Debt’s ubiquity is a burden, but also an opportunity.
“The point of debtors’ unions it is to build collective power—people power.”
Moral thinking about debt has fluctuated throughout history, as Olivia Schwob’s recent piece in these pages deftly details. The current moment, she notes, marks the possibility of still another turning point.
Bernie Sanders has proposed abolishing all outstanding student loan debt and over $80 billion of medical debt, promising to make truly public higher education and medical care available in the wake of debt abolition. Elizabeth Warren has more limited plans, but has built her career—from a law professor specializing in bankruptcy to the spearhead of the Consumer Financial Protection Bureau—focused on household debt.
Even in the most nefarious corners of household indebtedness—the criminal punishment system, which leaves people with an average of $13,607 in debt, not to mention bail debts—there are glimmers of transformation. Multiple California counties have ended the collection of select criminal legal fees, and the Families Over Fees Act—a state-wide senate bill—was introduced last year. As its proponents write, “the bill will end the unjust practice of balancing government budgets off the backs of people of color and low-income communities.”
These proliferating plans for debt cancellation indeed mark a dramatic moment in moral thinking about debt. But how did we get here? What makes moral thinking on debt fluctuate? And, now that we have gotten to this moment, what can we do? Beyond progressive legislation and even debt abolition, can we use the massively unequal indebtedness that typifies this moment in racial capitalism in the United States to build power? And if so, how do we use that power to build the alternative financial systems and relationships we need?
“Proliferating plans for debt cancellation mark a dramatic moment in moral thinking about debt.”
The answer to the first question is that social movements got us here. The Debt Free Justice Coalition in California, for example, has been leading the charge against financial predation in the criminal punishment system, alongside National Bail Out, the Movement for Black Lives, and other groups. The Debt Collective, which I co-founded, has been working for years to reimagine household debt completely. With debtors’ unions as the organizing strategy, the organization works to transform indebtedness from an isolating and often shame-ridden experience into a source of collective leverage and power over our financial system.
As we struggle under multiple forms of debt—medical debt and student debt, housing debt and debt from the criminal punishment system—the idea that debt can be a form of power may seem counterintuitive. But we need only look to words typically attributed to the oil tycoon John Paul Getty for a radically different perspective. “If you owe the bank $100,” he is reported to have quipped, “the bank owns you. But if you owe the bank $100 million, you own the bank.” The starting point for debtors’ unions is to ask, what would happen if we saw the staggering $14.15 trillion in household debt today as a source of collective leverage, rather than as an aggregate of individual liabilities? Millions of debtors, isolated, are owned by the banks. But, as Getty shows us, if you’re part of a collective that owes $14.15 trillion, you all own the banks—along with the federal, state, and municipal governments that have themselves become predatory lenders in the age of neoliberalism.
“If you owe the bank $100 million, you own the bank.”
The Debt Collective’s first debtors’ union, organized in 2014, brings together people holding debts from for-profit colleges. This collective has won not only more than $1.5 billion in debt cancellation to date but also the attention of policy makers. Indeed, in June 2019, when Representatives Ilhan Omar, Pramila Jayapal, Alexandria Ocasio-Cortez, along with Sanders, introduced their College for All legislation that would abolish student debt and make public college free, it was Pamela Hunt—Debt Collective member and student debt striker—who they invited to take the microphone. “I have $212,000 dollars of student debt, $51,000 of which is interest alone,” Pam began. “I stand before you as a person who pursued a higher degree and was worse off because of it.”
Hunt described herself as a proud single parent with three daughters who have graduated from college in the last four years, each of whom bears an additional $50,000 of student debt. She also described herself as an activist. “I came to Washington D.C. in 2015 as one of the first student debt strikers in U.S. history. We organized for years, and as a result, some debtors won relief, although I haven’t.” Identifying herself as a striker in a debtors’ union and a member of the Debt Collective, Hunt was clear about what she was asking for, and what she wasn’t: “I am not asking for forgiveness. I am seeking justice. The only justice is full debt cancellation.”
That Hunt could define justice as full student debt cancellation in introducing a piece of federal legislation that demands the same was unthinkable less than a decade ago. As Occupy Wall Street took root in lower Manhattan in 2011, the Occupy Student Debt campaign recognized “$1 T Day”—the day outstanding student debt hit one trillion dollars—demanding full debt cancellation and free college. Reuters’ Chadwick Matlin responded with derision: “They want all student debt in the country forgiven. . . . And if the government would be so kind, they’d appreciate if it would pay for higher education from here on out, as well.” He went on to ask, “what has happened to this proposal, this great demand that we’ve all been waiting for?” and respond, “hardly anybody has cared.”
“The only justice is full debt cancellation.”
NPR’s All Things Considered also covered the action and growing concern around student debt, reporting that “most experts believe there’s little chance the government would ever forgive student loans.” Undeterred by media derision and dismissal, a subset of Occupy Wall Street began to focus their analysis and activism around the relationship between finance and household debts of all kinds. In the spring of 2012 this group emerged as Strike Debt, first in New York and then in Oakland. As the group began to research and reimagine indebtedness in the wake of the 2008 crisis, they held debtors’ assemblies in both cities and produced a series of projects including the Debt Resistors’ Operations Manual (which Schwob cites at the end of her article) and the Rolling Jubilee, “A bailout by the people, for the people.”
