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Debt-Trap Debbie Swimming With the Loan Sharks

Debt-Trap Debbie needs to stop shilling for predatory payday lenders who siphon $8 billion in fees and interest each year from those who can least afford it.

That was the message delivered this week to Florida Rep. Debbie Wasserman Schultz’s doorstep at the Democratic National Committee, which she chairs, by a hundred grassroots leaders from National People’s Action, Alliance for a Just Society, USAction, and allies.

Decrying the “Sharknado” of debt brought on by the loan shark industry, the leaders arrived with more than 13,000 signatures calling on Wasserman Schultz to stop accepting money from the payday lending industry and stop sponsoring legislation that prioritizes predatory lenders over everyday families.

debt speakerThe grassroots leaders found the doors to Wasserman Schultz’ office building closed to them – so they turned up the heat with chants reminding Wasserman Schultz that they were determined to beat back the shark attack.

While leaders waved signs reading “Sharknado 4, starring Debbie Wasserman Schultz, produced and directed by the payday loan industry,” speakers from throughout the country testified to the devastation they and their communities have suffered.

“Once you’re swept up into the tornado of debt one loan turns into another in a cycle that just doesn’t let up,” said Candice Byrd, a member of Illinois People’s Action who spoke at the event. “It has been a nightmare for my family and me. We need our elected officials to stand with us against these predators, not in their pockets.”

Wasserman Schultz is cozy with the predatory payday lenders, having taken $68,000 in campaign contributions from the industry over the last 10 years.

Aide from Deebies officeNow she’s co-sponsoring legislation that would gut the Consumer Financial Protection Bureau’s efforts to crack down on these debt predators – and she’s lobbying her colleagues in Congress to sign on as well.

The Los Angeles Times’ David Lazarus calls her bill (H.R. 4018) “a shameless effort by the payday-loan industry, acting through congressional proxies, to avoid federal rules that would require more responsible behavior. The only choice it offers consumers is the ability to keep taking out high-interest loans even if it’s clear they can’t make payments.”

That’s why the leaders chanted even louder as barricades were brought out, then prayed for families devastated by predatory payday lenders – and for Wasserman Schultz, who does the bidding for an industry that charges up to 390 percent in interest rates.

The voices of so many persistent leaders were too powerful to ignore. After at first resisting a meeting, a representative for Wasserman Schultz emerged from behind the doors to accept the petition and a letter to Wasserman Schultz.

The leaders who descended on the Wasserman’s Schultz’s office will continue the fight.

They are determined not only to stop legislation bought by the predatory debt industry but to also win strong rules from the Consumer Financial Protection Bureau. Joining with Stop the Debt Trap Campaign, they will push for a small-dollar credit system that meets the needs of families and communities, and helps build an economy that’s equitable for all.

New Report: Disenfranchised by Debt

For Immediate Release
March 8, 2016
Contact: Kathy Mulady
Communications Director
(206) 992-8787
kathy@allianceforajustsociety.org

Washington D.C. – Poverty isn’t supposed to be a barrier to voting in the United States, at least according to the Constitution.

Yet, more than 50 years after poll taxes were prohibited by the Voting Rights Act of 1965, people with criminal convictions in at least 30 states are still being barred from voting because they are too poor to pay their jail fines and fees.

Disenfranchised by Debt is a new report by the Alliance for a Just Society released today at the Debt Nation conference in Washington, D.C. The report analyzes how millions of people, especially people of color, are blocked from voting because they can’t afford their criminal debts. Meanwhile, former offenders with means are able to quickly regain their voting rights – creating a two-tiered system.

A history of racism in the United States and the growing criminalization of poverty means that African Americans particularly, are more likely to be arrested, convicted, to receive harsher penalties, and are then less likely to regain their right to vote.

“Ending criminal disenfranchisement would be the ideal way to prevent the loss of voting rights due to court debt,” said Libero Della Piana, national organizer and racial justice leader with the Alliance for a Just Society. “Poverty should never be a reason for withholding anyone’s right to vote.”

Some of the recommendations in the report include:

  • Limiting interest rates and fees attached to unpaid LFOs.
  • Ensuring that those with misdemeanor convictions have the right and ability to vote while incarcerated.
  • Automatically registering people with conviction records when they become eligible to vote.

