STUDENT DEBT | 35

dent debt from reports, it is not impossible. You can use the strategies and
resources outlined in Chapter IX to demand that CRAs and debt collectors
proe that the amount o your debt is ully eriable. 1his will require a
concerted letter-writing campaign, but you may be pleasantly surprised by
the results. Often, record keeping is poor and there are no accessible records
tying you to a debt. Although a court judgment is not required before your
paycheck, bank account or tax return is garnished, you are entitled to an ad-
ministrative hearing if you request one.
If you want to get out of default, you can often rehabilitate your loan by
entering into an agreement to make twelve consecutive on-time payments to
the original lender or guarantee agency in exchange for the removal of the prior
delinquency history from your credit report. Be sure to get this agreement in
writing and to be clear about how this will be entered on your credit report.
KNOW YOUR LOANS
As the amount of middlemen standing between you and your loan con-
tinues to increase, it can be hard to know who guarantees, originates, ser-
ices and collects your loans. 1o nd this inormation about your ederal
loans, visit the national student loan database at nslds.ed.gov/nslds_SA. Its
a little more complicated when dealing with private loans. FinAid is a great
rst resource or understanding the dierent institutions inoled: naid.
org/loans/studentloans.phtml. Its important to fully understand your own
situation, since the laws can differ. For example, state guarantee agencies
are exempt from the Fair Debt Collections Practices Act, but any private
collection agency hunting you down must comply with this law. So be aware
of their illegal practices and know your rights. This FinAid page about de-
aulting on student loans is a good place to start: naid.org,loans,deault.
phtml. Abusive debt collection behavior is also highlighted in Chapter IX.
We recommend you read it carefully.
COLLECTIVE ACTI ON TOWARDS CHANGE
I we ght this system alone, the best we can hope or is to keep our
heads above water. The good news is that those suffering with student debt
have begun to organize. Collective action is the only true solution. At this
point, there are several campaigns under way.
Student Loan Justice (founded in 2005) and Forgive Student Debt to
Stimulate the Economy (founded in 2009) aim at persuading lawmakers to
reform the system. Both organizations have pushed for policies restoring
bankruptcy protection and partial debt forgiveness. Unfortunately, these rea-
sonable proposals have produced little in the way of legislative change. Four
attempts at restoring bankruptcy protection have ultimately failed. And in
spite of over one million names on a petition urging Congress to pass a ten-
36 | THE DEBT RESISTORS' OPERATI ONS MANUAL
year partial orgieness program, lawmakers, heaily beholden to the nance
industry, have not budged. Unfortunately, these measures will not de-com-
modify education nor claim it as a public good.
The Occupy Student Debt Campaign (OSDC) emerged in 2011 in tan-
dem with Occupy Wall Street as part of a global uprising against neolib-
eralism. 1o ght the debt-nancing o education, OSDC proposes dierse
collective strategies of direct action, including a campaign of collective debt
refusal. For more details, refer to the OSDC website (below).
OSDC believes that our public education system must be free, that any
future student loans must be offered at zero interest, that all university in-
stitutions must be transparent and accountable, and that all current student
debt must be cancelled. These principles, or principles like them, should be
the foundation of any student debt movement.
All o these moements can be ound online i you want to nd out how
to join a larger collective to help effect change.
RESOURCES
WEBSITES
linAid ,naid.org,
Forgive Student Loan Debt to Stimulate the Economy (forgivestudentloandebt.com)
Income-Based Repayment Info (ibrinfo.org)
Occupy Student Debt Campaign (occupystudentdebtcampaign.org)
Student Loan Justice (studentloanjustice.org)
ARTICLES AND BOOKS
Jerry Ashton, Americas Financial Institutions and Student LendersAttention:
OWS Occupy Student Debt Committee Has Something to Say, +XIQJWRQ 3RVW,
November 21, 2011 (tinyurl.com/DROMAshton).
Pamela Brown, Education Debt in the Ownership Society, AlterNet, June 27, 2012
(tinyurl.com/DROMBrown).
George Caffentzis, Platos Republic and Student Loan Debt Refusal, Interactivist, De-
cember 31, 2011 (tinyurl.com/DROMCaffentzis3).
Alan Collinge, The Student Loan Scam: The Most Oppressive Debt in U.S. Historyand
How We Can Fight Back, (Boston, MA: Beacon, 2009).