Rolling Jubilee organizers legally formed a debt collecting agency, crowdsourced money, and purchased defaulted medical debt and private student debt for pennies on the dollar. Rather than collecting on those debts, they abolished them. Organizers designed the Rolling Jubilee precisely to challenge the moralizing myths around debt. Household debtors—too often labeled “consumer debtors”—often understand debts as a dyadic and indeed personal relationship between debtor and creditor: the creditor lent to me, and I am contractually and morally obligated to repay.
But the Rolling Jubilee illustrated how misleading this dyadic image is. Defaulted debt is less an intimate relationship between debtor and creditor, and more a tradable asset—a potential piece of larger securities, even fodder for lobbying power, as failing U.S. banks made clear in the wake of the mortgage crisis. Because debtors don't know that debt collectors buy debt so cheaply, they don't realize that they could also pay less for their distressed debts, as opposed to more. Rolling Jubilee showed people that the market value of their debt fluctuates radically, and can plummet to as little as 2 percent of its value. Following debt’s rhizomic paths, Rolling Jubilee began to pry open the creditor/debtor dyad, showing debts’ proliferative form that, to date, only creditors have been able to exploit.
“Defaulted debt is less an intimate relationship between debtor and creditor, and more a tradable asset.”
The general public loved the Rolling Jubilee. John Oliver stripped it of its radical origins and used it on his talk show, and other spin-offs proliferated. Why this popularity? In part because Rolling Jubilee made debt abolition seem less a matter of debt-as-class-struggle, debt-as-race-struggle, and more like feel-good hack of debt infrastructures. But organizers always had other ideas.
In the winter of 2014, the Rolling Jubilee purchased a portfolio of private student debt from what was then one of the biggest for-profit colleges in the country, Corinthian Colleges Inc. For-profit colleges offer a uniquely troubling case study of financialization and racial capitalism. They are often up to twice as expensive as Ivy League universities, and routinely cost five or six times a community college education.
Spending the majority of their budgets on advertising, CEO pay, federal lobbying, and shareholder returns, for-profit colleges are notorious for aggressive and misleading advertising and substandard education. Marketing themselves as the democratization of higher education, they deploy advertising and recruiting tactics that disproportionately target black and Latinx students, single mothers, and veterans. In 2014, 71 percent of Corinthian’s enrolled students were women, 35 percent were black, 18 percent were Hispanic or Latinx, and 58 percent of the total enrolled were people of color. Claiming to be a market solution to rising demand for higher education, for-profit colleges are in fact funded by public money in the form of federal student loans, which provide 86 percent of their revenues on average.
In 2013 former California Attorney General Kamala Harris filed a lawsuit against Corinthian and its subsidiaries, accusing the company of false and predatory advertising, securities fraud, and intentional misrepresentations to students. By 2014 other attorneys general joined the fray, and Corinthian was also the subject of a criminal investigation by federal prosecutors. As Corinthian’s scandals grew increasingly public, Debt Collective organizers met with a small group of deeply indebted former students who had already begun to organize. They worked collaboratively toward two ends.
“For-profit colleges are notorious for aggressive and misleading advertising and substandard education.”
First was a pilot debt strike. A group of fifteen former Corinthian students, the majority of whom were already in default on their student loans and suffering the consequences, took part in an intensive retreat that included legal workshops, leadership development, political education, story sharing, and media training. In February 2015 the Corinthian 15 went public with their historic debt strike.
Second, for those who chose not to join the strike, the Debt Collective developed an online legal tool activating what was then a little-known provision in the Higher Education Act known as Defense to Repayment (DTR). With the DTR tool online, between 2015 and 2017 the strike grew beyond Corinthian to encompass ITT Tech and Art Institute debtors, and the Debt Collective’s DTR tool was used to file 82,000 claims by November 2016 according to the Department of Education’s numbers.
Thanks to such tireless, underfunded organizing over the last four years, our nation’s first student debt strike has won over $1.5 billion in debt cancellation for strikers and rapid federal policy change. The morality is indeed fluctuating thanks to collective action. While I am clearly a biased participant, take it from former Warren advisor Julie Margetta Morgan, who told MarketWatch that though the Debt Collective’s campaign targeted a relatively small group of borrowers, it opened up a broader conversation around debt forgiveness. “This process of trying to leverage existing provisions,” she explained, “started to both show the flaws of the existing system and make people more comfortable with the argument that sometimes debt has to be just wiped away.”
Here, social movement organizing not only improved people’s material conditions, but also made the media, and eventually politicians and the broader public, change their minds.
“Our nation’s first student debt strike has won over $1.5 billion in debt cancellation for strikers and rapid federal policy change.”
