Forgive Us Our Debts

SARA WAS DESPERATE. She was fleeing an abusive husband, living with her mother in a mold-infested house, and she needed to rent an apartment. A recent college graduate, Sara had a job at a hospital that paid well and provided benefits. Apartment rent was within her means. But the background check came back to the landlord: “Do not rent.”

Sara (not her real name) was $22,000 in arrears on her student loans. The more she tried to pay the debt, the higher the interest rate climbed. Only after she filed for bankruptcy did she learn that none of her student loans were eligible for even the basic bankruptcy protection afforded other debts. At any time, the lender could garnish her wages—even to the point of making it difficult to pay basic living expenses, such as rent and utilities.

Sara is one of the new 21st century debtors, in financial bondage because they borrowed money for education. In 2014, the education debt in the United States totaled $1.2 trillion. More than 7 million borrowers are in default.

Why are education loans so difficult to manage? Credit card debtors often can transfer high-interest debt to another lender for a better deal. Car loan borrowers can walk away from the loan and allow the car to be repossessed. Homeowners can refinance their mortgage or, if all else fails, default and save their money for a rent deposit while the lender goes through the foreclosure process. As a last resort, these types of borrowers can declare bankruptcy and have their debts forgiven or reduced in a manageable payment plan. Bankruptcy courts will not allow debtors to be made homeless just because they can’t pay their creditors.

But if the borrower of an education loan is late with a payment or goes into default, according to Andrew Martin of The New York Times, the lender can levy penalties up to 25 percent of the balance and legally increase the interest rate to several times the original rate.

The education loan borrower cannot refinance at a lower rate, cannot pledge property to satisfy the loan, and cannot have the loan forgiven in bankruptcy.

So let’s stop calling this system “student loans,” a phrase that evokes an image of college-age kids borrowing a little spending money while they work their way through school. It’s education debt. The present system is broken and is turning former students into indentured servants.

“This is personal,” Sen. Elizabeth Warren said before the Senate last May when she introduced a bill that would have allowed education debtors to refinance their loans. “I grew up in an America that made it a priority to invest in young people,” Warren said. “I believe in that America—an America that puts students ahead of billionaires.”

Changing this system must begin with recognizing and changing the assumptions and attitudes that got us here.

Reset the Balance

Our nation needs people who enroll in higher education to learn specialized skills, gain specialized knowledge, and lead society to a greater understanding of the wider world. Public colleges and universities were established to provide tax support for an educated citizenry. Private donors funded (and got naming rights to) professorships and scholarship funds for the same reason.

Starting with the GI Bill after World War II, continuing with the National Defense Education Act in 1958 (which funded teacher education to meet a national shortage), through the War on Poverty in the mid-1960s that established subsidized loans and grants, Congress and the president agreed that the nation had a stake in helping people go to college. For the most part, what and where students studied was their choice, although some programs rewarded doctors or teachers who worked in underserved communities.

But the loan program was a new funding approach, giving money to individuals instead of institutions. An unintended consequence was the idea that education mainly benefits individuals, rather than society as a whole. Beginning in the late 1970s, with rumors that recent medical and law school graduates were declaring bankruptcy to avoid their large loans, Congress began cutting back. In a series of laws over the next 25 to 30 years, Congress reduced bankruptcy protection for federally financed education loans. In 2005, nearly all private loans were excluded from protection as well.

More recently, funding for educational institutions has also been cut. From 2000 to 2013, income for U.S. universities shifted from mostly public support to nearly half coming from tuition.

According to The Economist, “Universities have passed on most of their rising costs to students.” For public universities, the average cost for in-state students is $8,400; it’s more than $19,000 for out-of-state students. The average private-school tuition is greater than $30,000 per year.

This shift is having a measurable effect. The federal Consumer Financial Protection Board held public hearings on the impact of education debt and published its findings in May 2013. In addition to the economic impacts of delayed home buying and reduced consumer borrowing, the report commented on the growing social costs of high indebtedness of educated people: “The United States faces a critical shortage of primary [health] care providers. ... High debt burdens can impact a medical student’s choice of practice area, leading some to abandon geriatrics and family medicine in favor of more lucrative specialties, exacerbating the primary care shortage.”

Education debt also directly affects churches. Sixty-seven seminaries in the Association of Theological Schools (ATS) are participating in research funded by the Lilly Endowment to define the economic challenges faced by seminary students and graduates. Daniel Aleshire, executive director of ATS, explains that clergy with higher debts need and expect higher salaries. This puts pressure on congregations to funnel more of their contributions in that direction, potentially forcing clergy to “compromise their moral and religious authority to lead,” he says.