Malcolm Harris, Bad Education, n + 1, April 25, 2011 (tinyurl.com/DROMHarris).
Brian Holmes, Silence=Debt, Occupy Student Debt Campaign, 2012 (tinyurl.com/
DROMHolmes).
Sarah Jae, Meet 5 Big Lenders Proting rom the >1 1rillion Student Debt Bubble,`
AlterNet, November 28, 2011 (tinyurl.com/DROMJaffe).
Anya Kamenetz, Generation Debt, (New York, NY: Riverhead Books, 2006).
Private [Student] Loans: Facts and Trends, The Project on Student Debt, July 2011 (ti-
nyurl.com/DROMPSD).
Some Options, EDU Debtors Union, 2011 (tinyurl.com/DROMEDU).
Jeffrey Williams, Student Debt and the Spirit of Indenture, Dissent, Fall 2008 (ti-
nyurl.com/DROMWilliams2).
STUDENT DEBT | 37
NOTES
1. Mark Kantrowitz, Student Loans, FinAid, 2012 (tinyurl.com/DROMKantrowitz3).
2. Steve Odland, College Costs Out of Control, Forbes, March 24, 2012 (tinyurl.com/
DROMOdland).
3. U.S. Department of the Treasury, /HVVRQV /HDUQHG IURP WKH 3ULYDWL]DWLRQ RI 6DOOLH 0DH
(Washington D.C.,: GPO 2006) (tinyurl.com/DROMTreasury).
4. Doug Lederman, Deceptive Practices in Loan Industry, Inside Higher Ed, March
16, 2007 (tinyurl.com/DROMLederman).
5. Tyler Kingkade, Private Student Loan Bankruptcy Rule Traps Graduates with Debt
Amid Calls for Reform, +XIQJWRQ 3RVW, August 16, 2012 (tinyurl.com/DROMKing-
kade).
6. Alan Collinge, Student Loan Scam: The Most Oppressive Debt in U.S. Historyand How
We Can Fight Back, (Boston, MA: Beachon Press, 2009).
7. Malcolm Harris, Bad Education, n + 1, April 25, 2011 (tinyurl.com/DROMHar-
ris).
8. Collinge, Scam.
9. Julianne Hing, Study: Only 37 Percent of Students Can Repay Loans on Time,
Colorlines, March 17, 2011 (tinyurl.com/DROMHing).
10. What are these Programs? IBR and PSLF, IBRInfo (tinyurl.com/DROMIBR).
11. Mark Kantrowitz, Defaulting on Student Loans, FinAid, 2012 (tinyurl.com/
DROMKantrowitz2).
V. HOUSI NG DEBT:
WHY THE AMERI CAN DREAM IS A
DANGEROUSLY MEAN PRANK
If youre living in an underwater home (the value of your
home is lower than your mortgage), youre probably think-
ing, how did I get myself into this mess? Youre probably
feeling like there was something you could have or should
have known. But what we were told about the security of
real estate was in fact never true. In reality, the rapid growth
o the housing market was an articial creation based on a
secretive relationship between banks and the government.
This chapter will explain the long history that pro-
duced what we refer to as the subprime bubble, and
how the system actually operates. \hen the rst wae o
the nancial crisis hit in 2006, there was no way any o
us could have imagined how bad things would really get.
But the crisis has exposed the dynamics of the system and
produced a potential political force 40 million strong with
nothing more to lose.
A LI TTLE BI T OF HISTORY
You cant escape the need for shelter. But in America, this
basic need is entangled with our fervent belief in the Ameri-
can Dream. When you hear the story, it sounds like the Amer-
ican Dream existed from the beginning of time, but it was re-
ally created in 1934 when the government decided to partner
with the banks to create a housing market. Since then, weve
been believers in a fantasy that has driven the 99% to take on
more and more debt just to have a home to live in.
Before the 1930s, the vast majority of Americans did
not own their homes nor have any hope of doing so. If
you wanted to join the 40% of Americans who owned
their homes, you would either have had to pay cash, or to
have known someone who would lend you the money. The
lender could be a bank, but only if you had a good rela-
tionship with your local banker. And even then, they would
HOUSI NG DEBT | 39
only allow you to borrow 50% of the property valueand you had to pay it
o in three to e years.
