Did you borrow for college and end up the victim of a sky-high-interest student loan?
A new group, Debt Collective, says it's time to go on a "debt strike."
That is, stop paying.
An outgrowth of Occupy Wall Street, Debt Collective is a year-old activist organization rallying financially strapped students of the now-defunct Corinthian Colleges.
The strikers are mostly young adults, including some single parents, who borrowed from Corinthian's lending arm at up to 14 percent annually.
They still owe on their loans, despite the fact that Corinthian, a for-profit college, was investigated and ultimately shut down by federal regulators.
Its students got no help with outstanding loans. The only agency with the authority to grant relief is the U.S. Department of Education. (Student debt cannot be discharged by declaring bankruptcy.)
So Debt Collective has taken up their cause - and that of those who owe $1.3 trillion in education debt. Among 43 million total federal student-loan borrowers, 7.3 million are 90 days delinquent on their loans, and five million are in default.
Corinthian's collapse exposed this national problem.
The Education Department has "no process to allow students to apply for, or to initiate, debt cancellation for students who have been subject to illegal practices by their schools," says Ann Larson, one of Debt Collective's organizers.
Last month, Debt Collective presented the feds with some ideas. Its 100 or so strikers met March 31 in Washington with Undersecretary of Education Ted Mitchell and the Consumer Financial Protection Bureau, which brokered the meeting.
"It was tense, very tense," Larson says. "We're scheduled to meet with Mitchell again in 30 days to get some answers."
Among Debt Collective's proposals:
Consolidate the debt of current and former Corinthian students through a single servicer, preferably the Department of Education's direct servicing arm. "Students' relief from predatory loans should not depend on their servicer," Larson says.
Use the Higher Education Act statute U.S.C. 1082(a)(6) to erase student loans and refund money they have already paid.
Include students and consumer-protection advocates in plans to resolve predatory loans, not just college administrators and lenders. "The department makes decision after decision without student input, even though it affects students most profoundly," Larson adds.
Debt Collective's efforts to erase or refund student loans could create a template nationally.
A transparent and accessible process for students to ask for changes in loans would be known as a "defense to repayment" process.
Debt Collective came up with its own proposed form, which you can read on its website (www.debtcollective.org).
Independent judges, rather than school officials who have conflicts or financial incentives because they collect the debts, could adjudicate the process.
If a school comes under investigation for wrongdoing, students could be eligible for Debt Collective's proposed defense to repayment.
"The influence of trade schools is clearly too strong in the Education Department," says Laura Hanna, cofounder of Debt Collective. She notes that the Association of Private Sector Colleges and Universities - the trade group for the $30 billion education industry - is a powerful lobby on Capitol Hill. The association donates close to $1 million a year in campaign contributions, according to the Center for Responsive Politics (www.OpenSecrets.org).
The U.S. Consumer Financial Protection Bureau's Student Loan ombudsman, Rohit Chopra, said in a statement after the meeting: "We continue to urge struggling borrowers to submit complaints with federal agencies to aid regulators in holding accountable those who break the law. The bureau's litigation against Corinthian remains ongoing."
You can submit a complaint about your student loan to CFPB at www.consumerfinance.gov/complaint or by phone at 855-411-2372.
You can refinance your student debt. Avoid for-profit debt consolidators if possible, says Jeremy Brenn, vice president at Sensenig Capital in Fairview Village, Montgomery County, a financial-planning firm.
"We warn clients away from them," Brenn says.
Stick with nonprofit credit counselors approved by the Department of Justice. Find listings at www.justice.gov/ust/eo/bapcpa/ccde/cc_approved.htm.
The National Foundation for Credit Counseling is another large nonprofit organization.
"NFCC acquired a student-loan platform that was developed by some of its members," says Mark Kantrowitz, senior vice president of Edvisors.com, a college-cost planning site, and author of the book Filing the FAFSA.