ITT Students’ $1.5 Billion Bankruptcy Settlement Approved by Judge

On Wednesday, November 28, the judge in the ITT bankruptcy case gave final approval to the settlement between the student class and the estate of ITT. The settlement is a big victory for former ITT students who were defrauded by the school and provides important relief. The court’s final order approving the settlement will become effective in approximately ninety days, during which time state Attorneys General and the U.S. Attorney General may file objections.

Key Components of the Settlement:

– The student class gets an approved $1.5 billion claim in the bankruptcy. In exchange, former ITT students give up their claims against the estate of ITT, and keep their rights to seek further relief from the Department of Education and private lenders;
– Over $500 million in student debt held by ITT is canceled; and
– ITT’s estate has returned the $3 million that students paid directly to ITT after it declared bankruptcy.

As part of the settlement, the parties got an official ruling from the IRS, saying that the estate is not required to treat the more than $500 million of cancelled debt as taxable.

This landmark settlement has provided more relief to defrauded student borrowers than the Department of Education has in the last two administrations combined.

In fact, the Department of Education has taken every possible to step to thwart relief for students. The Department has only approved 33 borrower defense applications for ITT students, while approximately 14,000 outstanding borrower defense applications sit unadjudicated.

To make matters worse, late last month, Betsy DeVos, Secretary of Education, reinstated the Accrediting Council for Independent Colleges and Schools (ACICS), ITT’s long-time accreditor. In 2016, the Department of Education had cut off ACICS’s ability to accredit schools because it failed to comply with federal criteria designed to make sure that schools like ITT followed federal and state laws and provided an education to students that was worthy of federal student loans. Year after year, ACICS enabled ITT to perpetrate its fraud on students, giving the company access to billions of dollars in federal student loan revenue. Now, ACICS has been given the green light from the Department to continue accrediting schools despite its role in defrauding hundreds of thousands of ITT students.

Meanwhile, this past June, the Securities and Exchange Commission gave former ITT executives Kevin Modany and Daniel Fitzpatrick a sweetheart deal on its charges that Modany and Fitzpatrick cheated the company’s shareholders and operating the company for their own personal financial benefit. On the eve of trial, Modany and Fitzpatrick walked away with a slap on the wrist.

Multiple agencies of the federal government have been loud and clear about where defrauded ITT students stand. But students will be louder. This settlement is an important step in acknowledging students’ experiences and the harms they have suffered at the hands of ITT and ACICS. All ITT-related fraudulent debts, including the federal and private loans that are not covered by this settlement, must be canceled, and we will continue to fight on behalf of students until that happens.

Click here to see the Washington Post’s recent story about the settlement.

Visit our website for additional information for former ITT students and to sign up for email updates about the student class claim in the bankruptcy case.

My Future Was Stolen By A Corporation: An ITT Student Story

The author, Lorenzo Boyland, is a former student of the for-profit ITT Technical Institute campus in Cordova, TN and resides in Mississippi.

My future was stolen by a corporation. Now, I’m left waiting for justice.

There are thousands who could tell a similar story. This is mine.

When I graduated high school, I joined the military and served my country. I served a four-year tour, and then re-upped for four more years, finishing in Iraq.

When I returned home, it was time to find a job. I graduated from  high school near the top of my class. I was an honorably discharged veteran. But I knew I needed a college degree.

One of my best friends told me about ITT’s campus in Cordova, Tennessee, which was conveniently located close to my home. When I sat down with ITT’s recruitment person, it seemed like a perfect fit.

I wanted to pursue a career in computer science. The recruiter promised that if I graduated from ITT, I was guaranteed a job. They promised that if I maintained a 3.4 grade point average, I would receive a discount on my tuition. I made the school aware that I was a military veteran and that my G.I. Bill would help to cover the cost of tuition. They told me not to worry about taking out additional loans, because ITT would put me on track for a well-paying career.

I was excited about beginning my higher education, which ITT sold me as the beginning of the next stage of my life. Then I learned that ITT was all a fraud.

I cared about my education, and I worked hard for my degree. I graduated with that 3.4 and honors. ITT never delivered the promised tuition discount.

I went to the career placement office for help finding a job. They pointed me to the job board at the front of the room.  And they referred me to a retail job at Best Buy.