Aleshire urged the project committee to wrestle with the dilemma. “If we act as institutions and individuals as if there is not enough,” Aleshire says, “then we ignore the reality that God has the resources to accomplish God’s purposes. If we think we will solve the problem, we fail to recognize its enduring complexity. If we do nothing about it, we fail to be faithful.”

How to restore the balance of public vs. individual support for higher education, including seminaries? First, increase tax support for public higher education, including scholarships and grants. Second, increase congregation and denomination support for seminaries and ministerial candidates. Third, encourage wealthy individuals, through tax policies as well as public opinion, to return to the practice of funding professorships and scholarship funds instead of putting their money and names on buildings and sports arenas whose maintenance simply adds to the cost of education.

Treating Debtors as Profit Sources

If you shift the burden of paying for education from public money to individual students and then view their debts as a source of profit and their earning capacity as an asset for their lenders, the result is a form of debt slavery.

News stories and media features often treat “the student loan problem” as a personal-finance issue. Suze Orman, author of The Money Class, warns that the system is stacked against borrowers of education loans. “When you don’t pay [loans] back, [the lenders] are thrilled, because it starts to compound and compound and compound, and $40,000 turns into $80,000 turns into $150,000,” Orman told an audience at George Washington University in 2012. She noted that struggling debtors can sometimes get their loans deferred, but the interest keeps piling up.

The federal government has turned into a collection agency for education debt. The Educational Credit Management Corporation is a nonprofit corporation with an exclusive government contract to service loans for 25 lending agencies and the U.S. Department of Education. It has been criticized increasingly for predatory lending practices, harassment of debtors, and rigid pursuit of collections even in the face of court rulings of hardship or sufficient payment of debt.

Consider the case of Thomas. He borrowed a modest $1,500 to get a medical technician certificate. He finished the course, but he never got a job in the field. He has had a number of minimum-wage jobs, but he has been unemployed and underemployed for much of the time since he got his certificate. In the meantime, he has paid back more than the principal of the loan and still owes $1,500. Because of sporadic payments, the interest rate on his loan has gone up to 35 percent and his debt continues to grow.

Thomas was behind in making child-support payments to the mother of his 2-year-old son and had promised to give her his income tax refund for a deposit on a rental apartment, as she and the boy were homeless. The federal government withheld his refund and applied it to his education debt instead.

And that’s not the only funds the federal government can withhold. According to Bloomberg Business Week, the federal government withheld all or part of the monthly Social Security payments of 155,000 retirees in 2013 to pay off student loans, up from just 31,000 in 2002.

The federal government is profiting from this rigorous debt collection, when it ought to be supporting students’ hard work.

As We Forgive Our Debtors

Timothy C. Ahrens, senior minister of First Congregational United Church of Christ in Columbus, Ohio, began a social justice project with young adult church members. After a general discussion about what issue to tackle, Ahrens finally asked, “What makes you angry?”

The answer was student debt. The young people felt betrayed by a society that encourages people to “get an education,” offers so-called help through loans, and then imposes unanticipated higher costs as soon as they graduate. “For millennials, their whole life story is caught up in this debt,” said Ahrens, who is 57.

Looming debt has affected their choice of career, their ability to tithe to the church, and their relationship with the congregation. Recently, the group has begun talking about the biblical concept of Jubilee. Ahrens points out that “the actual words used in the Lord’s Prayer are ‘debt’ ta opheiemata and ‘debtors’ tois opheiletais (Matthew 6:12 and Luke 11:4).” The words refer to “the forgiveness of a slave debt,” Ahrens wrote.

The education debt system in the U.S. is a moral crisis. Ethicist Obery M. Hendricks says the plight of debtors in the gospels “was not just an unfortunate unfolding of the natural scheme of things; it was unjust and against the law of God. ... In other words, the people’s poverty was not the result of laziness or incompetence; it was the result of the greed of others. To be poor while others are rich, and to have to pay to borrow what should be freely lent, if not freely given, is not the way of God’s kingdom.”

It’s not the way of the U.S., either.

Driving people who strive to be educated into poverty and debt slavery is not good for the country—not for its economy, not for the health and well-being of its citizenry, not for a well-functioning government, and not for a socially conscious church.