We Take Care of Our Own

Prepared remarks for New Jersey Citizen Action’s 9th Annual Financial Reform Summit, “The Future of Fair Housing, Fair Lending, and a Fair Economy,” October 16, 2018

It’s wonderful to be back in New Jersey. As some of you may know, I grew up right down the road from here — near the border of Essex and Morris counties. I also spent some time living way down there in South Jersey — right outside of Trenton.

Anybody who knows me knows that I have an unabashed and even vocal love for the great state of New Jersey. As I’m sure everyone in this room knows, New Jersey has the best of so many things — bagels, pizza, the shore, the ability to make left turns by only making right turns.

But perhaps one of the most underappreciated things that should most certainly be on the list is that New Jersey is fortunate enough to have an advocacy organization that is as strong, as committed, and as devoted to fighting for justice as New Jersey Citizen Action. I have traveled to more than three dozen states and met with hundreds of consumer groups, and while each group should be commended for their efforts, there is something truly special about New Jersey Citizen Action. And that is very much a testament to the work of Beverly, Phyllis, and their entire amazing team.

Which brings me to why I am here today — New Jersey Citizen Action realized that in order to do its work — battling every day on the frontlines in the fight for social, racial, and economic justice — it needed to get more involved in the student loan space.

Nearly a million student loan borrowers in New Jersey are drowning in a sea of debt. They are barely scraping by, in a market filled with predatory student loan companies and a federal government that now stands with powerful special interests instead of borrowers. But these borrowers aren’t struggling alone — their families and communities are struggling with them. And when something is hurting the great people of New Jersey, the great people of New Jersey do what makes them great.

They look out for each other, they stand up for one another, and they demand a government that does the same.

So today, I want to talk about how New Jersey can be a leader — both in protecting its citizens in the broken student loan market and creating a roadmap for tackling the student debt crisis that we can use nationwide.

But before I dive into that, it is imperative to step back and take stock of where we find ourselves today.

You’ve heard the numbers before, but I think they are worth repeating — more than 44 million consumers across America collectively owe over one and a half trillion dollars in student loan debt. The debt that hangs over these borrowers’ financial lives is larger than the GDP of 200 countries. In New Jersey alone, nearly one million borrowers carry a combined $41.67 billion in student loan debt.

In just over a decade, the total volume of outstanding student loan debt in this country has tripled, adding nearly a trillion dollars onto the backs of student loan borrowers. The average individual borrower’s student loan balance has increased by 300 percent since 2005. And the financial consequences of these increases are devastating to families.

We now see new evidence that student debt is driving declines in household formation and homeownership — creating barriers to economic mobility for borrowers across the country. One study found that rising levels of student debt resulted in 360,000 fewer homes purchased by just millennials over the last 15 years — an amount greater than the total number of occupied homes in all of Essex county. And in fact, that’s more than the total number of homes in the four most populous New Jersey cities combined.

For individual families, this struggle is real and immediate. Yet the most alarming consequences of the student debt crisis may happen not at the individual level, but where student debt begins to shape our economy and society.

Mounting evidence shows that the ripple effects of student debt are substantial. We are beginning to see how this debt fuels economic, gender, and racial inequality; inhibits asset accumulation; accelerates the wealth gap; and carves out a generational divide that, even in the best of circumstances, will take decades to erase.

The evidence shows that the burden of student debt is not shared equally, and the impact of this burden is far more severe for certain populations.

Women make up half of all college students, and yet owe two-thirds of outstanding student loan debt. And the gender pay gap only serves to keep women in debt longer.

Data shows that a little more than a decade into repayment, white borrowers have paid down 65 percent of their loan balance, while African American borrowers will owe 113 percent of what they originally borrowed.

We now know that one of the most telling factors in whether residents of a zip code will struggle with paying their student debt is not income, but rather the racial composition.

And sadly, it gets worse. When we take a closer look, what we see is human tragedy playing out on a terrifying scale.

Across America, 8.5 million federal student loan borrowers are in default. There are nearly as many student loan borrowers in default as there are people in this state.

Another 5 million borrowers are at least two student loan payments behind — many of these are defaults yet to come; borrowers we can expect the system to fail as we continue to do nothing.

In 2017 alone, more than onemillion student loan borrowers defaulted. That follows the more than one million borrowers that defaulted in the year before that. And the year before that. That’s one default every 28 seconds of every day, every week, every year.

And here in New Jersey, we see alarmingly high rates of borrowers crippled by student debt, in Newark, in Camden, in Trenton… But its broader than that. It doesn’t sort neatly along racial and geographic lines. We see a similar cause for concern as a significant number of borrowers are struggling in Cumberland, Ocean, and Warren counties.

And so, as the “very serious people” in Washington D.C. debate how to refer to student debt — let me be clear — this is a crisis.

Adding insult to injury

To add insult to injury, borrowers struggle to pay back this debt in a market littered with illegal and predatory practices committed by some of the most powerful financial services companies in the country.

In my former role at the CFPB, I worked across all levels of government to halt abuses by companies that plagued borrowers throughout their financial lives. We found a range of unfair, deceptive, abusive — straight up illegal — practices that inflicted significant financial harm on borrowers:

We saw student loan companies cheat borrowers in financial distress — denying millions of the most vulnerable borrowers critical protections against financial ruin and saddling them with billions of dollars in additional debt.

We saw student loan companies rip off servicemembers and veterans — denying tens of thousands of military families the key consumer protections they earned through service to our country.

We saw student loan companies lie to public service workers — denying teachers, cops, nurses, and other public servants critical loan protections they were promised in exchange for giving back to their communities.