I thought – that’s what you’re recommending to me? I paid thousands of dollars to you and all you can recommend is Best Buy? I could have done that out of high school.

I went out to find a job on my own, but I did not have many connections. I was directly out of the military and had been away for eight years.  I learned very quickly that the ITT diploma was not worth anything to companies looking to hire, and employers frequently laughed at me when they learned I attended ITT. I studied and succeeded, but the computer science job I worked so hard for never materialized.

When I told ITT that I could not get a job in computer networking, they told me that it was because I only had an associate degree, and that I should enroll for a bachelor’s. ITT tried to prey on my inability to get a job due to their broken promises to convince me to further fund their scam. At that point I realized that I, like so many others, had been completely ripped off.

Since I could not get a job in computer networking, I began working as an overnight baker at Panera. That job allowed me to start making payments toward my $34,000 in federal loans from ITT.

Then I got a call that felt like a punch in the gut. It was Chase Bank asking about another $18,000 loan in my name. I had no earthly idea what they were talking about.

Turns out, ITT had signed me up for an additional private loan without my knowledge. And it was 1000 days past due! I was completely blindsided.

I am continuing to pay down my federal loan. But that private loan? I’ll probably get another call today asking me to pay. I don’t blame the people on the phone – they are just doing their job. But that loan is impossible to get caught up on.

My financial situation wears on me every day. I work hard to try to earn enough to live while paying off my loans. I should not have to pay a dime given the egregious lies ITT sold me.

I am not alone. ITT routinely lied to hundreds of thousands of other students. They targeted people who were eligible for federal loans and grants –including low-income people and veterans like me – and took advantage of our dreams and ambitions.

I work hard. I served my country. I went to college to build a better life. ITT profited off of my aspirations and left me nothing.  ITT’s actions were wrong and illegal. It perpetrated a fraud on hundreds of thousands of students. ITT put us all in a hole without a shovel to dig ourselves out.

ITT declared bankruptcy in September 2016, and even then, only stopped collecting money from students after students sued in the bankruptcy. This week, a judge has finally canceled some ITT debts based on that case.

However, like thousands of other former students, I am still paying federal student loans that funded a school that no longer exists.

We are still waiting for justice.

If you are a former student of ITT, click here to sign up for future updates.

“The newest Federal Court Experiment”: Chief Judge of the U.S. Court of Appeals for Veterans Claims speaks at Harvard Law School

On Thursday, November 8th, Chief Judge Robert N. Davis of the U.S. Court of Appeals for Veterans Claims gave the 2018 Disabled American Veterans (DAV) Distinguished Lecture at Harvard Law School to an audience of students, faculty, staff, and members of the veterans community.  The Chief Judge’s Lecture was entitled “The United States Court of Appeals for Veterans Claims:  The newest Federal Court experiment, past, present and future.” Opening remarks were provided by the National Adjutant of DAV, Marc Burgess.

Chief Judge Davis of the U.S. Court of Appeals for Veterans Claims delivered the 2018 DAV Distinguished Speaker Series Lecture at Harvard Law School

Chief Judge Davis—a Navy veteran who joined the Court in 2004—spoke about the history of veterans law, the origins of the Veterans Court, and present challenges facing the Veterans Court in its role reviewing benefit decisions of the U.S. Department of Veterans Affairs. Chief Judge Davis chronicled the evolution of veterans law from World War I to the present day, including discussion of the Veterans Judicial Review Act of 1988 that introduced court review for veterans claims and established the U.S. Court of Appeals for Veterans Claims. Chief Judge Davis highlighted the need for continued innovation, noting how much “[o]ur veterans legal landscape has evolved from its early days,” and challenging audience members to use their own voices—as veterans, students, advocates, pro bono attorneys—to prompt the significant change required to provide the services that veterans will need in the future.

Chief Judge Davis also discussed the Court’s structure, accomplishments, and challenges. The Veterans Court is unique in terms of its exclusive jurisdiction over appeals from the Board of Veterans Appeals, as well as the way which the vast majority of appeals are decided by single-judge non-precedential decisions. The Veterans Court has a tremendous caseload, handling over 7,000 cases in 2018. Among its challenges, the Chief Judge stated that the Veterans Court is “grappling with how to efficiently decide more panels, decide class actions, and deal with an increasing case load.”