By 1934, with household income on the rise, the need for public housing
allegedly decreased. The federal government came to believe that increased
homeownership was the key to unlocking credit and creating new jobs. The
Housing Act of 1934 established the Federal Housing Administration (FHA)
for the purpose of providing mortgage insurance for residential properties.
The FHA also created the Federal National Mortgage Association (a.k.a. Fan-
nie Mae) to provide a secondary market where banks could sell mortgages.
In other words, the banks partnered with the government so that they could
prot immediately rather than waiting or the mortgage to be paid in ull.
This combination of insuring and buying mortgages quickly led to mort-
gages being offered for up to 90% of home value. Payment terms were ex-
tended to teen years at rst, then to thirty. O course, the creation o the
modern mortgage expanded the market enormouslyby the 1970s, home-
ownership had grown to 65%.
This partnership between the banks and government agencies continues
today with the vast majority of mortgages on the books of FHA, Fannie
Mae, and Freddie Macin other words on the backs of the taxpayers. In
2011, the federal government guaranteed more than 95% of mortgages.
1
40 | THE DEBT RESISTORS' OPERATI ONS MANUAL
THE OWNERSHIP SOCIETY
The reality of growing ownership was a shifting burden of risk from
business and publicly subsidized housing to you, the individual owner. In
addition to creating a society of homeowners, the expanding mortgage
market created a society of debtors. Instead of building affordable housing,
checked by the ability to pay for a home in a relatively short period of time,
prices grew to accommodate the longer payment terms.
Although you probably associate the Ownership Society with
George W. Bush, the concept actually came out of Clinton-era policy.
The stated goal of Clintons National Homeownership Strategy: Part-
ners in the American Dream program was to extend homeownership to
8 million low-income buyers. This policy opened the door for the sub-
prime lending industry to deelop new products, specically targeted at
low-income people of color. While the burden of public housing was lift-
ed off of the governments shoulders, mortgage debt was coming down
like a ton of bricks on unsuspecting families of color. A steady increase in
foreclosures followed.
Although the FHA will allow you to put down only 3.5% of home value,
theyll charge you higher interest rates and require the purchase of addition-
al mortgage insurance. The banks designed complicated products including
adjustable rate mortgages, interest-only payments, negative amortization and
hybrids of all three. And the government never told you that if its agencies
werent operating as a secondary mortgage market (allowing banks to sell
their risk immediately) this would never have been possible. They left you
with all the risks and banks with all the gain.
Oddly enough, actual levels of ownership only expanded by a couple of
percentage points. Although wages have stagnated or declined, and the per-
centage of full-time workers has decreased, more and more of us have been
getting mortgages. In some states, 65% of mortgages were originated after
2000. Ioweer, the ast majority o mortgages went to those renancing or
trading up. Very few new homeowners were actually created.
If you were under the impression that the housing market could grow
perpetually, you were not alone. We were told time and time again that, in
the housing market, what went up would never come down. Too bad they
forgot to mention that the banks wouldnt lose if you couldnt pay. And,
oops, they also forgot to mention that you would be paying as a taxpayer,
even though you also lost everything as a homeowner, since the vast ma-
jority of mortgages are insured by government agencies. Its hard to be-
liee that either the bankers or the goernment ocials belieed the mar-
ket could grow forever. To the contrary, the reason they developed the laws
and nancial schemes they did is because they knew it could not continue
to grow forever.
HOUSI NG DEBT | 41
THE CURRENT NIGHTMARE
The realization that ownership does not instantly occur when you ac-
quire a mortgage has been exposed by the foreclosure epidemic. The reality
is that the bank owns the property and youre really only purchasing an op-
portunity to become an owner, if all goes well for thirty years. How bad is it?
Approximately 11 o all homes in the United States are empty.
1he rate o homeownership in the United States has dropped to 1998
levels.
Between January 200 and August 2010, mortgage lenders repossessed
a total of 3 million homes.
Light million Americans are at least one month behind on their mort-
gage payments, and 5 million homeowners in the United States are at
least two months behind.
So ar 5 million homes hae been oreclosed. Last year in Caliornia,
1.2 million were foreclosed, and another million are expected to be
foreclosed in California in 2012.