LFO debts grow at every stage of the judicial process, including while in jail or prison. Costs can even include laundry expenses, or haircuts. These debts also accrue interest at rates as high as 12 percent – including while the person is incarcerated. Many prisoners leave jail thousands of dollars in debt, with few job opportunities.

“Legal Financial Obligations prevent ex-offenders from rebuilding a productive life,” said Allyson Fredericksen, senior policy analyst and author of the report. “Many of these issues can be ended by reducing fees and eliminating interest on debt while incarcerated. The ability to pay should never be a criteria for voting.”

Most formerly incarcerated people never regain their right to vote.

“Our research shows that while some states explicitly require the repayment of legal debt before voting rights are restored, many other states are more indirect, requiring the completion of probation or parole – with the payment of fees and fines a condition of completing parole,” said Linnea Lassiter, co-author of Disenfranchised by Debt.

In Maryland, voting rights have recently been restored to to 40,000 people statewide completing probation, and starting March 10 will be restored automatically upon their release from prison.

In Virginia, Gov. Terry McAuliffe is the only person able to restore voting rights to those with felony convictions, per Virginia’s constitution. He announced last year that “outstanding court costs and fees will no longer prohibit an individual from having his or her rights restored.”

This opens up the opportunity to vote to even more returning citizens, many of them African American.

Virginia Organizing leader Eunice Haigler of Fredericksburg, Va., does workshops to help former felons regain their voting rights.

“I don’t know if a lot of people know how valuable it is to African Americans to be able to vote,” said Haigler. “Many African Americans don’t have a lot of hope, so to be able to vote and have a say in your community, to make it better, is a whole new world.”

Alliance for a Just Society is a national organization that focuses on social, economic and racial justice issues.

Disenfranchised by Debt

Washington D.C. – Poverty isn’t supposed to be a barrier to voting in the United States, at least according to the Constitution.

Yet, more than 50 years after poll taxes were prohibited by the Voting Rights Act of 1965, people with criminal convictions in at least 30 states are still being barred from voting even after serving their sentence because they are too poor to pay their jail fines and fees.

Disenfranchised by Debt is a new report by the Alliance for a Just Society released today at the Debt Nation conference in Washington, D.C. The report analyzes how millions of people, especially people of color, are blocked from voting because they can’t afford their criminal debts. Meanwhile, former offenders with means are able to quickly regain their voting rights – creating a two-tiered system.

A history of racism in the United States and the growing criminalization of poverty means that African Americans particularly, are more likely to be arrested, convicted, to receive harsher penalties, and are then less likely to regain their right to vote.

“Ending criminal disenfranchisement would be the ideal way to prevent the loss of voting rights due to court debt,” said Libero Della Piana, national organizer and racial justice leader with the Alliance for a Just Society. “Poverty should never be a reason for withholding anyone’s right to vote.”

Some of the recommendations in the report include:

  • Limiting interest rates and fees attached to unpaid LFOs.
  • Ensuring that those with misdemeanor convictions have the right and ability to vote while incarcerated.
  • Automatically registering people with conviction records when they become eligible to vote.

LFO debts grow at every stage of the judicial process, including while in jail or prison. Costs can even include laundry expenses, or haircuts. These debts also accrue interest at rates as high as 12 percent – including while the person is incarcerated. Many prisoners leave jail thousands of dollars in debt, with few job opportunities.

“Legal Financial Obligations prevent ex-offenders from rebuilding a productive life,” said Allyson Fredericksen, senior policy analyst and author of the report. “Many of these issues can be ended by reducing fees and eliminating interest on debt while incarcerated. The ability to pay should never be a criteria for voting.”

Most formerly incarcerated people never regain their right to vote.

“Our research shows that while some states explicitly require the repayment of legal debt before voting rights are restored, many other states are more indirect, requiring the completion of probation or parole – with the payment of fees and fines a condition of completing parole,” said Linnea Lassiter, co-author of Disenfranchised by Debt.

In Maryland, voting rights have recently been restored to to 40,000 people statewide completing probation, and starting March 10 will be restored automatically upon their release from prison.

