When it comes to alleviating the enormous burden of student loan debt on young Americans, there are typically two solutions reformers have in mind: Bankruptcy relief, or a full-out student loan bailout.
But joinStampede, an ambitious campaign that launched just over two weeks ago, hopes to harness the power of collective action to work with lenders themselves to negotiate better terms for student loan borrowers. The most appealing part of the strategy? It doesn’t require congressional action.
“It’s about getting people together who have a common interest, and then negotiating on behalf of the group,” said Stephen Dash, the founder of joinStampede. “It’s about harnessing the power of a group to achieve change in the market.”
Americans now owe more than $1 trillion in student loan debt, surpassing the amount owed on cars or even credit cards. In fact, student loans are the only kind of household debt that continued to rise during the Great Recession, according to a February report from the Federal Reserve Bank of New York. And that debt continues its steady growth – between 2004 and 2012, the number of borrowers for student loans, as well the average balances, reportedly both increased by 70 percent.
Congress has largely failed to address the burgeoning student loan debt bubble. That’s where joinStampede steps in.
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The goal is to mobilize at least 100,000 Americans with student loan debt and then use the power of that group to negotiate better loan terms with private lenders. Borrowers have until April 4 to join the campaign, by registering via its website, at no cost. Between April 5 and April 17, joinStampede aims to use the power of collective action to negotiate more favorable repayment terms -- some possibilities include a lower interest rate or an exclusive rebate -- on behalf of its members.
As of Monday, joinStampede’s almost 27,000 members accounted for more than $1.5 billion of student debt. That estimate is based on a self-reported debt range that members input when registering on the website.
Dash, who is Australian, admittedly does not carry the kind of back-breaking student loan debt that plagues the people looking to joinStampede for some kind of potential relief. He said he only grasped the scale of the problem after a friend who attended a university in Boston told him his monthly student loan payments equaled twice his rent.
“I almost fell out of my chair,” said Dash, explaining how that is virtually unheard of in his native Australia. “My peers in the U.S., instead of saving for a deposit on a house or something like that, have to devote most of their extra income to their student loans.”
As of 2012, the average student loan balance for all age groups was $24,301. Of the nearly 20 million Americans who attend college each year, close to 60 percent borrow money to cover at least some of the cost, which the U.S. Department of Education reports is outpacing both inflation and wage growth.
The goal of joinStampede is simple enough: Any kind of relief. While Dash, who previously worked as a banking analyst for JP Morgan, acknowledges that there’s no way of telling what kind of deal the campaign ultimately will be able to strike, he is hopeful. Dash said private lenders have already reached out to him for tentative discussions.
But Alan Collinge, the founder of the grassroots advocacy organization Student Loan Justice, is skeptical. According to Collinge, any real platform for effective student loan relief would have to address reinstating bankruptcy protection for private loans.
Bankruptcy relief has not been an option for federal student loans since 1978. But it wasn’t until 2005 that Congress passed a law exposing private student loans as well, treating them differently from every other form of private debt. (Interestingly, according to Sen. Dick Durbin, D-Ill., lawmakers cannot even pinpoint the person who offered that 2005 provision).
That means borrowers -- often, young adults barely out of high school -- do not have any consumer protections to guard them from the high, often variable interest rates attached to private loans. There is absolutely no way to be rid of them. Even if borrowers decide to simply stop paying their debt, lenders can garnish their wages.
According to Collinge, there is one glaring problem with the joinStampede strategy: It relies on offering benefits to lenders. Those benefits? Free marketing for the private lenders that choose to participate -- after all, reducing rates on borrowers certainly can’t be bad for publicity -- and, as a result, a new customer base.
“It seems to be trying to convey the notion of a unionized, collective bargaining dynamic, but in truth is more of a ‘matchmaker’ between borrowers and lenders,” Collinge said.
Plus, private loans only account for about 15 percent of the nation’s student debt. Real reform clearly will not occur until federal loans are addressed, and that can’t happen without congressional action.
It’s not that lawmakers aren’t trying. Various bills about the nation’s mounting college debt -- everything from a move to completely forgive all student debt, to simply reinstating bankruptcy protection -- have been proposed in recent years. And they’ve all failed.
Rep. Karen Bass, D-Calif., is the latest lawmaker to propose a measure to assist student borrowers. The Student Loan Fairness Act of 2013 would aim to address the looming student loan crisis by permanently capping the interest rate of all federal loans at 3.4 percent, suspending interest payments while borrowers are unemployed and creating a “10-10” standard for repayment that would actually discharge that debt if a borrower makes 10 years of consistent payments equaling 10 percent of their discretionary income.
The Congressional Budget Office has yet to report how much such a program would cost taxpayers.
For his part, Dash knows joinStampede is far from a full-fledged solution to the country’s student debt epidemic. But it’s a start.
“There isn’t a silver bullet here,” he said. “Our key promise is, we will get an offer that a member will not be able to receive anywhere else.”