Debt Forgiveness: End the Student Loan Industrial Complex


On April 15th, the Department of Education stated it is “working on a process to help federal student loan borrowers submit a defense to repayment of their federal student loans.” The statement came with a press release announcing that the federal government will fine Corinthian Colleges $29.6 million for lying to students about its jobs placement numbers. The DOE cites nearly 1,000 cases of outright lying to students, including one incident where an accounting students previous position at Taco Bell was listed as a successful job placement.

“Defense to repayment” refers to an obscure provision that forgives federal student loans when “schools have done something wrong” according to state law. Over 250 Corinthian College Students have requested their loans be forgiven on these grounds. The DOE is now working towards a formal process for addressing such requests, as none has existed before. Activists from the National Consumer Law Center and New America Foundation express concern that the new process will impose arbitrary requirements on those seeking debt relief or become a “horrible web of red tape.” For profit-colleges are notorious for their dishonest recruitment and surprise expenses. They are known to prey upon those with few options, who are looking to get out of tough situations. Their outright fraud is completely incompatible with a free society.

Worse, a major source of funding for the for-profit college industry is Federal Student Loans. It is debatable whether the student loans program will cost or earn billions of dollars for the government over the next decade, depending on what accounting system is used, but it is a clear conflict of interest for the state to be earning interest off dishonest education schemes.

The student debt crisis is not limited to students in for-profit schools, but state institutions as well. Federal Student loans have the problem of being one size fits all. In a market setting, lenders would be able to assess student’s future prospects before lending. By making student loans so widely available the state contributes to making higher education a “must have” for even entry level jobs. Corporations are now able to abandon in-house education, shifting costs to tax payers and students. Degrees themselves have become commodities rather than the skills acquired. In such an environment, Universities are able to charge students for four years of irrelevant courses rather than simply granting the degree or certification for a specific trade or skill. Furthermore, it allows corporations to justify shifting greater percentages of their pay to overly credentialed upper management. The same happens at universities themselves as administration costs and tuition sky-rocket, while cuts are made everywhere else.

The end result is students forced to choose between overpriced state colleges or predatory for-profit schools. The banking interests who benefit from this situation also benefit from a series of laws making it near impossible to absolve student debt through bankruptcy (unlike other types of debt). The state also makes it difficult to create alternatives to this system, as anyone seeking to start their own college or trade school will have costly red tape to work through. It funds predatory for-profit institutions and over-priced public institutions, while artificially raising the credentials needed for entry level work. The state is at the heart of the debt crisis. Let’s forgive the debt it creates and kill the student loan industrial complex.


John C. Wilson identifies himself as a blogger and activist anti-authoritarian, anti-establishment, feminist and pro-labor leanings. 

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