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Yves here. As much as we we’ve been vocal supporters of many of the initiatives of the Occupy Wall Street movement, such as the excellent work of Occupy the SEC, the impressive relief efforts of Occupy Sandy, the success of local Occupy Homes groups in combatting foreclosures, the many projects of the Alternative Banking Group (including both a book explaining the crisis and its 52 Shades of Greed card deck, and last but not least, Strike Debt’s Debt Resistors’ Operations Manual.

However, Rolling Jubilee is a notable exception.

Rolling Jubilee, with great fanfare, raised over $800,000 to “abolish debt” of individuals who were stuck with high rate loans. Their idea was to buy the debt at a deep discount and “forgive” it.

As noble as this project sounds, as we explained, it was fraught with problems. First, the simple act of buying discounted debt means the money would go to the very same predatory debt collectors that are the thuggish enforcers of this abusive system. Second, the large discounts means that the debt is almost certainly unenforceable. It wouldn’t be sold so cheaply if it were. Third, forgiving debt has the potential to create tax problems for both the borrowers and for Rolling Jubilee itself.

Now this project still could have been useful despite those many apparent issues had the leaders recognized the debt buys as a vehicle for raising visibility about the issue, rather than an end in itself. For instance, Rolling Jubilee did (with difficulty, another problem we anticipated) buy what on its face was millions of dollars of medical debts. Those debt buys could have served to gather and present the stories of the victims. It would have been simple: Rolling Jubilee said they were sending letters to all the people whose debt they were waiving. They could easily have enclosed pre-paid return post cards asking if the recipients would give their permission to be contacted by members of Rolling Jubilee to gather more information. They could then have done both a data compilation, and for those willing, interviews or even video tapings.

Instead, the occasional debt buys led to blips of stories that were about Rolling Jubilee and not about the problem, and those stories had no afterburn. This appears to be happening yet again as Rolling Jubilee, which said it was going to spend its funds on medical debt, recently changed focus to student debt. A misguided program compounded by a self-serving approach to public relations is far from a model of effective social action.

This post is by an activist deeply involved in the effort to fight excessive and sometimes abusive student loans. The critique echoes many of our observations.

By Alan Collinge of the Student Loan Justice Organization, a grass roots group seeking the swift return of standard bankruptcy protections and other consumer protections to all student loans in the U.S.

“We started by going after Sallie Mae debt because Sallie Mae is for my generation sort of the Voldemort, this cosmic level of evil out there,” Gokey said. But after suggesting that Sallie Mae typically sells those debts for 15 cents on the dollar, St. Peters abruptly changed course and refused to deal with Gokey and Debt Collective, he said. (St. Peters did not return a call seeking comment.) Think Progress, “Debt Activists Just Canceled $4 Million In Student Debt. For Their Next Trick, They Need Your Help”

In recent weeks, much media attention has been focused on a project dubbed the “Rolling Jubilee”- an action whereby people’s defaulted student loans are purchased for “pennies on the dollar” with donated money, and the debt is extinguished. To date, the Jubilee claims to have forgiven some $4 million in defaulted student loan debt at a cost of about $100,000.

Sounds like a great idea, right? After all, who would not want their student loan debt to be paid off for them? Looking at the board members for the Rolling Jubilee (which includes Occupy Wall Street pioneer David Graeber), one could only assume this would be a slam dunk for the 99%; however, Sallie Mae’s Douglas St. Peters believes the forgiveness of debt to be a bad idea. Surprisingly, however, it turns out that this project is, I am sorry to report, a terrible idea with troubling implications. Consider the following and see if you don’t agree:

Putting aside the obvious criticisms- that the project only applies to private loans and does nothing to address the rising cost of college, skyrocketing debt loads, or the uniquely predatory nature of the debt due to the removal of fundamental consumer protections (like bankruptcy) that exist for all other loans, the most troubling aspect of this project lies in the systemic effect of the project- who it helps, and who it really doesn’t. Upon examination from this perspective, the project reveals itself to be, frankly, suspicious.

Think about it. The RJ, by purchasing defaulted debt, only “feeds the beast”, and in fact makes defaulted debt more valuable on the market. This rewards the horribly predatory behaviors that the absence of bankruptcy protections and other factors have enabled in the private student loan industry. Since, after exhausting all existing opportunities for collection of these loans, the debt holders know there is a buyer for the “worst of the worst”, this only encourages the lenders and loan holders to inflate this debt as much as possible, with the knowledge that there is a willing buyer for even the worst performing loans! So that is quite a red flag,

Being a long time Zucotti Park resident myself, I’d almost be willing to overlook this distasteful aspect of the project, and instead focus on the suffering that this transaction eased…but there again, we get an unpleasant shock: The loans that the project buys are almost certainly at or past their statutes of limitations(private student loans still have these), and/or were likely never paid on by the borrower much if at all. So while it is impressive to hear of the large amounts of debt being forgiven, the fact is that the people who are finding their debts erased more than likely won’t care much because they are either no longer under any legal obligation to pay the note and have long since forgotten about it, or never intended to pay the note in the first place, and never would! So these borrowers won’t likely be gushing with praise and thanks, and frankly won’t be helped much if at all by the repurchase of the debt. I suspect that people learning of their debt being purchased and erased were, instead of relieved and grateful, were more perplexed as to why anyone would go to the trouble of clearing up debt that they themselves had forgotten about long ago! By far, the happiest participant in these transactions, are the banks/collection companies who are thrilled to get anything for the loans! People with cosigners for their loans (about 90% of private loan borrowers), and people who have been paying at least something for their debts should not hold their breath if they are hoping to one of the lucky few to get their loans absolved- it simply won’t happen.

So this project does very little for the borrowers it affects, and nothing but encourage and exacerbate the predatory underpinnings of the lending system by rewarding instead of resisting it (Resistance being an oft-repeated theme by the folks running this program, and its affiliated organization, dubbed Strike Debt). There is no resistance, here, only paying into a predatory lending system for almost no real benefit. I wouldn’t go so far as to call bullshit on this project, but it is really, extremely tempting to.

Unless there were grand plans to somehow buy off ALL student loans in the country- and I’ve been told that there isn’t, there is almost nothing good to say about this project, and a lot of troubling questions that cry out for answering.

It is surprising to me that the well regarded people (David Graeber, Andrew Ross, and Astra Taylor) who sit on the board for this project would let their names be attached to it upon reflection.

Notes and References:

– Debt Activists Just Canceled $4 Million In Student Debt. For Their Next Trick, They Need Your Help Alan Pyke, “Think Progress”

– “The Argument” Alan Collinge, Student Loan Justice Org.

– Strike Debt is a nationwide movement of debt resisters fighting for economic justice and democratic freedom. You are not a loan.