[A]ny time it takes a veteran years to get a final decision on a claim, the system is broken.

Looking ahead to the future of veterans’ law, Chief Judge Davis stressed the importance of pushing for overhaul of the veterans claims system. He stated that while many veterans are able to navigate the veterans claims system in a reasonable way,“any time it takes a veteran years to get a final decision on a claim, the system is broken.”

He ended his lecture by urging the veterans community to continue working towards positive change in the veterans claims system, pointing to the progressive evolution of veterans law over time. “Veterans law is maturing. The Court has carried out their vision of a place where veterans can go to get fair, efficient justice.” Finally, Chief Judge Davis left the audience with a call to action, declaring “We have a voice. We need to start using it.”

Veterans Court Chief Judge Davis and DAV National Adjutant Marc Burgess pose with staff of the Veterans Legal Clinic

After his lecture, Chief Judge Davis answered a range of questions from the audience, including the role of pro bono attorneys at the Court, the impact of presumptive diagnoses for disabilities, and the appellate reforms to be implemented under the Appeals Modernization Act.

The event was hosted by the Veterans Legal Clinic of the Legal Services Center of Harvard Law School, in partnership with the HLS Armed Forces Association. The lecture was the 5th annual event in the Disabled American Veterans (DAV) Distinguished Speaker Series, sponsored the DAV Charitable Service Trust. The Speaker Series provides a forum for national leaders to address the critical issues facing our nation’s disabled veterans and to engage in conversation with the local community. Prior speakers include then-Secretary of the U.S. Navy Ray Mabus, the founder of the first veterans treatment court Judge Robert Russell, and former VA Secretaries David Shulkin and Robert McDonald.

New York Times Highlights Project on Predatory Student Lending Cases and Clients

A recent story in the New York Times highlighted several of the Project’s cases, and their prominence in the ongoing battle to force the Department of Education to recognize the legal rights of students who have been cheated by predatory for-profit colleges.

New York Times: Borrowers Face Hazy Path As Program To Forgive Student Loans Stalls Under Betsy DeVos

The article featured several of the Project on Predatory Student Lending’s major victories in court asserting student borrowers’ rights. These favorable rulings are a testament to our clients’ perseverance and willingness to stand up to the Department and drive change for student borrowers who attended for-profit colleges across the nation.

One such client, Meaghan Bauer, is profiled in the article. Meaghan was one of the plaintiffs we represented in Bauer v. DeVos. In winning that case, she thwarted the Department of Education’s attempts to prevent the implementation of the 2016 borrower defense rule. Because of this lawsuit, the rule prohibiting schools from taking federal money while forcing students to arbitrate their claims against schools took effect.

Photo of Meaghan Bauer. Credit: M. Scott Brauer for The New York Times

 

Meaghan talked to the Times about her experience the for-profit New England Institute of Art, and how the debt she incurred as a result of the school’s fraud has affected her life.

 

 “It’s just dream-crushing,” said Meaghan Bauer, who owes $45,000 for her time at the New England Institute of Art. The for-profit school, in Brookline, Mass., closed last year and was sued on fraud charges by the state attorney general in July.

“I can’t afford to go back to school,” Ms. Bauer, 27, said. “Will I ever be able to buy a house? Or get married? I spent so much time working on a useless degree, and it could ruin me financially for the rest of my life.”

 

Meaghan is just one of the many thousands who are waiting for the Department to rule on their borrower defense applications. Right now, “more than 100,000 claims for relief are in limbo, according to the Education Department’s most recent data” according to the Times.

And even when the Department has reviewed claims, it used illegal methods to justify giving students “partial relief.” In another of our cases, Calvillo Manriquez v. DeVos, Corinthian students challenged these partial denials and a judge ruled that the Department’s actions were illegal, and granted our injunction to stop these practices. As the Times references:

 

The department’s attempts to reduce the amount of forgiven debt and block a new forgiveness rule have drawn rebukes from federal judges.

A judge in California found that the department had illegally obtained data from the Social Security Administration on the earnings of former Corinthian Colleges students as it sought to offer some of them only partial loan relief. Last month, the judge granted class-action status to 110,000 former Corinthian students who have applied to have their loans forgiven and may have been granted partial relief.

 

Still, even after being rebuked again and again by federal judges, the Department has been incredibly, callously slow to act.

