SCOTUS & Student Loan Debt Forgiveness - A Conversation with Mike Pierce

In this episode I talk with Mike Pierce, Executive Director of the Student Borrower Protection Center. We discuss the recent SCOTUS ruling on the Biden Administrations Student Loan Forgiveness plan. We breakdown the politics of the ruling as well as the Biden Administrations latest plan for student loan relief. Mike gives listeners great background on the student loan crisis as well as resources that borrowers can turn to in order to better understand how to get their loans canceled. 

https://www.cancelmystudentdebt.org/
https://studentaid.gov/manage-loans/forgiveness-cancellation/debt-relief-info

Transcript

Eloy: 0:09

Hi, I'm Eloy Ortiz Oakley, and welcome back to the Rant, the podcast where we pull back the curtain and break down the people, the policies, and the politics of our higher education system. In this episode, I get to sit down with a well-known student borrower advocate, and a proponent of the Biden Administration's push to cancel student loan debt. Mike Pierce. Mike is the Executive Director of the Student Borrower Protection Center. Mike, welcome to the rent.

Mike: 0:38

Thanks for

Eloy: 0:38

it's great to have you, Mike. You and your organization have been very busy lately. You've been in the consumer protection business for quite some time, and now you're leading a major organization and involved in the student loan relief debates. But before we get into all that, and before we get into the debate, I'd love for you to tell us more about you, particularly for our listeners who haven't had a chance to get to know you yet. Tell us about your higher education journey and what led you down this path to lead the Student Borrower Protection Center.

Mike: 1:12

I fell into this work by accident. I think that the same way that a lot of folks that do student borrower advocacy. I'm a lawyer by training. I'm a consumer lawyer by training. But I actually got my start when I was a law student, as an intern in the Office of Federal Student Aid at the US Department of Education. And shortly after that, you know, I was in my early twenties. I didn't even really know where the bathrooms were, but I was just starting to get a feel for college because I had learned all of those lessons the hard way myself. Right after I went back to finish law school, I finished the summer at the Department of Education. The preferred lender list scandal broke. And I don't know, for, for, I think this is the audience, if anybody knows what I'm talking about. It's your audience here. But back during the Bush administration there was this scandal that school financial aid offices were taking kickbacks from companies like Sally Mae to be able to push not just guaranteed federal student loans, but also private student loans on students. I was one of those students. I had a very high rate private student loan that was pushed to me by my financial aid office, and I saw myself in that story and I realized that the kind of change we needed to, the way that we pay for college was much more fundamental than you could do working within the administration. So I went to Congress instead. And I got a job working for my hometown member of Congress, Congressman Sarbanes is still there. Just as he was putting the finishing touches on the law that would create public service law, forgiveness. I worked for a member of the House education committee. Then the financial crisis happens and they're creating this new consumer protection agency that's looking at things just like what happened at people with student debt, but in the mortgage market. People affected by abusive debt collection practices. And I. Convinced now Senator Warren to give me a job. I was part of the original team at CCF p b back in 2011. And I've been doing some version of this ever since. The Trump administration came in. It became really hard to do that work within the administration. And so my former boss and I Seth Rottman, who's now back at the C F P B, we left and started the Student Borrow Protection Center. With this idea that somebody needed to bring that bearing to the fight on behalf of student loan borrowers, to think about this as a consumer financial product, not just as a symptom of runaway cost of higher

Eloy: 3:20

Well, that's a great story and it's particularly great because it's a nice history lesson of CF pb, which has been in the news lately. there's some members of Congress who would like it to go away, hopefully it sticks around for quite some time. It's definitely needed. Now, there's one part of your story that, I wanna bring back, which is, You were one of those students who had these high rate loans, and so I imagine that's really stuck with you and sort of drives some of your passion today.

