Blacks and Latinos Will Suffer When the Student Debt Bubble Bursts

When the housing bubble burst, the resulting foreclosure crisis was a disaster for black and Latino families, who lost 53 percent and 66 percent of their median household wealth, respectively, between 2005 and 2009.  As a result, the racial wealth gap is widening, with white households enjoying 18 times as much wealth as their Latino counterparts, and 20 times more than African-American households.

There is every indication that the bursting of the student debt bubble, like the housing bubble before it, is imminent.  And when it happens, it will send shockwaves throughout the financial markets. People of color will be especially vulnerable.

Although education is widely viewed as a way up and a way out for poor, working-and middle-class students, the prohibitive cost of college tuition has created a virtual debtors' prison for many.  Loan defaults and delinquencies are on the rise in America, and are only expected to worsen.

A recent report from Moody's Analytics says that tuition has doubled since 2000 -- that's a 10 percent increase every year -- causing student debt to accelerate during the recession. In contrast, other types of consumer debt such as mortgages, credit cards and auto loans have decreased sharply. Outstanding student loans have increased 25 percent since 2008. Student debt now exceeds total credit card debt, and is likely to reach $1 trillion this year, with the average debt for a bachelor's degree at $24,000.

To add to the problem, unemployment is high and there are no jobs for recent graduates. And in the lucrative for-profit college industry where students of color predominate at 54 percent, graduation rates are lower than traditional institutions of higher learning. So, students leave without the benefit of a degree, but with the debt burden just the same.  

For blacks and Latinos -- who suffer from lower pay and double the unemployment, and must assume larger debt loads to pay for school -- the deck is stacked against them.  According to a Georgetown University study, blacks and Latinos earn less than whites, even with advanced degrees. Moreover, members of these groups who have earned a master's degree earn less than whites with a bachelor's. It is no wonder that their default rates are higher. In a 2007 survey, black students had a default rate five times higher than whites and nine times higher than Asians, with the Latino rate double that of whites and quadruple that of Asians.    

This talk of student default goes far beyond dollars and statistics. These are human beings who are thrown into hopeless life situations because the tuition is too damn high. Recently I had the pleasure of reviewing the new film Default: The Student Loan Documentary. I appreciate the film's clarity in spelling out the nature of this American crisis and its impact on ordinary people. Borrowers break down and cry in front of the camera as they reveal the amount of money they owe in student loans. Some were brought to financial ruin as the result of prohibitively high monthly loan payments, compounded by illness or some other setback. Others are unable to get married and start a family because their loan payments prohibit it. One has to take a step back and ask if this is really what America has become.  

"The private loan industry, they don't care about people," said Carmen Berkley, who appeared in the film. Carmen, who is African-American, has $80,000 in student loan debt, in addition to $5,000 in credit card debt and thousands in medical debt due to an illness. "I told them, 'Look I don't make that much money. I make $34,000 a year. There's no way I can spend 600 or 900 dollars a month just for loans.' And they said, 'Well there's nothing we can do about it.'"

Default touches on far more than the inability of college graduates to afford to repay their loans, and the financial ruin they face as they must choose between paying their rent, eating or paying off their mortgage-sized school debt. Although that heart-wrenching part of the story by itself is enough to warrant a documentary, the problem is even deeper, as the movie points out.

Ultimately, the student debt crisis is a product of the union of greed and corruption -- the banking industry and the politicians they have purchased for the purpose of carrying their water. Colleges and universities do their part by hiking up tuition far in excess of inflation. Meanwhile, private lenders exploit financial realities where students can no longer work to pay their way through college, and federal loans no longer pay for most or all of a college education. Moreover, these lenders benefit from loan defaults, as the fees and penalties that rack up can double or triple the amount of the original loan.

Much of this new financial crisis really speaks to the power of the lenders, who receive their money's worth from their investment in Congress. There is a reason why student loans are the only type of debt that cannot be discharged in a bankruptcy. The banks paid for the laws that exempt such loans from fundamental consumer protections. Even gambling debts can be discharged in a bankruptcy, as is mentioned in Default.

And in the irony of all ironies, the banking institutions that were "too big to fail" enjoy their federal bailout funds. This, as they continue to extract additional profit from human suffering, whether by exploiting homeowners with predatory mortgages, or bilking students with predatory school loans.  These bailout recipients are making everyday people suffer, yet where is the bailout for the students?

Rick Perry compares the civil rights movement to the GOP's fight for lower taxes for the rich

During the week that the Martin Luther King Jr. Memorial opens to the public on the National Mall in Washington, Texas Governor Rick Perry finds a way to insult the legacy civil rights movement, and by extension, black people. It's all in the timing.