“This rule is only as good as the administration’s intent to implement it,” Toby Merrill, the Director of Harvard Law School’s Project on Predatory Student Lending, told the Times.

The Department tries to argue that this issue is complicated, but it is not.

If borrowers were cheated by their school, the government must cancel their loans upon request. It’s what borrower defense is all about. Our partners at The Debt Collective organized cheated Corinthian students in 2015 to demand the cancellation of Corinthian debts. And Eileen Connor, the Project’s Director of Litigation, worked with Debt Collective to develop the original borrower defense application, and was a negotiator for the committee that developed the 2016 borrower defense rule. She even proposed the arbitration provision, which got added to the 2016 rule and took effect when we won Meaghan’s case.

Hundreds of thousands of students have applied for borrower defense since 2015, but only a very small fraction of claims have been processed. This includes another one of our cases, ITT, where only 33 students have received cancellation with 13,000 applications outstanding.

Jason White, a former ITT student, has been waiting for three years. As he told the Times:

 

Mr. White, 41, of St. Louis, graduated in 2008 with a bachelor’s degree in software engineering. But when he landed a position as a web developer, he quickly discovered that he lacked the skills to do his job.

Instead of teaching students to program computers, Mr. White said, instructors had handed out sheets of code and simply had the students retype them. At one final exam, the instructor stood at the front of the classroom and read the answer key aloud, he said.

“My degree,” he said, “was a sham.”

To finance that degree, Mr. White took out loans totaling more than $80,000.

 

Seeking justice for borrowers has never been easy. The court victories we’ve achieved have made significant progress, but are just the beginning of the work that lies ahead.

It’s past time for the Department of Education to do the right thing and cancel the debts of students who were cheated by Corinthian, ITT, and other predatory schools.

We’ll keep fighting alongside these students, one victory at a time, until they do.

Click here to read the full New York Times article.

A Federal Judge Told Betsy DeVos to Stop Stealing Students’ Tax Refunds

The rights of more than 100,000 borrowers are affected by this court ruling.

For years, the Department of Education has acted more like a collection agency than an agency operated for the benefit of students. Using aggressive collection methods, the Department of Education routinely seizes the tax refunds and wages of thousands of students who are struggling to pay their student loans after being cheated by predatory for-profit colleges.

On October 25, a federal judge told the Department of Education to stop.

In the case of Williams v. DeVos, the court found that the government had unlawfully taken the tax refunds of two Corinthian College students to collect on their student loans, even though the Department had previously acknowledged Corinthian’s fraud and the Massachusetts Attorney General had applied to have the students’ loans cancelled.

There are more than 100,000 students with pending borrower defense applications who could be affected by the decision.

Not only did the court withdraw the Department’s authority to seize these borrowers’ tax refunds, it ruled that the Department of Education must consider the borrower defense application submitted by the Massachusetts Attorney General on behalf of all Massachusetts Corinthian students – an important acknowledgement of the power of Attorneys General to submit borrower defense claims on behalf of their constituents.

This ruling is especially critical for the many thousands of Massachusetts students who have been cheated by Corinthian, because many of them are not aware that they are eligible for borrower defense, or don’t know how to apply. The Department has callously exploited that fact, mercilessly collecting and coercing payments from students while fully aware that debts from Corinthian are invalid.

This government theft of tax refunds, especially when those tax refunds are really anti-poverty benefits like the earned income tax credit, is unconscionable. The Department of Education shouldn’t need a court ruling to understand that.

The Department of Education has the power and the obligation to do the right thing and immediately cancel the debt of all Corinthian borrowers, all of whom were cheated on the government’s watch.

Any former student who was cheated by their school can apply to discharge their federal student loan debt. This website has information about borrower defense, and a link to the Department of Education’s Universal Borrower Defense form.

A Winning Streak For Student Borrowers

Students Won Several Major Victories This Month Against the Department of Education.

After years of delay by the Department of Education, student borrowers represented by the Project on Predatory Student Lending are finally winning their rights in courts. On four separate occasions this month, judges rebuked the Department, struck down illegal policies, and ruled in favor of students.

These recent rulings and decisions demonstrate that student borrowers have, and can enforce, their rights against the Department of Education and predatory for-profit colleges. These wins are a testament to our clients’ perseverance and willingness to stand up to the Department and drive change for student borrowers who attended for-profit colleges across the nation.