Mike: 3:49

It's both stuck with me in the, in the abstract. A lot of our work does focus on private student lending a kinda debt and credit we call shadow student debt, the sorts of financial products that sit outside of the Title four federal Student Aid system. It's also stuck with me personally. I still have private student loans that I'm gonna be paying off until my kids

Eloy: 4:06

Wow. Yeah. Well that's, that's, that's certainly a motivator for sure. let me turn our attention now to, to talk more about student loans and student loans. Relief, which has been in the news quite a bit lately. You've been a vocal supporter of the Biden administration's push to cancel student loan debt. You and your organization has put, have put out a lot of great work educating the public about the student loan debt crisis. What do you make of the SCOTUS ruling on debt forgiveness, and do you think that this latest Biden plan has any better chance for success?

Mike: 4:45

I'm gonna choose my words a little carefully here. I think in part because the decision was both expected and also wrong this court has decided that historical norms and precedent don't find it. And it's done things that we would describe as lawless and out of bounds and contrary, not just to. Public opinion, but also to the law itself. And often the constitution, this is one of those decisions that fits right in that box along with Dobbs and along with a bunch of other decisions that put this new right wing court majority on the opposite side of the American people and on the opposite side of the law. So I think they got it wrong. That doesn't mean we didn't expect it to happen, and I would love to talk a little bit more about the politics of that. But I do think what the administration is doing now is different but in some ways they're just calling the Roberts Court bluff here. The, the Roberts Court is their decision in Nebraska. It's not a, a binding precedent in a way that would prevent them from doing exactly what they're doing now. It's narrow. It focuses on emergency powers. It says that the emergency powers the administration used in debt relief 1.0. Are not permissible under the major questions doctrine. It doesn't weigh in on what the Higher Education Act can do. It doesn't weigh in on all of these other kind of targeted programs to deliver debt relief. It's limited. But the, the dicta in the decision, the, the kind of throat clearing, the vibes by Chief Justice Roberts are pretty expansive. They make it clear that like this right wing majority is not thrilled that this administration is trying to use government to help people. And to the president's credit, he doesn't care. His job, he was put in office to help people, to use his power to make people's lives better. And he's prepared to do it. That's exactly what you wanna see. And again, the court didn't do anything to stop this. It could have, it could have reached further and shut down the whole exercise in delivering student debt relief, but there wasn't a majority to do that. They didn't read beyond the case that was in front of them. And so they've left this administration with the opportunity to give it another try. And I do wanna emphasize for your listeners, this is really normal. This is actually exactly how the push and pull between courts and, and presidents have. For, for centuries. There was a period of time in the New Deal era where the court really hated state minimum wage laws and they were striking down state minimum wage laws. And then the next year, the same court upheld state minimum wage laws because the politics changed. Courts are political actors, they're responsive to public pressure. They read the stories about themselves in the New York Times. You know, famously Brett Kavanaugh reads his clips and I think that the blow back to this very unpopular anti-pop decision will frame the context for the next time the court

Eloy: 7:23

So let's, let's peel back a little bit more of the politics. I mean, obviously this is something that certainly Senator Warren, Senator Sander's offices have been pushing for quite a bit in the Senate. there is there counter argument about the executive branch having to do more than some people believe it should be doing. Given that. By and large, one could argue that this is Congress's role to, to set these things in motion. But Congress is enacting. So how do you see the politics continuing to play out? Cuz I imagine this will come up again. The executive branch taking, taking their own action. Do you think that the politics will influence the court, or do you think that there is a better argument in the way that they're approaching it today?

