If You Want Student Loan Debt Cancellation, the Time to Act Is Here

By Umme Hoque, In These Times

29 March 21

The Debt Collective is embarking on a week of action to tell the Biden administration that it’s time to cancel every cent of student debt.

n March 18, the Biden administration’s Department of Education announced that it will cancel $1 billion in federal student loan debt held by 72,000 borrowers who were defrauded by for-profit universities. These students received subprime educations and worthless degrees, and then were burdened with debt often in the tens of thousands of dollars?—?all while predatory companies and their investors made millions.

The only reason this debt is now being cancelled is because debtors got organized. In 2015, students from for-profit, now defunct Corinthian Colleges Inc. launched the country’s first student debt strike, refusing to pay their loans because they had been scammed by their school. First, they fought the Obama administration, and then the Trump administration. As a direct result of these efforts, this latest victory means the U.S. government has been forced to abolish nearly $2 billion dollars in debt to date.

Now, we need to continue what they started. We must fight to make sure that all $1.7 trillion of student debt is cancelled. We have a window to make history. As Rep. Alexandria Ocasio-Cortez (D?N.Y.) said on March 12 after the massive American Rescue Plan was passed, “[I]f you care about student debt cancellation, it is go time for you. You need to mobilize, and now is the time to organize to create political pressure.”

And we are. From March 29 through April 4, debtors and our allies will be taking part in the Debt Collective’s week of action to cancel ALL student loan debt. Events are planned in New York City, Chicago, Albuquerque, Denver, Knoxville, Washington D.C., Los Angeles and many more across the country. We believe that now is the time to get involved and take to the physical and digital streets, because we can’t sit back and wait for elected officials to act on their own. We have to push them by holding events, rallies, marches, phone banks and other actions to create pressure and grow our fight.

While corporations and the rich get bailed out when they face crises, nothing is ever simply handed to the working class. But we can win?—?if we organize together. Every progressive policy in this country was fought for: it took the civil rights movement to inch this country closer to racial justice; women marched and took action to win right to vote, and it’s only thanks to workers striking and taking militant action that we have an 8?hour workday and weekends. Debt cancellation is no different. Debtors must unite to have our voices heard and our demands met.

President Biden campaigned on a promise to forgive $10,000 of student loan debt for everyone, along with more relief for select borrowers. That’s a positive step, but his plan still leaves out millions of people and doesn’t address the root of the crisis.

It’s time to cancel all student loan debt and build a pathway to tuition-free college. Cancelling $10,000 or even $50,000 (the amount advocated by Democrats including Massachusetts Sen. Elizabeth Warren) is better than nothing, but if that’s all Biden does, he will leave tens of millions of Americans drowning in debt. Fortunately, Biden can cancel all federal student loan debt right now using the authority he holds from the Higher Education Act.

Higher education in the United States is fundamentally broken. Federal and state governments are slashing education budgets, and tuition costs are ballooning. Between 2008 and 2018, tuition exploded by 37%, and university costs grew by nearly 25%?—?but states spent, on average, 20% less on higher education. Meanwhile, the costs of rent and electricity continue to increase while the minimum wage of $7.25 an hour remains stagnant.

The math is simple: there’s a gap, and it’s being filled by debt. Over the past 10 years, the amount of student loans increased by more than 100%. Some point to the government’s existing loan repayment and forgiveness programs as solutions for this overwhelming debt crisis. But, in spite of millions of applicants, only 32 people have qualified for income based cancellation.

Let’s go back to the 72,000 defrauded students who will benefit from the disappearance of that $1 billion of debt. Sadly, countless others are still suffering: 90% of borrowers who were scammed by their schools say they were denied relief. The federal government’s current fixes simply don’t work.

A diverse coalition of voters supported Biden in his presidential campaign because this country requires deep transformation, and because he committed to cancelling some student debt. I’m a South Asian Muslim from a working class family, and I currently hold over $70,000 in student debt. The last thing I want to see is a return to “normal” that endangers our communities and the tattered thread of democracy we still possess. It’s time to address the actual problems that created the crisis we’re in right now. Doing so will help working people from all walks of life.

Organizing around debt has taught me how widespread this problem is. People whisper it to me quietly, as if they are the only ones struggling, when student loan debt actually impacts a huge number of us: teachers, nurses, grocery store workers, artists, web developers, researchers, journalists, people who never graduated, unemployed people. And those who don’t have this debt? Many of them did before, so they know how hard they worked to pay it off and why no one else should have to?—?or they know someone who does who is suffering: their sister, brother, child or cousin.

Debt shouldn’t be our shameful secret. It can be our collective power and shared struggle. When an issue affects 45 million people, it isn’t an individual error. We did what we are all told to do: go to school, try to get a degree, and then try to find a well-paying job. But the system isn’t designed to actually work for working people.