42 | THE DEBT RESISTORS' OPERATI ONS MANUAL
\all Street analysts predict as many as .4 to 9.3 million borrowers will
face foreclosure.
A quarter o Arican American and Latino,a borrowers hae lost their
homes or are currently at risk of foreclosure, compared to 12% of
whites.
Oer 30 o all U.S. mortgages hae negatie equity.
Between 2005 and 2009, the typical Latino,a borrower saw their home
equity decline by 51%.
Industrial cities are turning into ghost towns. lor example, in Day-
ton, Ohio, 18.9% of all houses are now standing empty, and 21.5% of
houses in New Orleans are vacant.
U.S. home prices hae already allen urther during this economic
downturn (26%) than they did during the Great Depression (25.9%).
2

HOUSI NG DEBT | 43
WHAT CAUSED THE MELTDOWN?
The common blame the victim account of the subprime mortgage
crisis ignores the act that the mortgage industry deeloped complex -
nancial instruments designed to tempt and confuse borrowers. The most
infamous of these loans were adjustable rate mortgages (ARM) and stated
income products.
ARMs are exactly what they sound likeyou receive an initial inter-
est rate that adjusts after several years. These loans frequently allow you to
choose whether to pay the full monthly payment or just the interest. They are
often combined with home equity lines of credit. These loans can cause the
principal to increase if you make reduced payments. Even after the collapse,
the predatory nature of the ARM is still being revealedthese rates are set
against the LIBOR index, which we now know to have been manipulated by
the major banks in a scam to line the pockets of the 1%.
Stated income loans (a.k.a. liar loans) allow you to simply state your
income with no erication. 1hese loans were most oten used by growing
masses of freelance and precarious workers, many of whom did not qualify
for a traditional mortgage.
Certainly, ARMs and stated income loans have high rates of failure, but
the causes or the nancial collapse are much more complex and cannot be
blamed on the purchasers of these complicated loans.
According to the Federal Reserve Bank of Cleveland, there are ten myths
about the subprime market:
1. Subprime mortgages only went to borrowers with impaired credit.
2. Subprime mortgages promoted homeownership.
3. Declines in home values caused the crisis.
4. Declines in mortgage underwriting standards triggered the crisis.
5. Subprime mortgages failed because people used their homes as ATMs.
6. Subprime mortgages failed because of mortgage rate resets.
7. Subprime borrowers with hybrid mortgages were offered low teaser
rates.
8. The subprime crisis was totally unexpected.
9. The subprime mortgage crisis was unique in its origins.
10. The subprime market was too small to cause big problems.
3
In reality the crisis was caused by a combination of factors that were
oreseeable rom the early 2000s. Predatory nancial products were sold to
buyers, who believed that they were entering into long-term relationships
with banks. But the banks were securitizing these mortgages, most often by
selling them on the secondary market created by Fannie Mae and Freddie
44 | THE DEBT RESISTORS' OPERATI ONS MANUAL
Mac, cashing out and shifting the risk to the buyer as the taxpayer. Not sur-
prisingly, the major banks hae made enormous prots since the meltdown.
Economic hate crimes
The patterns of predatory mortgage lending grew out of Americas long
history of committing and facilitating economic hate crimes. Starting with
the retracted promise of forty acres and a mule, African Americans have
been unable to break into the white housing market. From steering to redlin-
ing to reverse redlining, the African American perception that homeowner-
ship benets whites more than blacks reeals its truth in the actual data.
Whereas less than 12% of white homeowners are at risk of foreclosure
today, 25% of African Americans are still at risk.
So far, 25% of African American homes have been foreclosed during the crisis.
Whereas just over 5% of white borrowers received high interest loans despite
good credit, over 20% of black borrowers and just under 20% of Hispanic
borrowers received bad loans when much better options where available.
Over 40% of African American borrowers received high-risk loans in spite of
good credit.
HOUSI NG DEBT | 45
Bddpsej oh up uif Fdpopnj d Qpmj dz J otujuvuf- bt
of December 2009, medi an wealth of white
households di pped 34%, to $94,600; medi an
Afri can Ameri can household wealth dropped 77%,
to $2,100.
4

The median household net worth was nineteen times greater for whites
than Blacks in 2009. Wealth disparity is far greater now than it was in 1995,
when the wealth differed by a factor of seven.