Mike: 8:17

I do think there's a better legal argument in the way that they're approaching today. I dunno, maybe betters the wrong word. Cause I do think that, that the first version of this was legal in the way that courts had interpreted executive actions historically. And there is something, a historical about this decision that was just handed down. But I do think going through the negotiated rulemaking process as the Higher Education Act requires feels normal. Like the vibes are more normal. I keep using that word cause that what we're talking about, but like, it, it does feel more normal. And maybe that's a thing that federal judges, maybe not this court majority, but, but at least federal judges will perceive as within bounds where the other thing maybe was out of bounds. I'm a little bit skeptical that any of that matters though, because it does feel like that this is a a politicized judiciary in a way that is different than it was even four or five years ago. And what the president is doing here is following the norms of yesterday as an, as an exercise in demonstrating to the public that, that he is the responsible. Party here and is governing. And if the court wants to be reactionary and and out of bounds, that's the court's decision. And that he's gonna use all the tools in his toolbox to be able to deliver for working people with student debt, which is all we can ask of him. And the alternative, right? The, the, the, the assumption that the Roberts court got it right and unilateral disarmament in the face of a right wing court, that's not good governance. It's also really bad. Politics I wanna talk about, if you don't mind, I would love to talk about both, like the electoral politics of student debt, but also the legislative politics of student debt. Cause I do think they're a little bit different. You mentioned the legislative politics of student debt. We haven't reauthorized

Eloy: 9:55

Right.

Mike: 9:55

Act since 2008. It's been a minute since Congress actually did its job here. The president's trying to govern in the absence of clear instruction from the hill. And I think that that is what it is at, at any given point. You know, there was a point where President Trump had Republican majorities in both chambers and Virginia Fox. The, the then chairwoman, now again, chairwoman of the House Education Committee couldn't even bring an H chair re authorization to the floor because there weren't enough Republican votes to move it there. There's a real governance problem, and it is not just. About Democrats wanting to use executive power instead of legislative power. Neither party has been willing to govern on higher education for, you know, we're

Eloy: 10:38

yo. Well, that's certainly true and that's certainly has been my experience over the years. As much as people have talked about wanting to do it, my last conversation with Senator Alexander was, are we gonna do this or not do this? And of course, if he couldn't pull it off, I, I don't know who's going to now, but but no, I, I think that's exactly the argument. Congress has had every chance to act and they haven't. So what's left the executive branch to try and exercise their authority to help rectify the situation that they see happening. Across the country. let me take a step back though. we have this crisis for a reason. I mean, you mentioned some of the reasons in your opening remarks about how some financial aid offices in the past have been pushing student loans. And then we've got the. Continuous rising costs of education. There's many reasons for that. But every time you open the paper, you see some highly rejected college or university raising tuition yet again. I mean, here in California, USC is now, you know,$66,000 a year, which is just. Insane to me. What what have you and your organization uncovered about the, the challenge with the rising cost of education? How do you feel it's contributed the current debt crisis?

Mike: 12:05

I'm gonna, I'm gonna answer that in, in sort of a long way, if you don't mind, cuz I actually think there's three different things working here. The cost college. Objective colleges is extraordinary. Particularly private nonprofit colleges are driving a lot of today's student debt. For-profit colleges are also driving a lot of today's student debt. The incentives are a little bit different there. The economics are very different there. But neither of those are where most people go to college. Most people go to college in open enrollments. I mean, you know this, but most people go to college in an open enrollment school in their community within a few miles of where they grew up. And the fact that we have 43 million people with federal student loans, more than 45 million people with student debt. Isn't really just a function of college being too expensive, and it's definitely not a function of brand name. Highly rejected colleges being too expensive. What you actually have here, 40% of people that have student debt never completed a degree so, You have a problem, a crisis among people that have credential, have no credential and have debt. And for those people, many of those debts are really modest. These are people with three, four,$5,000 worth of debt the day they walk out the door and don't come back. But the student loan system itself is broken. So the typical student loan borrower Is struggling to pay back those loans if they didn't complete their credential for every two people. across the, the universe of 40 million people with student debt. For every two people who pay off a loan in 12 years, three more, or even deeper in debt than when they first started. there's something about the economics of higher education there, but there's also something about the structure of the financial product itself. We allow people to fall behind on their student loans and go even deeper in depth than when they first started. And that's there, there's something broken about the structure of the financial product there. We use the term. Debt trap to describe this problem for people with student debt. Some of those borrowers are people that were badly serviced by a private company hired by the federal government, or hired by their holder. There was a, a huge multi-state. Consumer Protection Action by a bunch of state ags against Navient a few years ago that outlined how some of this works. But people were steered into financial options with their student loans that were not in their best interest, and it resulted in interest charges. And that's what you see across the board. You know, that's the, the two people pay it off. The three people are deeper in debt. Those are the three people. They're people that are in Forbearances. They're people that are in income driven repayment, but making payments that don't keep up with the debt service. Former students of color. This is much, much worse for black students in particular among black people with student debt. For every one person who pays off a student loan 12 years later, six more are even deeper in debt. And the typical black student loan borrower is caught in this debt trap. part of what our organization has sought to do, Let's tell that story. Yes. College is too expensive. There are extraordinary advocates that have been making that point for decades. College is inaccessible. There are extraordinary advocates that have been making that point for decades. Where we sit in this community. It's talking about the programs itself, the idea that we have