In Virginia, Gov. Terry McAuliffe is the only person able to restore voting rights to those with felony convictions, per Virginia’s constitution. He announced last year that “outstanding court costs and fees will no longer prohibit an individual from having his or her rights restored.”

This opens up the opportunity to vote to even more returning citizens, many of them African American.

Virginia Organizing leader Eunice Haigler of Fredericksburg, Va., gives workshops to help former felons regain their voting rights.

“I don’t know if a lot of people know how valuable it is to African Americans to be able to vote,” said Haigler. “Many African Americans don’t have a lot of hope, so to be able to vote and have a say in your community, to make it better, is a whole new world.”

Alliance for a Just Society is a national organization that focuses on social, economic and racial justice issues.

Student Debt: Study Up Before You Sign Up

It’s that time of year again. Students nationwide are heading back to college and signing fresh promissory notes for financial aid. I am one of them. Many of us will mourn the loss of the summer sun while we simultaneously anticipate carving pumpkins and the smell of fallen leaves.

As our quest for knowledge continues and in that vein, I dare to ask, how much student debt do you have and, more importantly, do you understand the parameters in which you agreed to such debt?

As a graduate student, I am skilled in the art of back to school preparation – including ensuring that my financial aid paperwork is signed and ready for disbursement. However, until recently, I didn’t actually know what I had gotten myself into, and what legislation is in place to protect – or harm me. Knowledge is power; the lack of it can be costly.

Doing a little math, I was shocked to learn that the sum I will owe at the conclusion of my graduate studies, roughly $33,000, will accrue additional interest of about $12,000 over the course of the loan. That means for the next decade I will be responsible for a monthly payment of approximately $375, in addition to covering all my other costs of living. That’s about equal to a month of groceries, a monthly car payment, or a health insurance premium. I am certainly not the worst off – and I am not alone.

Even more troubling is the additional cost to me as a woman. The gender pay gap complicates the equity women strive for in choosing to purchase an education. I might be stuck paying off my student loan debt longer than the men sitting next to me in class, due to the lower pay women receive for the same work as men. Women typically earn 79 cents for every dollar a man is paid.

Paying my loan back over a longer period means compounding interest, and a higher total cost.

Several bills in congress have the potential to change the nature of student loans and the student debt crisis. Let your representatives and fellow constituents hear your voice.

One recent notable action by President Barack Obama includes changes to rules regarding financial aid applications. These new rules allow students to apply earlier in an aim to increase Pell grant eligibility, which may decrease the total amount needed for loan borrowers. It’s a small step, but in the right direction.

If I could reach back in time to my former self I would tell her to know the key terms when reading your promissory notes, map out a plan that is best for you, and talk to your congressional representatives about legislation that will work toward solving the student debt crisis. We can make this a better world for students and higher education.

This is my story, share yours at DeclareYourDebt

The Alliance for a Just Society has written a series of reports on the effects of student loan debt which include personal narratives of students who raced to the challenge of higher education and will continue to pay the price tag for years to come.

Household Debt Is a National Crisis

Years after Toni Potter’s husband passed away from pancreatic cancer, debt collectors in her state of Washington were still relentlessly hounding her about his hospital bills.

Andrea Anderson, a young student in Oregon, has been saddled with $150,000 in college loans as she pursues her dream of becoming a social worker. She knows she’ll be paying the loans back for decades, threatening her other dreams of buying a home or starting a family.

Linda Mock of Idaho was trapped by a payday loan that quickly grew from the original $300 to more than $900 in interest alone. Trying to break free of the debt, she took out a title loan on her car and ended up losing her only transportation.

Family debt is no personal failing — it’s a national crisis. Even as unemployment declines, the debt crisis is holding back a full economic recovery and pushing more people into poverty.

That’s why President Barack Obama announced recently that he’s instructed the Department of Education and other federal agencies to do more to help borrowers afford their monthly loan payments.

That’s a step in the right direction. 

But I’d urge him to go further and rein in the lenders, banks, and collection agencies that are profiting from Americans’ debt. It’s time to stop blaming borrowers and instead hold the financial interests that created the crisis accountable.

When hospitals give big price breaks to insurance companies but refuse to work with a widow struggling to make ends meet, something’s not right.