The newly minted presidential candidate was on the campaign trail in Rock Hill, South Carolina. This year marks the 50th anniversary of the historic Rock Hill lunch counter sit-in, when studentsfrom Friendship Junior College vowed to engage in civil disobedience and go to jail in the process. A reporter mentioned to Perry, "This year we celebrated the 50th anniversary of the Friendship Nine sit-in."

"Listen, America's gone a long way from the standpoint of civil rights and thank God we have," the governor responded.

"We've gone from a country that made great strides in issues of civil rights, I think we all can be proud of that. And as we go forward, America needs to be about freedom," Perry added. "It needs to be about freedom from overtaxation, freedom from over-litigation, freedom from over-regulation. And Americans, regardless of what their cultural or ethnic background is, they need to know that they can come to America and you got a chance to have any dream come true because the economic climate is gonna be improved."

For the rest of my take on Perry, follow the link at theGrio.

Mississippi: Why is the blackest state the reddest state?

Hattiesburg Mayor Johnny DuPree made history when he won the Democratic Party's nomination for governor of Mississippi on Tuesday. This makes DuPree the first African-American in modern times to receive a major party nomination for the position in the Magnolia State.


Oddly, Mississippi, the blackest, poorest and most federally-dependent state in America is also the most conservative state.  Check out the rest of my analysis at theGrio.

The 20th anniversary of the Crown Heights riots

August 19 marks the twentieth anniversary of the infamous Crown Heights riots. In 1991, the Brooklyn, New York neighborhood was rocked by three days of unrest and racial discord that became a flashpoint in black-Jewish relations and altered New York City's political landscape.


Check out my full analysis at theGrio, where I get to "The Heart of the Matter."

Profiteering and Union-Busting Repackaged as School Reform

This is one of those stories that shows how far some people will go in America to make a buck—even if it means profiting at the expense of children, or exploiting the legacy of the civil rights movement.

Stand for Children is an unassuming name for an organization.  Just taken at face value, one would conclude that the Portland, Oregon-based nonprofit aspires to accomplish what the title suggests.  Their website says SFC is “an innovative, grassroots child advocacy organization.  Our mission is to use the power of grassroots action to help all children get the excellent public education and strong support they need to thrive.  Our members believe we need to stand up for our children now - particularly for their education from pre-school through high school - to create a better future for America.”

Now, that all sounds good, until you dig deeper.  The cofounder and CEO of SFC, Jonah Edelman, is the son of Marian Wright Edelman, the well-respected civil rights activist and head of the Children’s Defense Fund.  Critics charge that Stand for Children started out on the right side of the issues, devoting itself to progressive issues such as class sizes, affordable children’s healthcare and adequate funding for schools.  But then, things changed when they started taking the money, and lots of it— from wealthy interests who arguably care nothing about poor children of color in the inner cities, and care a great deal about a vision of privatization that extracts profit from the public schools. 

In an infamous YouTube video that went viral, Edelman discussed his strategy in Illinois at a July 10 Aspen Institute event.  That strategy was essentially to mislead the teachers unions, do a number on them, and pay off the state legislators to pass SB7, an extensive school reform bill.  The original bill would have stripped teachers of their right to strike, eliminated seniority as a factor in layoffs, and denied teachers their due process rights that come with tenure.  What this has to do with the interests of children is anybody’s guess.  A weaker version of the bill that passed still undermined labor rights by restricting seniority and the right to strike. 

Typically, when Edelman goes into a state, he sets up a PAC, raises a ton of money and hires the best lobbyists money can buy.  He benefits from his mother’s rolodex and the cache her name and reputation bring to the table.  SFC spreads money around in the community, in an attempt to soften up the black clergy and community leaders and get them on board as partners.  And they bribe public officials to pass union-busting legislation.

In Illinois, SFC raised $3 million late last year and hired 11 lobbyists.  They approached Illinois Speaker Michael Madigan—who failed to garner union support that year for passing pension reform— and donated $610,000 to nine state campaigns in both major parties. 

And Edelman attended a community meeting of black Chicago clergy with what observers have called a “slick dog and pony show.”  But the pastors didn’t take the bait.  According to Rev. Robin Hood, executive director of Clergy Committed to Community, SFC wasn’t the least bit interested in the concerns of the black community.

“One of the schools I’m working in has serious problems.  Their organizer wasn’t concerned about that, they were interested in getting people to see [the film] Waiting for Superman,” Rev. Hood said of SFC.  “Waiting for Superman did not fly here in Chicago.  It wasn’t a hit like they thought it was going to be.  It was about taking away the rights of unions to organize.  In the communities we live in we need living wage jobs,” he said.  “Most of these parents have been arguing about how we don’t have books in school.  Those are not the things Stand for Children were talking about.  They were talking about taking power from teachers,” Hood added.