5
In 2009 dollars, the median
household net worth for Blacks decreased from $9,885 in 1995 to $4,900 in
2009, while it increased for whites from $68,520 to $92,000 during the same
timespan. This shocking statistic is in part due to long-term housing disparity.
As of 2011, nearly 75% of white Americans were homeowners, compared
with only about 45% of African Americans. About 90% of the subprime
mortgages taken out rom 1998 to 2006 were or homeowners renancing.
6

The vast majority of these mortgages were issued in lower-income commu-
nities of color, perpetuating a clear cycle of predatory debt.
From the Housing Act of 1934 onward, housing discrimination by banks
was conducted through the practice of redlining. Home Owners Loan Cor-
poration (HOLC), a federal agency set up in 1933 by Roosevelt for the pur-
pose of preventing foreclosures, initiated this practice of redlining when its
agents were asked by the Federal Home Loan Bank Board to create maps
indicating the security of real estate investment.
The maps were not based on assessment of the economics of individuals
in a community, but rather based on assumptions about its racial composition
and consequently dened communities o color as unworthy o mortgages.
The practice of redlining shifted as the laws around housing discrimina-
tion were strengthened. Clintons push to expand homeownership to low-in-
come borrowers led to the current subprime market dynamics, which are based
on a predatory strategy of reverse redlining. Reverse redlining occurs when a
community is targeted to be marketed high interest or high-risk loans. We now
know that this was a common practice across the mortgage lending industry.
Most recently Wells Fargo, the largest mortgage lender in the country,
settled a reverse redlining case with the Justice Department. The bank only
agreed to compensate individual borrowers for $125 million dollars worth of
losses. This is a far cry from the true cost of this predatory lending and will
not put the victims of this hate crime back in their homes. SunTrust Mort-
gage settled a similar case and Bank of America also settled a similar suit over
its Countrywide Financial unit.
The result of the long history of housing discrimination is still apparent
today with increasingly racially segregated communities.
46 | THE DEBT RESISTORS' OPERATI ONS MANUAL
FORECLOSURE PREVENTI ON/PROTECTI ON
Lets say youre having trouble making your mortgage payments, maybe
youve gone into foreclosure, and want to stay in the home. What can you do?
It is dicult to generalize since rules concerning mortgages, oreclosures
and eviction differ by state. Still, some things do apply to all states.
There are many things that you can do to resist foreclosure and try to
work out a better deal if you stay in the home. Banks can only remove peo-
ple after a foreclosure notice has been given in an act of eviction, and this
is dicult or them rom a legal and physical perspectie. Banks can and do
reconsider mortgages that are at the eiction point, nding deals that work
better for all parties. This only happens when the owner is in the home.
At this point in dealing with your mortgage, you will likely be exhausted
and want to give up. That exhaustion is one of the banks strongest weapons
in taking your home, so stand strong.
If you are in trouble with a mortgage, there are three major ways of try-
ing to deal with the situation:
1. Hire a lawyer if you can afford one. Legal aid, a bar association or
any law practice might have special options if you dont have the
necessary resources.
In general, watch for fraud and people looking to scam you and
steal your money, while promising to help you with your home. People
who want a lump-sum fee upfront are the most notorious. Anyone
looking to take your mortgage payment and give it to the bank is un-
trustworthy; youll want to pay the bank directly.
In general, anyone who promises you a silver bullet is almost cer-
tainly lying. Even the best lawyers know, and should tell you, that this
is a dicult situation with no easy answer.
2. A second group is housing counselors like the Neighborhood Associ-
ation Corporation of America (NACA). The advantage of contacting
them is that they have accredited housing counselors experienced ne-
gotiating with banks.
Sometimes housing counselors have a vested interest in building up
their businesses and may be funded by banks; some are straight-up frauds.
3. A third option is getting involved with community-based organiza-
tions and Occupy Homes organizations. Occupying is a way of resist-
ing the power of the banks, and saying you wont leave until a deal has
been made.
Banks hate public pressure, especially around specic homeown-
ers. As a result, when homes are occupied, there is more leverage. This
can amplify some of your other legal options, like home counselors or
a personal lawyer. I, at a time o eiction, ty people are there who
wont leave, the eviction people will usually walk away. Sometimes they