How the Rolling Jubilee Works

Will the Rolling Jubilee Work?

The mission of Rolling Jubilee is noble, to wipe away the monumental consumer debt that is forcing millions of American households into financial ruin. But is it even possible?

As of December 2012, Rolling Jubilee had raised close to $500,000 in donations. If that money were invested in the secondary debt market, Rolling Jubilee estimates it could purchase and abolish about $9.5 million of debt. That's a tremendous amount of money and could undoubtedly lift the debt burden for dozens of American families. On the other hand, when compared to the total consumer debt load, it's barely a drop in the bucket.

Rolling Jubilee, with its crowd-sourced funding, is competing with very large and well-funded debt-buying companies. One of the biggest is Encore Capital Group, which spent $47 million on $1.1 billion of debt in a single quarter of 2012 [source: Encore Capital Group]. For firms like Encore, that is money well-spent. According to the Association of Credit and Collections Professionals, Encore and its associates typically recover three times what they invest in bad debt, often through legal settlements with debtors [source: Silver-Greenberg].

There's also the issue of student loan debt, which makes up 8 percent ($904 billion) of the consumer debt total in America [source: Federal Reserve Bank of New York]. Roughly 90 percent of student loans originate from the federal government and 10 percent are "private" or "alternative" students loans from banks [source: FinAid]. Rolling Jubilee cannot purchase debt owned by the federal government, because it is not sold on a secondary market like other distressed debt [source: Rolling Jubilee]. That's bad news for many indebted college graduates; the class of 2011 owed an average of $26,600 in student loans [source: Ellis].

But perhaps all of this talk of effectiveness is missing the point. The organizers of Rolling Jubilee openly admit that their small nonprofit is not going to solve the debt crisis in America. They also insist that it's not a debt forgiveness program. Since debt is purchased in anonymous bundles, there is no way of determining who "deserves" to be forgiven. The primary goals of the project are to raise public awareness about the impact of consumer debt, and apply pressure on government regulators to hold the banks accountable for their role in the credit crisis [source: VanderMey].

For lots more information on debt, the economy and how big banks work, check out the related HowStuffWorks links on the next page.

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