We saw student loan companies force older borrowers into years of unexpected debt — denying parents and grandparents a promised “way out” after they had been required to co-sign for student loans that imperiled their retirement security.

We saw private lenders and for-profit schools push students into loans they knew could never be repaid — denying the victims of the most predatory for-profit colleges any shot at a financial future, due to business practices that would make payday lenders blush.

We saw scammers defraud struggling borrowers searching for relief — denying the most desperate borrowers in the student debt crisis the last few dollars in their bank account.

And unfortunately, I could go on, and on, and on.

These breakdowns are not mere annoyances that we can greet with a collective shrug. This isn’t like calling Comcast.

I have talked to dozens of state and local policymakers about this issue, and sadly, one of the most common retorts is, “student loans are a federal problem. Let the federal government deal with it.”

And the one thing I always tell them — and perhaps the most important thing I can tell you — is that there is no white knight riding in to save these borrowers. There is no cavalry on the horizon — certainly not in this administration.

Tens of millions of student loan borrowers are falling victim to a federal government that is not only walking away from this fight, but is aggressively arming the other side:

Where the Justice Department once filed enforcement actions against Navient on behalf of military borrowers, it now brazenly marches into federal and state courthouses, arguing that companies like Navient are above the law.

Where the Department of Education once committed to reform a predatory student loan market, it now fills its leadership with former for-profit executives and industry lobbyists who treat this $1.5 trillion market as a slush fund for special interests.

And where the Consumer Financial Protection Bureau once stood proudly as the most vocal and vehement champion of student loan borrowers, its leadership now spends its time rearranging letters in its acronym and defending its political appointees from the indefensible.

So I will say it again — there is no cavalry on the horizon.

If we want to help student loan borrowers and their families, we need to roll up our sleeves. If we want to protect our neighbors and our communities, New Jersey must stand up for itself.

I know we are up for this challenge, because if I know anything for certain, it’s that the people of this state have one defining characteristic: “We take care of our own.”

For some of the younger folks in the room, that’s a Bruce Springsteen reference.

New Jersey has a long and storied history of standing up when it matters; it has been a leader on issues of equality and choice, labor and health care, consumer protection and the environment.

That’s not to say that this state is perfect. I am the first to acknowledge that it has not been a straight line of progress. Chris Christie did graduate from my high school after all.

But at the end of the day, I think we can all agree that New Jersey takes care of its own.

And that must be our guiding principle in this fight to ensure that this state takes care of those who have done everything we have asked of them — those who have gone to school, taken on the debt, tried to provide a better future for their children and their families — only to be forced to deal with unprecedented debt and crushing headwinds for their financial futures.

The first step is making sure New Jersey has the tools it needs to go after the companies preying on the nearly-one-million people in this state who owe student debt — the companies that view these borrowers as a chance to make a quick buck.

I am excited about the work your new attorney general, Gurbir Grewal, and Director of the Division of Consumer Affairs, Paul Rodriguez, are doing in this space. I genuinely believe New Jersey will prove to be one of the most effective attorney general offices in the country.

But the state can and must do more.

We cannot look the other way when there is a one and a half trillion-dollar black hole in the middle of America’s financial market. We are allowing the companies that engage in rampant illegal practices to continue operating in the shadows, unchecked. Our nation’s financial future — New Jersey’s financial future — is at stake.

Over the past few years, four other states, including your neighbor, Connecticut, have given themselves new tools to police student loan companies and rein in illegal practices — the authority to demand answers about how these companies are treating their states’ student loan borrowers, and the authority to take action when these companies break the law.

New Jersey should be the next state on this list.

But that is just a start.

Every day, New Jersey is undertaking the hard work necessary to show that there is a different path — a different future — than the one being contemplated 170 miles south of here. New Jersey now has a governor and administration that chooses community over division, investing in people instead of special interests, and committing to a shared economic future instead of failed economic theories and tired dogmas.

So, I urge you to think about how the nearly one million student loan borrowers in New Jersey fit into this vision — the folks next door, or down the street, struggling to buy a home, save for retirement, or even start a family because of the weight of their student debt.

How do they fit into this the new vision — the right vision — for this great state?

This vision must be more than a promise to make college free for the next generation. We cannot simply vow to “do better” in the future, effectively writing off today’s borrowers only to help the next guy. If we fail to stand up for them, our communities are worse off. This state is worse off. This country is worse off.

Without them, the vision for a more just and equitable state remains incomplete and out of reach.

So how do we complete that vision? With the people in this room and the allies that lie beyond these four walls.

We need the leaders in our communities to fight for them and fight for the future of New Jersey. We should be asking ourselves the tough questions, not just passing the buck off to Washington waiting for answers that will never come.

If you are engaged in the fight for civil rights or economic justice, what have you done to demonstrate how student debt entrenches inequality?

If you are a realtor, and remain committed to the American ideal of homeownership as a gateway to the middle class, what have you done to show the human face behind the cost of student debt, and how that debt impedes one of the staples of the American dream?

If you care about college access and affordability, what have you done to ensure that the determinant of success is not limited to walking across the stage with a diploma?

If you are a community banker, and you see the importance of good credit as a gateway to building a strong financial future, what have you done to highlight how student debt impacts the people and community you serve?

And to all of you, if you care about protecting American consumers, what have you done to lay out a 21stcentury consumer protection framework for the student loan market?

How we collectively answer these questions will determine the future of this great state, and of the nation. And so it is up to each of us in this room to jump in the ring and join this fight.

I’m in. New Jersey Citizen Action is in. But we need you. This is a fight we can’t lose. And we won’t lose, because here in this state — we take care of our own.