. Yet Sallie Mae, a company that has repeatedly come under fire for its unethical business practices, managed to make $84 million in profit on its federal servicing contracts last fiscal year alone. The students who gathered outside the DOE in March wanted to know why we still pay the industry leader in the student debt racket two years after the Obama administration began touting SAFRA as an example of work it had accomplished on behalf of students. On May 9, twenty of us had a chance to sit down with Secretary Duncan and ask him these questions ourselves.

Our meeting could not have been better timed in terms of the attention people at major media outlets were paying to the student debt crisis. During the time I spent in D.C. prepping for the meeting, the Huffington Post published an exposé on the relationship between Sallie Mae and university endowments, and MSNBC hosted several segments that reflected negatively on the company. The student debt crisis seems to be finally breaking into public discourse, and as the owner of nearly 20 percent of the over $1 trillion of student debt in the country, Sallie Mae and its CEO Albert Lord make for compelling villains.

Before entering the room, the students present tallied up the amount of debt we personally were responsible for paying back. We found that the twenty of us alone owed over $600,000, and most of us were students at public universities who received need- or merit-based aid. This was a sobering number to begin the dialogue.

Instead of having a motivation to help students enroll in programs like Pay as You Earn or Income Based Repayment, companies like Sallie Mae earn more for “rehabbing” defaulting loans, meaning they actually have a motivation to let students slip into default. This is troubling to say the least.

Right away, Duncan told us it was unlikely that he would be willing to break the contract with Sallie Mae tomorrow. From there, we talked with him about making changes to the federal loan servicing contracts the DOE holds with companies like Sallie Mae. Currently, the DOE has programs that, if used more often, would greatly help future graduates pay back their loans in this uncertain job market. However, servicing contracts currently incentivize bad behavior. Instead of having a motivation to help students enroll in programs like Pay as You Earn or Income Based Repayment, companies like Sallie Mae earn more for “rehabbing” defaulting loans, meaning they actually have a motivation to let students slip into default. This is troubling to say the least, and with the contract between Sallie Mae and the DOE set to expire in the summer of 2014, the United States Student Association and our coalition partners are going to be working with the DOE to hold them accountable for making changes that students need.

Our second ask was for Secretary Duncan to publicly ask Albert Lord to meet with students. Members of the United States Student Association have been trying to set up a meeting with Lord for years. In March 2012, thirty-six of us were arrested outside of Sallie Mae’s D.C. offices while waiting to meet with him. And when we showed up at the Sallie Mae shareholders’ meeting that May, we were greeted by hundreds of officers from the Delaware State Police. On May 30, we are going back. Duncan would not say that he was willing to publicly call on Lord to meet with us, because of contractual obligations.

Throughout the meeting, Secretary Duncan kept reassuring us that he wanted to do the right thing. I personally think that this is probably true. As is always the case with elected or appointed officials, to quote Representative Keith Ellison, “[they] only see the light after they feel the heat.” In order to get a meeting with the DOE in the first place, we had make them feel some heat, and if we are going to seriously address the student debt crisis, we are going to have to apply some more. The next big opportunity to bring some light and heat to this issue is May 30, and I cannot wait.


John Connelly is a member of the board of directors of the United States Student Association and a recent graduate of Rutgers University.

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