Eloy: 15:04

Mm-hmm.

Mike: 15:04

to debt, but there's not entitlement, debt relief, or at least functionally there hasn't been an entitlement to debt. Relief is a huge public policy problem that sits separately from the high

Eloy: 15:13

Well, it's just amazing to think how much debt relief this administration has already created whether it's through public service loan forgiveness, whether it's through canceling debt from for-profit colleges and, and universities, or some of the latest moves that they recently announced. Yet, it's only the tip of the iceberg and we're talking billions of dollars that they've been able to forgive. So it's amazing how much we've let this grow. Now you mentioned your organization and the advocacy that you've been doing. else do you support student loan borrowers in the work that you do?

Mike: 15:51

So we are not a grassroots organization. Our constituents are people with student debt, but we don't have members. We position ourselves as the lawyers for the movement to cancel student debt. We both are predominantly lawyers. I'm a lawyer and we're mostly consumer lawyers by training. But we are organizers and advocates that work hand in glove with civil rights groups and labor unions and organizations that represent student loan borrowers to shape the policy environment that these decisions are made in. So we, we write papers, we build lawsuits, and we also run the, the Nation's first Academic center on student debt in the law. It's called the Student Loan Law Initiative that's based at uc, Irvine Law. And we just launched our second center at uc, Berkeley Law, And we work with two extraordinary law professors, one at each school, Dalia Jimenez at at uci and Jonathan g Glader at uc, Berkeley who were among the earliest academics. Two Sound, the alarm about the student debt crisis. And actually, professor Gladder was the New York Times reporter that broke the preferred lender lens scandal open back in 2007. And so his, his reporting when he was a reporter was really formative to my

Eloy: 16:57

Mm-hmm.

Mike: 16:58

advocacy journey. And we found ourselves working together on this project decade later, which is kind of

Eloy: 17:02

given all your background and experience I know I get a lot of questions from borrowers, whether they're current students or graduates or people as you described, who left their institution, are saddled with this debt and, and some of the stories I hear are just heart wrenching. I have people in my own family who. Completed their degree, but were sold the bill of goods about the kind of opportunities that they should expect when they signed up that never materialized. And so many of'em have in previous years gone into default. They're hearing all this news about, you know, are we gonna have debt relief? Are we not gonna have debt relief? How do I get in line for debt relief? What should I do given that my loans are gonna come due for repayment again And then they hear plans from the administration about how they're going to support a ramp up. What's your advice to borrowers? I it can be a very complicated thing, but if you were just stopping the street and say, Hey, Mike, how should I think about approaching my student loans going forward? With all the stuff that I'm hearing in the news?