In the past three weeks alone, student borrowers won the following cases:

The 2016 Borrower Defense Rule is Now in Effect.

Students thwarted the Department of Education and the for-profit college industry’s attempts to prevent the implementation of the 2016 borrower defense rule. This rule includes a set of important protections for student loan borrowers from predatory schools, including their right to bring their claims in courts instead of in arbitration if their school participates in the federal student loan program. The Department finally backed down from its stubborn delays after all of its arguments were rejected by the court. The judge also rejected an industry attempt to stop the 2016 borrower defense rules from taking effect. As a result, the rule took effect on October 16, 2018 after more than a year of illegal delays.

These victories are a rebuke to both the Department of Education and the for-profit college industry. Students did not stop fighting to get this rule implemented, and now, because of their willingness to fight, these important and long-delayed rules are in effect.

Read more about the borrower defense rulings and the cases Bauer v. DeVos and CAPPS v. DeVos.

The Department Cannot Seize Tax Refunds from Borrower Defense Applicants.

On October 25, 2018, a federal judge ruled that the Department of Education had illegally taken the tax refunds of two former Corinthian College students to pay their student loans, without addressing the assertion, made in borrower defense applications, that their loans are fraudulent and unenforceable. As a result of this ruling, all student loan borrowers are protected from having their income tax credit seized to pay their federal student loans while their borrower defense applications are pending. This win is one step toward stopping the Department’s long-standing and utter disregard for the rights of students who have been subjected to the harmful practices of the predatory for-profit college industry.

Read more about the victory in Williams v. DeVos.

Corinthian Colleges Students Win Class Certification, and Elected Officials Call on the Department to Cancel All Corinthian Debt.

On October 15, a judge certified a class of Corinthian Colleges borrowers, allowing these students to team up to fight for the full loan cancellation they legally are owed. The Project on Predatory Student Lending and Housing and Economic Rights Advocates (HERA) represent the students in the class action lawsuit Calvillo Manriquez v. DeVos.

That same day, a group of elected officials and organizations from across the country called on the Department of Education to cancel the debts of all Corinthian College students once and for all.

Read more about the #CancelCorinthian campaign.

65 Years, Countless Voices – Haben Girma ’13


This profile was published by Harvard Law Today on October 4, 2018. 

This September, Harvard Law School commemorated 65 years since women first graduated from Harvard Law School. Since that historic milestone, the number of women at HLS has grown dramatically from 13 women in the Class of 1953 to women making up nearly 50 percent of the incoming class in 2018.

On Sept. 14-15, hundreds of alumnae gathered on campus for Celebration 65 to commemorate this anniversary and celebrate HLS alumnae’s contributions to the legal profession and society.

In the “Countless Voices” video series, alumni from across the generations share their HLS experience and explain the difference their legal education has made in their lives.

In this segment, Haben Girma ’13, the first deaf-blind student to graduate from HLS, discusses her advocacy on behalf of individuals with disabilities and her work at the intersection of law, education and civil rights. Read more about Haben Girma’s journey to HLS and her career as an advocate.

No Crime to be Poor; LSC Alum Blake Strode to Lead St. Louis Civil Rights Law Firm

This article was originally published by Harvard Law Today on June 26, 2018.

By Elaine McCardel

There is no shortage of serious legal issues facing poor people in Greater St. Louis, especially people of color, says Blake Strode ’15, who was born and raised in the area. Just three years out of HLS, Strode is back home fighting the criminalization of poverty as executive director of ArchCity Defenders, a nonprofit civil rights law firm in St. Louis that has filed landmark cases that have already improved the lives of tens of thousands of low-income people.

Strode, who majored in international economics and Spanish at the University of Arkansas and toured the world for three years as a tennis professional before law school, always planned to go into public interest law. At HLS, he represented prisoners in disciplinary and parole hearings through the Prison Legal Assistance Project, helped fight evictions and foreclosures in Boston through Project No One Leaves, and was a student in the Housing Law Clinic at the Legal Services Center.

Not long after the 2014 death of Michael Brown in Ferguson, Missouri, Strode read a white paper on the over-policing of people of color in north St. Louis County that ArchCity Defenders had just published. The paper, which presaged a later Department of Justice report, “was the first time I’d seen that level of analysis of that problem in St. Louis,” he says. He reached out to the organization’s executive director and co-founder, Thomas Harvey, and soon found himself back in his hometown with a Skadden Fellowship to do housing-related work.