From the start, Rev. Hood found Edelman and his group disrespectful and arrogant, with dollar signs and union-bashing on their mind. “I found they were anti-union when we met with Stand for Children.  It was all about money, it was nothing about children.  That’s why they had to build a grassroots component.  They did a switch up while they were working here,” he said. 

Although SFC spread around a lot of money in Chicago communities, Rev. Hood emphasized that not one of the pastors in his group would take any of it.  “How much money do you people have?” he asked rhetorically of Edelman.  “First they said they are doing political advocacy, and using community organizations as their base.  Six months later they said ‘we got our own base now.’  Then they gave $3 million to state legislators,” he noted.

“Instead of advocating they became lobbyists,” Rev. Hood concluded. 

Rev. Hood also shared his thoughts on the recent fallout from Edelman’s comments at Aspen.  “As much money as they put out, I didn’t think they would self-destruct,” Hood said.  “On a personal level, it was interesting to see him self-destruct, and I knew they weren’t focused on changing things for the children.  They were union busting and making money off the backs of our kids.”  Moreover, Rev. Hood believed Edelman’s public disclosure of his machinations with Speaker Madigan was particularly damaging.  “Speaker Mike Madigan is the most powerful man in the state.  The Governor doesn’t have that power.  To say what he [Edelman] did to him [Madigan] is what the Japanese call hari-kari.”

To put Jonah Edelman and his operations in perspective, just follow the money.  Susan Barrett quit her volunteer leadership position at SFC in Portland because wealthy investors are now driving the organization.  “I want to make sure that people pay close attention to who is on the SFC board, where their money is coming from, and think critically about whether or not the agendas they are promoting will bring the results parents and community members hope for in public education,” Barrett recently wrote.

SFC’s Illinois PAC amassed the state’s largest war chest, just days before new caps on state campaign contributions went into effect.  Those new restrictions limit individual contributions to $10,000, with $20,000 from corporations.  All of the contributions to SFC were five- and six-figure amounts, including $250,000 from the billionaire Pritzker family, and $500,000 from Ken Griffin, CEO of the Citadel Group and bankroller of GOP state candidates.  Sam Zell, owner of Tribune Co., contributed $100,000.  Meanwhile, of the $610,000 that Edelman gave to legislative candidates, his PAC handed over $175,000—a record for Illinois— to Republican state House candidate Ryan Higgins, who lost his contest.

Stand for Children’s donor list is quite impressive, and equally revealing.  For example, last year SFC received a $3.5 million grant from the Gates Foundation, its largest donor.  The Walton Family Foundation—of Walmart anti-union fame—chipped in $1.4 million.  And New Profit Inc., with ties to a firm running Muammar Gaddafi’s PR campaign, has donated nearly $1.5 million in recent years.       

Meanwhile, the SFC board of directors consists of venture philanthropists and private equity investors, including the extremely wealthy and powerful.  One would think that a “grassroots child advocacy organization” would have at least a token of community representation on its board, including educators and child advocates of color.  Laurene Powell Jobs, wife of Apple CEO Steve Jobs, is a board member, as is Emma Bloomberg, daughter of New York City Mayor Michael Bloomberg.

Mayor Bloomberg, who is pro-charter school and seems to claim personal ownership of New York’s public schools, has a history of placing ill-prepared corporate types in charge of the nation’s largest—and mostly black and brown— school system.  Bloomberg’s most immediate past schools chancellor, a magazine executive named Cathleen Black, had no experience in education whatsoever.  During her brief and painful stint as chancellor, Black offended many with her jaw-dropping remarks, which included addressing shortages in classroom space by asking “Could we just have some birth control for a while?  It could really help us all out a lot.” 

Black’s predecessor, Joel Klein, now Rupert Murdoch’s deputy at News Corp., is overseeing an investigation into the company’s infamous phone hacking scandal.  Klein is the head of Murdoch’s new education technology business, which Murdoch plans to spend $1 billion to build.      

But the larger picture here is that corporate education reform is big business.  And the rightwing, plutocratic agenda— of school privatization, government austerity measures and deunionization— clashes with the needs of poor, working class, and disproportionately black and brown public school students.  

“What I can say personally is their true colors came out.  He won’t get a base in my community.”  Rev. Hood said defiantly of Edelman.  “We need to educate our kids, not get rich folks richer.  These are the same people that don’t want you to have a living wage and adequate housing.”    

Meanwhile, the education reformers, armed with a pocketful of billionaire money, rip off communities of color.  And as they buy off legislatures, they come off looking like the saviors of the black and brown children they just pimped.     

“I wish I could be wrong, but I think they’ll be back for vouchers,” Rev. Hood offered on a cautionary note.  “They’ll be back with a sad sack of legislators to write a bill for vouchers.”