Mike: 18:15

I, I'll repeat back something that you just said. It is very complicated and often the financial advice is very specific to your own situation. But there are programs that provide both debt relief and payment relief that are available to nearly everybody. We've launched a website called Cancel My Student debt.org, in partnership with American Federation of Teachers nea. Ask meet teamsters. And a number of other partners to help explain these changes to the programs the Biden administration has made that were not blocked by the Supreme Court, that are allowing people that have low incomes work in public service, have significant disabilities to be able to get their debts canceled under existing law. The best way to avoid the mess that's coming with the return of repayment is to not have a student loan. So if you're eligible for debt relief under one of these programs, now's the time to take advantage of them. So the first step is if you can get your debt canceled, get your debt canceled, and we do have resources for folks on Cancel My student debt.org. Student aid.gov is the federal government's website that has a whole bunch of information too. You can find out who your student loan company is, you can find out how much money you owe. So I, I don't want to, you know, lead with income driven repayment, which is really important. That is the widest payment relief program. But for somebody that has the right to get their debt canceled right now, it's inappropriate to make them pay, even if it's an affordable payment. We need to be getting people out of the student loan system. But if you're stuck, you know, you didn't get$10,000 canceled because the Supreme Court took that away from you. Income driven repayment is a way to be able to get a lower payment right now. And the administration just rewrote the rules for this program that creates an entitlement to pay nothing at all and to not be charged interest for folks that have modest income. But that income threshold is now much higher than it used to be. So you have middle class families people making 30, 40,$50,000 a year, which. Again, that's not a huge return on your higher education, but it's a lot of people that have kinda working class income and are gonna have a right to pay$0 and be charged$0 of interest under this new income driven payment scheme. So for those folks, you're treading water until you get to a place where you do get your right to

Eloy: 20:20

Mm-hmm.

Mike: 20:21

debt free. But it's better than making payments if you

Eloy: 20:24

Let, let me ask you this. You know, my travels across the country and talking to different leaders in different types of institutions. Every now and then, I hear different schemes of new loan programs, whether they will be directly created by institutions in themselves or other types of income sensitive repayment programs for some of the private student loans that. They know that they have to get to, to take in order for them to pay for their total cost of, of their programs. Are you, are you seeing anything that alarms you these days about some of the schemes that are popping up?

Mike: 21:01

Absolutely. And I think that in particular the idea that the private market can create a better loan product. And can offer it to people, to the exclusion of federal student loans. We've seen that become a catastrophe for folks. So there's, there's kind of two ways that that takes shape. One is as a supplement to federal student aid at Title four schools, particularly at highly rejected schools. And there like gap financing using private student loans. There's a separate set of consumer protection problems, but where we've really seen this go wrong, Our short term credential programs, often co-branded with brand name schools. There are there was just a lawsuit filed against Caltech for its bootcamp program yesterday last week a bipartisan group of 11 State attorneys general and the Consumer Financial Protection Bureau filed a lawsuit against this company called Pre-Hire based on a case that my team built and referred to, to federal law enforcement officials. And that was a scheme that pushed people into so-called income share agreements with this promise that if you didn't get a job, you wouldn't pay anything at all. Turns out that promise was a lie, and not only was that promise a lie, but the school, which was also the owner of these income share agreements, then sued hundreds of its students in a Delaware court, nowhere near where they live. The South Carolina Attorney General sued this company. This is just fraud. So I do think the the leading lights of the movement to have private

Eloy: 22:26

Mm-hmm.

Mike: 22:27

fill the gap here needs to be careful who they're getting in bed with. Because where we actually see private credit, it is, it is laying right next

Eloy: 22:34

Yeah.

Mike: 22:35

We are really worried

Eloy: 22:36

Yeah, I've heard, I've heard a lot of these claims that we're going to create a vehicle that guarantees a job at the other end of this, and that entices a lot of people and it gets people thinking. we'll see how this all turns out, but I'm sure they'll create a lot of work for you somewhere down the line. Well, listen, let me, let me ask you one more question as, as we begin to wrap up and appreciate all the time you're taking to help educate our listeners about what's going on. Many states including my own here in California Policymakers are constantly debating how to better, if not control the cost of education in states, but think about ways to reduce the, the total cost of education for, for students particularly low income students, in my state here in California. There's always a debate around the Cal Grant system or other ways to support reducing the amount of debt that students have to take on. Even in the University of California, there's constant debate about how you find ways to better support low income, middle income learners so that they leave with no debt. What, advice would you have for policymakers? What have you seen out there that you think might work well? What do you find does not work well?