ArchCity had recently filed several cases challenging the constitutionality of modern-day debtors’ prisons—the jailing of poor people because they are unable to pay court fines and fees—and Strode changed his focus to helping build the organization’s civil rights litigation unit through impact litigation targeting this practice as well as police misconduct and inhumane jail conditions. In his short time there, he and his colleagues have filed more than 30 civil rights lawsuits in federal court, partnering on some with Civil Rights Corps in Washington, D.C., founded by Alec Karakatsanis ’08. Strode played a significant role in obtaining a landmark judgment against the city of Jennings for imprisoning people unable to pay municipal fines: $4.75 million for a class of about 2,000 people. Settled in 2016, the case resulted in sweeping policy changes that serve as a model for legal reforms in other courts.

In January 2018, at the age of 30, Strode was named ArchCity’s new executive director when Harvey decided to leave.

“My goal is the same as our organizational goal: to combat the criminalization of poverty and state violence against poor people and people of color,” he says.

“Our clients are poor and overwhelmingly people of color, which in St. Louis means overwhelmingly black. We are seeking systemic change with and for them, which is only possible through a concerted effort of both legal and nonlegal advocacy. We’re calling for nothing less than that.”

The ways our clients engage in fighting back inspire us.

ArchCity, which relies heavily on private donations, was primarily a volunteer organization until a few years ago; it now has a full-time staff of 20, half of whom are lawyers, Strode says. Yet there is so much need in the community that growth is a top priority, he adds. That means building capacity in order to represent more clients and expanding to other parts of the state. ArchCity is a holistic provider, so growth also means expanding advocacy in housing, access to education, and consumer matters.

And while ArchCity’s victories are heartening, “even those, we have to work very hard to hold on to, and those gains aren’t enough,” Strode says. The work can be especially difficult in a politically conservative area like Missouri, “where millions of people face the greatest systemic challenges on a day-to-day basis because those challenges are institutional and deep-seated.” However, he adds, “The ways our clients engage in fighting back are really inspiring and inspire us to remain committed.”

Veterans Legal Clinic Welcomes DAV General Counsel for Conversation About His Role & Career Path

Chris Clay answers questions from students and staff at Harvard Law School

Christopher J. Clay, General Counsel of Disabled American Veterans (DAV), shared his perspectives on current challenges facing disabled veterans and his experiences as general counsel of national non-profit organization during a talk at Harvard Law School on October 2. The event was hosted by the Veterans Legal Clinic of the Legal Services Center of Harvard Law School, and was cosponsored by the Harvard Law School Project on Disability, Armed Forces Association, National Security and Law Association, and The Transactional Law Clinics.

Clinical Professor Daniel Nagin—director of the Veterans Legal Clinic—gave opening remarks, introducing both Mr. Clay and Richard E. Marbes, Chair of the Board of Directors of the DAV Charitable Service Trust, who was in attendance at the event. Nagin described DAV’s role as an important resource for veterans seeking access to benefits and supportive services. This year marks the sixth year that the DAV Charitable Service Trust has provided funding to support the work of the Veterans Legal Clinic.

Mr. Clay—a Ph.D-trained philosopher turned lawyer—spoke about his background, his unique career path, and his duties as the general counsel of a large nonprofit.  He answered questions from the audience on a wide range of topics, including how DAV collaborates with other veterans organizations, DAV’s relationship with the Department of Veterans Affairs (VA), and whether the role of general counsel differs between non-profit and for-profit organizations.

Mr. Clay also discussed DAV’s origins, structure, and accomplishments. DAV is a congressionally-chartered organization that was founded in Cincinnati with about 20 members and has now grown to over 1 million members. DAV offers a range of services to veterans, from no-cost advocacy before the VA to free rides to medical appointments. According to Mr. Clay, DAV handled over 250,000 VA disability claims last year and has donated over 4,000 vans and countless volunteer hours over the past few years to transport veterans to medical appointments at VA medical centers nationwide.