When a federal student loan provider charges young students nearly twice the interest it charges homeowners, something’s not right.

When payday lenders can get away with charging 300-percent interest on a short-term loan to a poor family just trying to fix their car so they can get to work, something’s not right.

The explosion of predatory lenders hurts families and siphons money out of local economies. There are more than two payday-lending storefronts for every Starbucks coffee shop in the United States.

Meanwhile, more than 70 percent of the students who graduate with a bachelor’s degree leave school deep in debt. The average student loan debt totals almost $30,000 today, up from $19,000 a decade ago.

For many Americans, there’s no way out.

Student loans can’t be discharged in bankruptcy. Some states will take your your driver’s licenses and professional certifications if you fall behind in your student loan repayment.

And if you can’t afford your legal fees, you could go to jail — just for being poor.

It’s time to break the shame around debt and start putting the responsibility for solutions where it belongs: on those profiting off struggling families. That means placing fair caps on interest rates, ending predatory practices that push people further into debt, and creating a path out of debt for people who are struggling.

Recently, folks from different communities across the country came together for a national online conference, “Up from Debt,” hosted by my organization, the Alliance for a Just Society. People from Seattle to New York shared powerful and moving stories — not to gain sympathy, but to erase the stigma that further burdens families trapped in debt.

The Obama administration should investigate all forms of predatory lending, including student loans, payday loans, medical loans, mortgages, and credit cards. On the White House website, you can sign a petition asking the president to create a pathway out of debt so families can reclaim their futures.

Our children, our neighbors, our parents, the sick, and the struggling aren’t cash cows for bankers and lenders to milk. It’s time to demand solutions that help families move up from debt.

LeeAnn Hall is the executive director of the Alliance for a Just Society, a national policy and organizing network that works on racial, health and economic justice issues.

 

Graduates Struggle Under a Mountain of Debt

College is supposed to be the pathway to a better job and a better life, but for students across the country college is also the pathway to a life of debt.

Since 2008, states across the country have decreased their investment in higher education, with every state except for Alaska and North Dakota providing less per student in 2014 than in 2008. These cuts have led colleges and universities to increase tuition to make up for the lost funding, shifting that burden onto students and their families.

“A Mountain of Debt,” released this week in Washington and Connecticut, show clearly that when students face increased tuition and low wages, many must turn to student loans to cover costs. In fact, nationwide 70 percent of students graduate with student loans. The average amount of debt at graduation is $29,000.

Students in states like Washington and Connecticut find themselves unable to get by without loans for college, and unable to easily pay them off after graduation.

“I was working 80 hours a week to pay for school and living expenses. My average day would include working multiple fast food jobs sporadically thrown between classes, working one job until 8:30 at night, working 10 p.m. until 4 a.m. loading trucks in a factory, then getting up for class at 8 a.m. and doing it all over again,” said Alex Katz, a student at the University of Connecticut.

Christina Hoadley, a student at Central Connecticut State University, works two jobs to help pay for college, but still is worried about the prospect of paying off her loans. “After grad school, I anticipate walking away with a loan amount to the tune of $40,000. I’ll have to begin paying on all that within 6 to 8 months after completing school. It’s a lot of stress knowing the huge weight of debt that lies ahead.”

In Washington, Roxana Pardo Garcia loves the work that she has found since graduation, but she does not earn enough to make paying off her student loans easy. “My current student loan debt load is $19,000, and my loan payments take about 20 percent of my monthly take-home pay. I just wish I could help my mom out more. After all, she is the reason I went to school: to lift us out of the cycle of poverty.”

Bernadette Binalangbang of Tukwila, Washington has had to take a job outside of her field just so she can work to pay off her student loans. “I really love to bake and making pastries is my passion, [but] I’m currently employed full-time at a medical lab. It’s a complete shift from what I’d like to be doing, but it pays my bills and keeps me afloat — just barely. My student debt payments take up more than 30 percent of my monthly income.”

Disinvestment by states has left students and graduates like Alex, Christina, Roxana, and Bernadette in an uphill battle against the mountain of debt they’ve accumulated. States like Washington and Connecticut need to reinvest in higher education, or even more students will find themselves with no choice but to take out loans that they will repay for years to come.