Mike: 23:58

The first is, and I think you hit the nail on the head this is a state policymaker problem, even if folks think that federal student loans are Washington's problem. And we have seen states really innovate here on the consumer protection side, thinking about what happens. To people once they end up in debt trying to pay for college. How can states use state resources to smooth out the rough edges of the student loan system? They're never gonna be able to push, you know, a hundred billion worth of student debt relief to their students. That's not within the bounds of what state government can do, but they can stop private sector companies from treating people out of their rights. And we've seen California pass the strongest student borrower bill of rights in the nation, creating a student loan ombudsman to be able to help people with individual problems and creating really clear roads, rules of the road for student loan. Companies that handle private companies that handle these student loans. Both on behalf of the federal government and also for private lenders like Sally Mae. So you are right. federalism gives a huge amount of power to the states to set the rules for higher education, but also to set the rules for the marketplace and where we're thinking about consumer protections, prohibitions on unfair practices the right to fair dealing. This has always been a state function, and there's nothing special about student loans that makes that somehow out of bounds for state policymakers. So if, if we're thinking about. How to protect people from being cheated by private

Eloy: 25:18

Right. No, I agree. I mean, this is the, their primary responsibility, and we keep pushing the problem onto the federal government. As we begin to close, your answer prompted a question in my head. I always get a question. I'm sure you do. There's always questions of why student loan debt can't be, you can't be erased through bankruptcy. Do you think that there will ever be that comes to fruition in Congress over this question?

Mike: 25:49

We see green shoots. There's a bipartisan bill authored by Senator Durbin and Republican Senator from Texas, Senator Cordon, and the Durbin Corn Bill does propose for federal student loans to reopen. Bankruptcy treatment for federal student loan borrowers. It's bipartisan. For the first time, Senator Durbin has been in a lonely fight to bring bankruptcy to the four of this conversation about the student debt crisis for decades. It makes us hopeful that maybe this could get legislated at some point in the future. Things are different now than they were 10 years ago because the federal government owns the loans. You're not talking about restoring bankruptcy rights in a way that hurts the bottom line of a bunch of big, powerful publicly traded companies anymore. The other thing that I actually think is more interesting and is happening right now is a recognition among bankruptcy judges that there are circumstances where you can discharge debt in bankruptcy. And the Biden administration the Justice Department and the education department have worked together to put together some, some new rules of the road for how the government. Opposes bankruptcy petitions, and we're starting to see the first borrowers now get their deaths discharged in bankruptcy just based on this new guidance. The, so the, this is cracking the door. It's not changing the law but it is progress and it's educating bankruptcy judges that there are circumstances where we need to recognize that these deaths aren't being paid back and that people should have a right to a fresh start, even under existing law. The other thing I would add there is the private market is not entitled to the special bankruptcy treatment, a huge share of time. We put out a paper last year that found that as much as a third of all outstanding private student loans were made in such a way that they actually can be charged of bankruptcy. The Consumer Financial Protection Bureau picked up on that and has taken a number of actions against private student lenders for. Either collecting on debts that have already been discharged in bankruptcy or improperly opposing people's discharge in bankruptcy. So on the private side, we're also seeing this change. We don't

Eloy: 27:43

Right.

Mike: 27:44

Congress here to do a lot of good, we do need for congress for a new

Eloy: 27:47

on that somewhat positive note, I will close this out. Mike, I really do appreciate you taking the time outta your busy schedule to, to talk with us. I know that our listeners will get a lot of great information. These are a lot of questions that are hanging out there right now, and so I do hope that we continue to have you and your organization advocating on. On behalf of borrower protections and I, I hope this administration continues to push forward and, and support the need to discharge a lot of this debt that really holds back a lot of low income students, a lot of learners of color, and I think at the end of the day, damages our economy. So thanks for being with us. Well, thanks for joining me everybody. I really appreciate Mike joining me today. If you enjoy listening to the Ran, please hit the like button, follow us on the YouTube channel, hit subscribe and follow us on your favorite podcast platform. Thanks for joining us today, everybody, and we'll see you again soon.