In addition to helping veterans access benefits and services, Mr. Clay discussed how DAV has sought to encourage veterans to live fuller lives. One program brings together severely disabled veterans to participate in winter sports and other activities that, Mr. Clay said, help veterans feel that “if I can do this, I can do anything.” Finally, he emphasized that the DAV’s veteran members are the ones that ultimately run DAV, which “ensures that the passion that began DAV remains with DAV.”

 

The Economic Case For Cancelling All Student Debt

Experts highlight data showing that cancelling all student debt would provide a massive boost to the economy, lasting decades

As the national student debt rises year after year, millions of Americans are overwhelmed with seemingly never-ending debt. What if there was an easy solution? What would happen if all student debt was cancelled?

That’s what a group of economists and researchers set out to examine. And their data shows that not only can you cancel all student debt, doing so would bring significant, long-lasting economic benefits. At a forum last week at Harvard Law School, hosted by the Project on Predatory Student Lending and Freedom to Prosper, the experts shared their research.

Steven Swig, co-founder of Freedom to Prosper, Stephanie Kelton an economist and one of the authors of the recent Levy Institute study The Macroeconomic Effects of Student Debt Cancellation, Julie Margetta Morgan, Executive Director of Great Democracy Initiative, and Toby Merrill, Director of the Project on Predatory Student Lending, gathered to discuss the concept.

Right now, over 44 million Americans have a combined $1.4 trillion in student debt. It is a massive cloud that hangs over the lives and financial futures of countless Americans.

“Student debt has now become the largest unsecure debt in the country,” said Steven Swig. “I call it reverse estate planning – we are sucking back wealth from future generations.”

There are lots of reasons for this. New, emerging industries have not trained workers for their jobs, and employers are increasingly demanding workers with advanced degrees. That has led to an increase in the number of students enrolling in colleges and other higher education institutions. This has coincided with an acceleration in the price of obtaining those degrees. In just 25 years, the cost of tuition and fees as a share of median household income has nearly doubled, from 18% in 1990 to 35% in 2014.

“If you actually look at trends in earnings, those with college degree have stayed stagnant or fallen, and those with just a high school diploma have fallen. Add rising student debt and you get a sense of why people are so frustrated,” explained Julie Margetta Morgan.

In short, more people are seeking higher degrees to advance their chances in the job market and going further into debt to do it.

At the Project on Predatory Student Lending, we have seen the exploitation of this situation by one particularly insidious industry – for-profit colleges.  The predatory for-profit college industry is the worst of the worst, preying on people who are low-income, veterans, single mothers, or people of color – with lies about quality training and job placements after graduation.

“The worst student debt targets the people who are least able to handle it,” said Toby Merrill, Director of the Project on Predatory Student Lending.

State attorneys general already have brought numerous cases showing that many of these colleges have committed massive and pervasive fraud against students. And the Department of Education has the legal authority to cancel fraudulent student loans. Yet, every administration has resisted doing so.

This resistance to reason is even less explicable in light of the broader economic argument that can be made for all cancelling student debt.

The Levy Economics Institute of Bard College conducted extensive research into what would happen to our entire economy if the government cancelled all student loans. The findings were presented in a report and at the forum on Wednesday, and the results are remarkable.

Each simulation run by the Institute saw a dramatic rise in almost every national economic indicator:

  • The Gross National Product rose from between $861 billion to one trillion dollars over 10 years.
  • GDP increased, on average, between $86 – 108 billion per year.
  • Unemployment went down and job creation went up – adding about 1.5 million jobs per year.
  • State budgets increased by about $10 billion every year for ten years.

Those are just the macroeconomic effects.

The study also showed that cancelling student debt freed up young entrepreneurs to act on their business ideas, resulting in more small business creation. It resulted in higher credit scores, offering people better opportunities to purchase homes or make other life purchases. It even helped more people attain college degrees by reducing college drop out rates.

“The economic consequences of student debt cancellation are an unequivocal net positive for the economy as a whole,” said Stephanie Kelton. “Credit scores increase, small business loans increase, and there’s a reduced vulnerability to economic shock.”

In short, the simple act of cancelling student loans resulted in a cycle of individual growth and national success, each steadily building on each other.

The Department of Education has resisted debt cancellation, claiming that the administration has an obligation to all taxpayers, not just the students. This is clearly a misinformed response. As this report outlines so clearly cancelling student debts benefits both students and taxpayers.