Learning Experience: Two Bachelors Degrees and Deep in Debt

In my family, going to University was never a question. My sisters and I were raised with the idea that higher education was our ticket out of poverty. Like our peers, we clung to the American dream of graduating and establishing careers that would allow us to fulfill our dreams of traveling, building a family, owning a family home, and eventually retiring in comfort. What we didn’t count on was the crippling debt we would have to surmount.

I graduated in June from Seattle Pacific University. After working full time for the last four years, I earned two bachelor’s degrees, and roughly $140,000 in debt.

I was so steeped in the ideology of higher education that when the bills came in for tuition, books, and housing, the fear associated with the prospect of not having a degree to my name exceeded my anxiety at my mounting debt. So much so, that when the grants and scholarships that I had received began to run out, my mother consented to take out parent-plus loans to keep not only myself, but also my two elder sisters in college, under the condition that we would repay the loans in her name.

Some of my peers were not so lucky and had to drop out. Six months later they were working minimum wage jobs attempting to repay the loans they had been able to take out – still without their degrees. Read more

Starbucks’ Free College Gimmick Clouds the Real Problem

student drinking coffee

As we’ve reported here and here, the state of higher education in this country has reached a crisis. The cost of tuition has risen substantially faster than any other good or service over the past 40 years.  There are many that are calling the student debt crisis the next financial bubble.

Under the Starbucks plan, employees would receive a discounted tuition rate for the first two years from Arizona State University’s online program. The discount amounts to roughly $6,500 over two years on $30,000 retail price. The remainder of their tuition is expected to be paid by the employee, through personal savings or federal Pell Grants or scholarships.

While this promotion may be somewhat helpful for struggling low-wage Starbucks employees, it does little to fix structural deficiencies in the higher education system. They are deficiencies that Starbucks directly causes and benefits from. As a key member of the Fix the Debt organization Starbucks funded groups that were lobbying for lower corporate tax rates.  These tax cuts are a direct cause of the disinvestment we’ve seen over the past 40 years in higher education. Read more

Sallie Mae Slap on the Wrist Doesn’t Go Far Enough

This week the Department of Justice levied a $97 million fine against the student debt servicing giant Sallie Mae. The findings of the DOJ’s long investigation revealed a host of bad practices and illegal behaviors at the company, including overcharging on nearly all military service members’ loans, and mishandling borrowers’ payments to maximize late fees and penalties.

The fine is appropriate and offers some sense of justice, but it also feels eerily familiar to the lawsuits levied against the mortgage companies before, during, and after the Great Recession. Time and time again, the Department of Justice, state attorneys general, and regulators all found ample evidence of egregious wrongdoing and rampant fraud, resulting in several multi-million dollar settlements with all the mortgage giants.

Unfortunately, it ended there. There still hasn’t been a single executive of a major bank brought up on criminal charges and held accountable for the actions that caused the housing crisis. There were no structural changes in how the banks operate. These settlements simply became the cost of doing business – and we are still seeing the same reckless and illegal behavior years after they’ve supposedly taken their medicine.

The student loan debt crisis is the next bubble, no different than the mortgage collapse. Our future and our families are at risk. We have been here before –  this time, it’s not too late to stop it. Slapping Sallie Mae on the wrist isn’t the answer.

Sallie Mae is a folksy name for the giant SLM Corporation. Contrary to what many assume, Sallie Mae is a for-profit company, it services and collects on student loans. Most student loans are originated by the U.S. Department of Education, which is also making a big profit off of student loans – a reported $41.3 billion last year. If the Department of Education was a corporation it would be the third most profitable in the world, right behind Exxon Mobil and Apple.

The Department of Education has options. Sallie Mae’s contract is coming up soon to be renewed for the next five years. Violating federal law is grounds for termination. Sign our petition telling Secretary of Education Arne Duncan that Sallie’s Mae contract shouldn’t be renewed.

This is a clear example of the federal government having an opportunity to restore the faith of the country. It’s an opportunity to hold giant corporations accountable. If you break the law, even if you’re a giant financial institution, there will be repercussions that are more than just the cost of doing business.

Until corporate executives are put in jail or until lucrative federal contracts are pulled, financial industry giants will continue to consider federal law a mere suggestion.

Please sign our petition here.