What Happens If You Boycott Your Student Loans?

Fifteen former Corinthian Colleges students are angry. The group alleges they were taken advantage of and targeted by the for-profit college system. They’re not the first to complain about the institution, but what makes these students different is that they’re refusing to pay back their federal student loans. They’re called the Corinthian 15 and they’re going on strike.

“If you owe the bank a thousand dollars, the bank owns you. If you owe the bank a trillion dollars, you own the bank. Together, we own the bank,” reads the website of the Debt Collective, a grassroots anti-debt organization calling on other students to challenge their creditors. Specifically, they’re calling on people with student debt from Corinthian Colleges to join the Corinthian 15, who say they will no longer pay for “degrees that have led to unemployment or to jobs that don’t pay a living wage.”

The school, for its part, isn’t backing down.

“Corinthian Colleges stands by the education it provided for its students and we are proud of our track record of helping students meet their educational and career goals,” said Joe Hixson, a spokesman for Corinthian Colleges, though he wouldn’t comment specifically on the actions being taken by the Corinthian 15.

He did note: “The traditional community college graduation rate is as low as 20%. Many Corinthian students tried a traditional community college before coming to Corinthian and found the Corinthian education better fit their needs. There’s clear need for an alternative to community colleges and Corinthian provides that.”

This isn’t the first time this year that Corinthian Colleges has been under the spotlight. The Consumer Financial Protection Bureau recently sued the company for allegedly engaging in deceptive marketing and predatory lending practices. A company that recently acquired a number of Corinthian’s campuses has already provided $480 million to relieve the private student loan debt of Corinthian students. Hixson did not comment specifically on the CFPB lawsuit.

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What Actually Happens When You Don’t Pay Your Loans?

It’s important to consider the ramifications of going on a student loan strike.

“I’m not sure we have anyone who’s going to get hurt except the people striking,” said Joshua Cohen, a student loan lawyer based in Vermont. “In order for this strike to really work, everyone would have to be untouchable.”

Before you sign up to join ranks with the Corinthian 15, consider what may very well happen if you default on a federal student loan, either intentionally or otherwise.

The government can send a debt collector after you. It can garnish your wages. If you have no wages, the government can (and most likely will) go after you once you start making money. The delinquencies, default and collection activity will do serious damage to your credit, making it difficult to rent a home, set up utilities and secure affordable rates on car insurance. (You can see how your student loans and any other debts are affecting your credit by getting a free credit report summary on Credit.com.) There also may be a variety of fees associated with these different scenarios, as well as interest that will continue to accrue on the loan, making your overall debt load even greater and more difficult to tackle. Furthermore, federal student loan debt is generally not dischargeable in bankruptcy.

In short: Boycotting your federal student loans could amount to exchanging one financial hardship for another.

If You Want to Join the Strike

The Debt Collective is not oblivious to these consequences. The organizers are personally following up with everyone who fills out a form on its website expressing interest in joining the strike.

Ann Larson, one of the Debt Collective organizers, said she starts the conversation with interested borrowers by asking what their loan status is — default, deferment, delinquency, etc. — and goes over the consequences for defaulting on federal student loans. She runs through the list of wage garnishment, losing federal benefits, credit damage and everything else associated with default, and then she asks if the person understands the default rehabilitation process, which is a long, difficult undertaking.

“I have a long list of students to call, we have volunteers, and we’re all working pretty hard to make sure they understand the consequences,” Larson said. She said many people she talks to have been in default for years. “This is not something new to them. They are already experiencing the consequences.”

She said she has told plenty of people they aren’t a good fit for this effort.

“Some people call, they’re excited about it, but you know they are concerned about their credit score and maybe they’re delinquent but not yet in default. … I say at that point, ‘I don’t think you’re a good strike candidate,’” Larson said.

Other student loan debt strikes are in the works. There’s a Debt Collective community forum called “Fight Sallie Mae and Navient” (Navient is a spin-off of Sallie Mae and services federal student loans), where a moderator called on borrowers to plan “the next strike.” The Debt Collective is also planning to dispute the Corinthian debts in a lawsuit, Larson said.

At the start of March, more than 1,200 borrowers had expressed interest in or support for the Corinthian 15 and their strike, and more than 500 have done the same for the potential Sallie Mae and Navient strike. Larson said they’ll have numbers on actual strike participants in a few weeks.

There’s no way to know how much education debt would have to go into default before the Department of Education feels the kind of pressure the Debt Collective aims to create. The national student loan default rate currently stands at 13.7%, representing billions of dollars in defaulted education loans.

And what if this doesn’t work? What if borrowers spend months and years in default and never get the leverage they want with the Department of Education?

Larson equated it to labor movements, where strikers risk having to walk away, perhaps worse off than when they started. In the student loan scenario, borrowers can choose to start paying again. They will be further in debt than when they started striking, but Larson said they’re making sure people understand this risk before they take it.

For the most part, Larson said the strikers are already living with those consequences, and the idea is to join forces with the millions of borrowers experiencing them, as well. “This is an effort to publicize that fact and turn it around from an individual situation of shame and suffering … into a public claim that they were wronged, and they’re going to fight back.”