Student loan debt is a racial justice issue. The largest burden of debt is held by Black and brown people. A deep legacy of structural racism in this country has denied these communities the chance to build intergenerational wealth, so they must take on more loans to go to school. Once in the workforce, Black and brown people tend to make less. First you start with nothing, and then you are penalized for trying to improve your life. This is probably why 40% of Black voters said they won’t vote for a candidate who opposes eliminating student loan debt.

Student loan debt is also an intergenerational issue, because now six million people between the ages of 50?–?64 and 870,000 people over the age of 65 still hold student loan debt. For retirees, instead of relaxing after a life of hard work, they’re having their social security garnished over student debt payments they defaulted on because they were too poor to pay.

Finally, student loan debt is an economic justice issue. Rich people don’t have to borrow to go to college, but almost everyone else does. Student loan debt heavily impacts poorer states and regions, both rural and urban. For instance, residents of Tennessee, where there will be two protests next week, have over $29 billion in debt.

No wonder full scale debt cancellation is supported by a majority of voters, across political parties. Debt cancellation is the deeply needed stimulus that our country wants and needs. It would put billions of dollars into our economy and create thousands of jobs. It’s so impactful that polling shows 1 in 5 Republican voters have said they’d consider voting for Democrats if Biden cancelled debt.

We can be certain that the banks and loan companies are not whispering in shame about how many lives they’ve destroyed. Instead, they’re proclaiming that their profits matter most, releasing farcical reports with dubious data about how cancelling student loan debt won’t help poor people, and lobbying their way to billions more in subsidies for themselves and their bottom lines.

If they feel no remorse for manipulating and continuing to exploit 45 million of us, why should we feel shame for taking on debt to improve our lives and our communities? Instead, let’s organize together to cancel our current debts and ensure future generations don’t have to suffer like this.

Next week, debtors and our allies will come together online and offline, in cities and Zoom rooms across the country. We will have marches and rallies, assemblies of debtors sharing stories, banner drops and other actions.

Every action will look a bit different. But each of them will be powerful, because anytime people come together to change things, we are one step closer to justice and liberation.

Drug Patents and Big Pharma Are Slowing Down the Vaccine Rollout and More

By Dean Baker, Jacobin

29 March 21

Our current model of pharmaceutical research is based on patent monopolies designed to enrich drug company executives and shareholders. But there's a better way to develop new drugs and vaccines, based on public funding and open-source research.

t is often said that intellectuals have a hard time dealing with new ideas. Unfortunately, for purposes of public debate, open-source government funding of drug development is a new idea, and people in policy positions seem to be having a very hard time understanding it. So, I will try to write this post in a way that even a policy wonk can figure it out.

The basic idea of government-funded research should not be hard to grasp since the government already funds a large share of biomedical research. The National Institutes of Health gets over $40 billion a year in federal funding, with the Biomedical Advanced Research and Development Agency (BARDA) and other government agencies getting several billion more. This puts the government’s total spending in the $45 to $50 billion range, compared to a bit over $90 billion from the industry. So the idea that the government would fund research really should not be that strange.

Most of the public funding does go to more basic research, but there are plenty of instances where the government has actually funded the development of new drugs and also done clinical testing. But under the current system, most of the later stage funding does come from the industry and is funded through patent-monopoly pricing. Relying on open-source, government-funded research for later-stage development and testing would be a major change.

The Outlines of a System of Government-Funded Research

To my view, the best way for the government to support the development of new drugs is through long-term contracts (10–12 years), which would be awarded through competitive bids for research in specific areas, like cancer or heart disease. The plan would be for the contracts to be relatively large, with the idea that the winners would be comparable to prime contractors for the military. (I describe this system in somewhat more detail in chapter 5 of Rigged [it’s free].)

Major military contractors, like Lockheed or Boeing, typically contract out to many smaller companies in specific areas. This is a good model. Most of the major innovations in the development of new drugs have come from start-ups, who are often bought out by major pharmaceutical companies like Pfizer or Merck. The winners of prime contracts under this system would be foolish not to look to award contracts to innovative start-ups to ensure they have something to show for their work.

One condition that would apply to both prime contractors and any subcontractors is that all research findings would have to be fully open, meaning that they are posted on the Internet as soon as practical. This would apply both to preclinical research and the results of clinical trials. The posting of trial results would mean that researchers around the world would be able to independently analyze the data and assess the effectiveness and risks of drugs and vaccines for different populations.

I have had many people ask me what the incentive would be for the companies that win contracts to actually innovate as opposed to just spinning their wheels. Since they presumably would want to renew their contracts when they expire, that should provide substantial incentive for them to have something to show.

Also, the researchers would presumably want to actually do something with their time rather than just looking to collect a paycheck. I have also suggested having a large pot of money (e.g., $200 million a year) to pay out as prizes, similar to a Nobel Prize. If a researcher, or group of researchers, has a major breakthrough that will radically improve the treatment of heart attack victims, why not give them $10 million? But this prize would be on top of their ordinary pay, not a replacement.

