Occupy Offshoot Cancels $4 Million in Predatory Student Loans鈥攁nd Starts a Debtors Union
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Nathan Hornes was sitting on the couch watching Maury when he saw the ad for Everest College.
Owned by the for-profit education company Corinthian Colleges, Inc., Everest commercials are known to target low-income people, promising a flexible education and, through it, jobs that earn more than minimum wage. They’re often aggressive, the actors calling viewers out for being lazy and then daring them to live up to their full potential. Hornes was an easy target.
鈥淭he first commercial I saw was the girl and she鈥檚 like 鈥極h, you鈥檝e got to get off the couch,鈥欌�� he said. 鈥淵ou can go to work, go to school, everything like that.鈥�
Hornes, who had dropped out of high school to pursue a career in music, had just turned 20 and thought getting a degree sounded like a good idea. Plus, the woman in the ad promised, he could work around his current gigs. So he called Everest.
After that first informational call, Hornes said Everest representatives phoned him constantly, sometimes up to four times a day. They told him he needed to enroll for classes in order to graduate as soon as possible. They promised that a 鈥渘etwork of employers鈥� would be waiting after he graduated, and they would help him find a job. So Hornes signed up for a degree in business management, and at Everest鈥檚 suggestion he took out loans to pay for it.
鈥淚 used to always tell people I went to Everest,鈥� he said of the early days, when he was proud of being a college student. But now, he said, 鈥淚 don鈥檛 even like telling people I went to this school.鈥�
At the time he enrolled, Hornes didn鈥檛 know how to evaluate a school鈥檚 accreditation or what to expect from college classes. Sometimes teachers didn鈥檛 even show up, and much of what they did teach felt like common sense. He said he didn鈥檛 even really have homework.
When he started to look for work after graduation, Hornes quickly realized his options were not as abundant as Everest had led him to believe. Job leads from the career center were sometimes forwarded from Craigslist. He hadn鈥檛 realized that many other colleges and employers don鈥檛 take degrees from for-profit colleges seriously.
鈥淓mployers find it laughable,鈥� he said. 鈥淚鈥檝e literally taken it off my resume. That鈥檚 how embarrassing it is.鈥�
Now 24, Hornes shares a Los Angeles studio apartment with his aunt. He often works 16 hours a day at two part-time jobs, one of them at a Carl鈥檚 Jr. restaurant in the airport.
And that degree from Everest? He owes $56,000 for it.
A Rolling Jubilee for student debt
The abysmal quality of Hornes’ academic experience may be extreme, but the debt鈥攁nd the way it will constrain his life, possibly for decades鈥攊s not. Hornes and millions of other former students and their families are part of a student debt crisis of tremendous proportions: Americans鈥攕ome of them senior citizens鈥攖ogether owe more than $1 trillion in student loan debt, the figure steadily rising as states and the federal government cut funding for higher eduction. Even credit card debt is not as large.
That’s why Strike Debt, an organization that emerged out of Occupy Wall Street to protect debtors’ rights, announced today it has purchased鈥攁nd abolished鈥攎ore than $4 million in student debt. It’s a first for the organization, which until now has only canceled medical debt.
The organization’s Rolling Jubilee project used $100,000 of raised capital to buy the privately owned debt of more than 2,700 Everest College students. They did this by purchasing private student loans from secondary markets for pennies on the dollar鈥攋ust the way collection agencies do. And then, they simply canceled it.
The idea arose from conversations three years ago at Occupy Wall Street. There, and at smaller gatherings focused specifically on the issue of debt, people who held student loans or medical debts often stood in a circle and encouraged each other to shake off their feelings of guilt. Sometimes they brought their bills or other paperwork and set them on fire. Meanwhile, members were constantly studying the mechanisms through which banks, collection agencies, and other organizations traded and profited from debt.
They took what they learned and turned it into Rolling Jubilee.
The project kicked off in November 2012鈥攐n the one-year anniversary of Occupy Wall Street鈥檚 eviction from New York鈥檚 Zuccotti Park鈥攁nd organizers raised more than $250,000. Because Strike Debt was paying only about $5 for $100 of debt, that amount allowed them to purchase millions of dollars worth of other peoples鈥� unpaid medical obligations.
In the nearly two years since then, organizers this week told 猫咪社区! that Rolling Jubilee has canceled more than $15 million in medical debt.
But unlike hospital bills, federal student loans are guaranteed by the government and are mostly unavailable for purchase on secondary markets. This is where debt collectors usually hunt for it. However, because Everest College encourages students to privately borrow a percentage of their tuition to supplement money available through federal student loans, this for-profit school created a unique pool of student debt ripe for the raiding.
鈥淲e started with medical debt because there is a clear moral argument,鈥� said Laura Hanna, a Strike Debt organizer. 鈥淧eople shouldn’t be forced into debt because they get sick.鈥�
Hanna said education was a natural next step, from an ethical point of view: 鈥淲ith education, people are trying to work to improve their lives. To make something better for themselves. Instead, most people fall into a debt trap. And there is no escape … not even through bankruptcy.鈥�
Predatory Lending U
Yesterday, the national Consumer Financial Protection Bureau sued Corinthian Colleges, Inc., for defrauding tens of thousands of students. The CFPB accused Corinthian of running a 鈥減redatory lending scheme,鈥� enrolling students in an overpriced education that would never help them get a job.