The very existence of proposed legislation that would abolish student debt and wipe out large swaths of medical debt, offering college and healthcare as public goods, is a tremendous victory. But as scholar and abolitionist organizer Ruth Wilson Gilmore often says, we must organize for the day after victory. We cannot pass our political, social, and environmental agendas to progressive politicians and walk away. This country’s damning histories of racist and colonial exclusion from ostensibly universal public provision remind us that we must stay not only vigilant but also visionary. The point of debtors’ unions, after all, is not merely debt cancellation or even robust public goods handed to us by state power: it is to build collective power—people power.
If, as Getty teaches us, owing the bank can mean owning the bank, debt’s ubiquity presents the opportunity to transform indebtedness from an issue of individual isolation and shame to a platform for collective action. Debt mobilized collectively as leverage through debt strikes or debtors’ unions could force the financial system to recognize people, in addition to banks, as systemically important and too big to fail. A look back at the 2008 financial crisis through this flipped lens—debt reimagined as collective leverage—illustrates the potential power and scale of debtor organizing.
The 2008 crisis was triggered by rising default rates on U.S. subprime mortgages. Small and unintentionally coordinated acts of nonpayment destabilized the entire global financial system. What if that nonpayment had been intentional and coordinated? What if there had been a mortgage-holders union in which union organizers heard from members that they could no longer afford their payments, and the union decided to threaten collective nonpayment to negotiate a bailout for homeowners, rather than banks? Or to demand mortgage write-downs, an end to racist lending practices, or a cap on ballooning adjustable interest rates?
“What if there had been a mortgage-holders union?”
We should ask ourselves why these counterfactuals sound far-fetched. Even Sheila Bair, the Republican head of the FDIC during the crisis, argued that homeowners should be bailed out, in a sense. As Joe Nocera wrote in the New York Times Magazine, Bair “was a fierce, and often lonely proponent of widespread mortgage modification” during the crisis, and had been sounding the alarm on the predations of subprime loans well before the crisis hit. And yet Fed Chairman Alan Greenspan and Treasury Secretaries Henry Paulson and Timothy Geithner dismissed Bair, insisting that banks be bailed out at the expense of homeowners.
Looking back at this outcome, we might say that some debtors—banks and bondholders in particular—were bailed out, while others—mortgage holders—were not. Imagine if Bair had had the backing of a nationwide union of mortgage-holders. The banks have a powerful collective advocacy operation: lobbyists and a revolving door of regulators and cabinet members who move between the upper echelons of banks and government. Debtors have no such collective representation.
Imagine if there had been a nationwide union of mortgage-holders to participate in the visioning and negotiation of Obama’s Home Affordable Modification Program (HAMP), a government-initiated program that farmed out the allocation of mortgage relief to the same predatory industry that caused the crisis in the first place, resulting in the denial of assistance to 68 percent of the 6.1 million people who applied. The counterfactual of the 2008 crisis with debtors’ unions allows us to imagine the potential of debtors—via their leverage over the economy—to exercise political power, disrupt major institutions, force elites to enact reforms they otherwise would have avoided, and even, dare I say, bring new economic systems and relationships into being.
In their potential to exercise political power, debtors’ unions work on at least two levels. First and most basically, they offer borrowers the power of contract negotiation which, to date, lenders alone have held. Are the terms fair? What is the interest rate? The repayment term? The fees and penalties? Are contract terms discriminatory? Will this income stream be securitized and if so, to what potential effect for borrowers? In addition to negotiations before the contract is signed, debtors’ unions’ ability to threaten or enact mass refusal to pay also enables the renegotiation or write-down of existing contracts.
Second, and more broadly, because debtor organizing targets the creditor, the regulation of lending, and the means of financing the good or service in question, it draws public attention to how and by whom things we care about—education, healthcare, housing, incarceration—are (or are not) funded. Debtors’ unions can exercise their power not simply to renegotiate individual debt contracts, but also to force open questions that the era of finance seems to have foreclosed: How do we even pay for things in the first place?
“Some debtors—banks and bondholders in particular—were bailed out, while others—mortgage holders—were not.”
The potential of debtors’ unions, in other words, is not merely to refuse and renegotiate illegitimate debts. The broader potential is to build power—with collective debt refusal as leverage—in the age of finance capitalism. And rather than merely ceding that power to the state, whoever may occupy it, we can use that that power to build the reparative anti-capitalist and anti-colonial social relations we need. That work is continuing. Earlier this month, on February 7, the Debt Collective launched a national student debt strike. Student debt strikers demanded full student debt abolition and free college for all from the grounds of our nation's most prestigious formerly public college system, the University of California.
In the foreword to his 1962 bestseller Capitalism and Freedom, Milton Friedman wrote:
Only a crisis—actual or perceived—produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable.
Moral thinking about debt has fluctuated so radically in this moment because social movements have been in struggle to keep new ideas, expansive visions, and reparative worlds alive and available. As we push and watch the politically impossible become politically inevitable, we must continue to imagine and organize for the day after victory.
Hannah Appel is Assistant Professor of Anthropology at UCLA, where she also serves as the Associate Faculty Director of the Institute on Inequality and Democracy. She is a founding member of the Debt Collective.
This article previously appeared in Boston Review.
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