People have often raised the problem of political influence determining the awarding of contracts. There is always a risk of political interference, which of course arises under the current system as well. One advantage of this system is that the full public posting of results should at the least make blatantly political decisions difficult, if not impossible. If a company had received $30 billion to research lung cancer over a ten-year period and had nothing to show in terms of new drugs or major innovations, it would be hard to justify another long-term contract to the same company.

All of the drugs developed through this system (the funding would include carrying new drugs through the FDA approval process) would be available as generics from the day they are approved. This would mean that new drugs that may sell for thousands of dollars, or even tens of thousands of dollars, under the patent monopoly system are likely to sell for ten or twenty dollars. Drugs are rarely expensive to manufacture and distribute; under a system of government-financed, open-source research, they would also be cheap to buy.

Government Funding in the Pandemic

The pandemic provided a great opportunity to experiment with open-source government funding. While we did the government funding part, with the US government alone putting up $10 billion through Operation Warp Speed, we did not get the open-source part. The government effectively paid for much or all of the research, but still gave private companies patent monopolies.

Ideally, we would have negotiated an international pact, where all countries would contribute to research, based on their size and relative wealth, and all findings would be fully open to researchers around the world. I’ve heard people object that it’s difficult to negotiate these sorts of deals, and we needed to act in a hurry. Some people have also insisted that China and Russia never would have agreed to such a deal.

On the first point, it really should not have taken very long to negotiate a pact. We are throwing money around all over the place. No one thinks that we are getting things exactly right. Some industries and individuals are getting compensated in ways that they probably don’t need or deserve and, undoubtedly, some people are being left behind. If the United States or some other country chips in 20 percent too much or too little, it would be chump change relative to the costs of the pandemics and various rescue packages being put forward.

As far as including China and Russia in a deal, I have no idea whether they would be anxious to join if given the opportunity. They have joined in many other international agreements, so there would be no prima facie reason to assume that they would not want to be parties to this sort of arrangement. We also can’t know for certain that they could be counted on to contribute their agreed-upon share and to make results fully open, but as a practical matter, both countries have been reasonably good about adhering to other agreements to which they are a party.

It would have been enormously advantageous if China and Russia would have been included in a pact with open-source research. Ideally, if all the successful vaccines were fully open, including their production processes, manufacturers anywhere in the world that had the ability to produce these vaccines could have done so.

And they could have begun to ramp up production even before the vaccines had been determined to be safe and effective. The cost of manufacturing one billion vaccines that turned out not to be approved is trivial, in both lives and money, compared to the cost of waiting to have one billion vaccines become available so that they can be administered.

While we can never know how much more quickly we could have learned about the effectiveness of vaccines and arranged their distribution, in an open-source world, we can have some idea just from what we have learned over the last several months.

For example, Pfizer discovered that it is possible to get six shots out of a standard shipping vial, not the five they originally believed. This means getting 20 percent more vaccines. If this knowledge was available sooner, it might have meant hundreds of thousands or even millions of additional vaccines.

There is also evidence, based on data from Israel, that the Pfizer vaccine is highly effective after just one shot. It is possible that if all the clinical trial data was fully public that this result could have been discovered sooner. This would have allowed countries to adopt a one-shot strategy with the second shot coming after most people had received their initial shot.

Pfizer also discovered that its vaccine can be kept in a normal freezer for up to two weeks, instead of requiring super-cold storage. If this was known sooner, it would have greatly facilitated the storage and distribution of the vaccine.

And Pfizer reported last month that it had discovered a way to alter its production process to nearly double its output of vaccines. It’s hard to believe that if engineers all over the world were familiar with Pfizer’s production process, not one would have been able to realize this potential improvement more quickly.

We also got an interesting lesson about incentives with reports that AstraZeneca cherry-picked the data it presented to the Food and Drug Administration (FDA) to gain approval of its vaccines. While AstraZeneca denies the charge, this problem would not exist in an open-source world.

First, the company that developed a vaccine or drug would have no special incentive to see it approved if it was not safe and effective. While it would like to have something to show when a contract came up, the risk of having a drug approved that later turned out not to be safe or effective would likely far exceed any potential benefit.

More importantly, the clinical trials would not be under its control. The data from these trials would be fully public so that any researcher anywhere in the world could analyze it independently. If the FDA or some other regulatory agency misread the data and made the wrong call, it is virtually certain that independent researchers would be able to recognize the mistake and call public attention to it.

We would not have stories like Purdue Pharma misleading physicians about the addictiveness of its opioids. Under a system of open-source research, they would have neither the incentive nor the opportunity.

If People Act the Way Economic Theory Predicts, We Should Want Open-Source Research

Economists always want to look at the incentive structures that we create with our policies. While patent monopolies do create incentives to develop drugs and vaccines, they also create incentives to keep as much research as possible secret, so as not to benefit competitors. The huge markups allowed by patent monopolies also create an enormous incentive for drug companies to lie about the safety and effectiveness of their products.

Open-source, publicly funded research radically alters the structure of incentives. The incentive is to try to have research results spread as widely and quickly as possible in the hope that others can build on them. And there is no incentive or opportunity to push drugs that are unsafe or ineffective. This is a big deal.