Corinthian is charged with lying to prospective students about job placement statistics. Ben Lopez, a former Everest student, told us he was hired as a librarian’s assistant in January when he finished his program, but after his graduation ceremony a few months later, he was laid off. Part of the company鈥檚 schtick is to hire recent grads to inflate career placement numbers, classifying one or two days鈥� employment as a career.
When 20-year-old Hornes first talked to Everest on the phone, the numbers they fed him were based on this and similar practices.
, from July 2011 to March 2014, Corinthian issued 130,000 private loans to pay its own exorbitant fees. The outstanding loans total more than $568 million.
And what kinds of students did they target? that according to Corinthian’s own internal documents, they sought out people with 鈥渓ow self-esteem鈥� and 鈥淸f]ew people in their lives who care about them鈥�; 鈥渋solated鈥� people who felt 鈥渟tuck, unable to see and plan well for future.鈥� They intentionally marketed to people with little-to-no financial literacy or credit history.
Everest recruits through daytime television advertisements like this one, which Hornes says he saw.
Moreover, the school misled students to believe it had no financial interest in the private loans they were pushing, known as 鈥淕enesis鈥� loans. But because the law prevented Everest schools from receiving all of their funding from federal loans, they were incentivized to convince students to take private ones, which then allowed the school to receive more public money. As the Bureau put it, 鈥淓very Genesis loan dollar that Corinthian induced its students to borrow, in effect, allowed Corinthian to receive up to an additional nine dollars in Title IV aid.鈥�
Corinthian has been under fire for a long time. It鈥檚 been accused of fraud by more than one federal agency and (For more on Corinthian’s sad backstory, check out John Oliver below).
If won, the CFPB鈥檚 case will secure more than $500 million, which will be used to cancel existing private student loans. That would be great for former students like Hornes. But it could also take years, while many who owe the company money slog away at minimum wage, trying to pay down their Genesis loan.
When asked whether he might consider going to college somewhere else in the meantime, Hornes says he is interested, but wary. Going to school almost anywhere else would, for him, mean more debt.
A debtors union
As effective as Rolling Jubilee has been in calling attention to debt issues, $4 million hardly makes a dent in a trillion-dollar picture鈥攏ot to mention the billions of dollars tied up in medical and other debts.
鈥淩olling Jubilee is a fantastic way to punch through the illusion that you actually owe what the 1 percent thinks you owe,鈥� said Thomas Gokey, a Rolling Jubilee co-founder who’s eager to take things to the next level. 鈥淚t鈥檚 not going to be possible to buy all the debt out there and get rid of it, so we鈥檙e going to need other tactics to win 鈥� it鈥檚 going to be a coordinated, large-scale effort.鈥�
Alongside today鈥檚 $4 million abolition announcement, Strike Debt is also unveiling plans for a new project: Debt Collective. Gokey, who’s forthright about his personal investment in the effort (鈥淢y student debt today is significantly more than the last time I talked to 猫咪社区!鈥� he told us鈥攁nd that was just two years ago), calls Debt Collective an 鈥渙n ramp鈥� to bigger changes and more aggressive tactics when it comes to abolishing debt. 鈥淭here鈥檚 never been something like a debtors union before.鈥�
Gokey envisions a movement where debtors are empowered to 鈥渞enegotiate, resist, and refuse unfair debts鈥� in the same way labor unions collectively leverage better pay, safer work environments, and time off. And to beat down the enormous pile of debt in general, they鈥檒l advocate for free education and universal health care.
Hanna compares Debt Collective to 鈥渢he factory floor of the past,鈥� when labor organizers, gathered in the same physical space, came up with tactics like slowdowns, walkouts, and strikes. As debtors, Hanna said, 鈥淲e might engage in collective bargaining or more robust refusal campaigns down the line 鈥� with an aim to transform the way we fund and access social goods.鈥�
As for this round of jubilee, Strike Debt has been sending letters to the thousands of debtors from Everest, delivering the news of a lifetime. Unfortunately, Hornes will not be one of them (debts are purchased anonymously, and Strike Debt only finds out debtors’ identities afterward). Still, he鈥檚 not giving in to the prospect of a lifetime of interest payments while working minimum wage jobs.
Back in Los Angeles, Hornes is now a key organizer with the Everest Avengers, a group of nearly 200 current and former Everest College students who feel they were duped into believing they were paying for a good education and are now burdened with crippling debt because of it. And within the Avengers, the Corinthian Collective was formed.
Made up of about 40 former students from the for-profit school system, the Corinthian Collective has been working directly with Strike Debt to strategize around freeing students from unfair and fraudulent loans. On the table, Hornes hopes, will be options like legal action and working to convince the Department of Education to discharge outstanding debts for Everest students across the country.
He may have missed out on the high-quality education in business management he aspired to. Instead, though, Hornes has gotten a crash course in leadership and organizing. Today, he鈥檒l be facilitating national conversations uniting Everest students, publicizing the facts behind his fraudulent debt, and fielding questions from the media.
Finishing up his short shift break before heading back to Carl鈥檚 Jr. last night, he said he now sees himself as a 鈥渂uffer鈥� who helps demoralized classmates understand that the education they received at Everest College will likely never lead to the jobs they were promised. Instead, it has brought them together.
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Christa Hillstrom
is a freelance writer and former 猫咪社区! editor.
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James Trimarco
is a former senior editor at 猫咪社区!
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Liz Pleasant
is a former managing editor at 猫咪社区!
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