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 below.
Author's Note: How the Rolling Jubilee Works
Rolling Jubilee is a project of Strike Debt, an offshoot of the Occupy Wall Street movement. While researching this article, I visited the organization's Tumblr page called Why Strike Debt. It's an open forum for individuals to share their stories about the destructiveness of debt. If you think that debt forgiveness is unfair to those who pay back their debts on time, read some of these people's stories. They are stories of people who sought out an education only to graduate into a recession. They are people who suffered car accidents and have medical pills that would take them a lifetime to repay. They are families whose mortgages are so deeply underwater that they have no choice but to walk away. Financial responsibility is important, but we need to make sure that the credit system isn't rigged for failure. While I don't think that Rolling Jubilee will solve the credit crisis, I welcome its voice into the conversation.
- Ellis, Blake. CNN Money. "Average student loan debt nears $27,000." October 18, 2012. (Nov. 29, 2012) http://money.cnn.com/2012/10/18/pf/college/student-loan-debt/index.html
- Encore Capital Group. "Encore Capital Group Announces Record Third Quarter 2012 Financial Results." Nov. 1, 2012. (Nov. 29, 2012). http://finance.yahoo.com/news/encore-capital-group-announces-record-200500218.html
- Federal Reserve Bank of New York. "Quarterly Report on Household Debt and Credit." May 2012. (Nov. 29, 2012). http://www.newyorkfed.org/research/national_economy/householdcredit/DistrictReport_Q12012.pdf
- FinAid.org. "Student Loans" (Nov. 29, 2012). http://www.finaid.org/loans/
- Hern, Alex. New Statesman. "Rolling Jubilee: can a crowdsourced bailout of personal debt work?" Nov. 9, 2012 http://www.newstatesman.com/economics/2012/11/rolling-jubilee-will-it-work
- Kinsler, Ross and Gloria. Jubilee Economics for One Earth. "Jubilee's Roots: Was the Biblical Jubilee Ever Really Practiced?" [Nov. 29, 2012] http://www.jubilee-economics.org/historical-biblical-jubilee/
- Pacomio, Luciano. Vatican. "The Jubilee in the Bible." Jan. 5, 1997 (Nov. 29, 2012). http://www.vatican.va/jubilee_2000/magazine/documents/ju_mag_01051997_p-78_en.html
- Rolling Jubilee. "FAQ" (Nov. 29, 2012) http://rollingjubilee.org/
- Silver-Greenberg, Jessica. The Wall Street Journal. "Boom in Debt Buying Fuels Another Boom -- in Lawsuits." Nov. 28, 2010. (Nov. 29, 2012). http://online.wsj.com/article/SB10001424052702304510704575562212919179410.html
- VanderMey, Anne. CNN Money. "Occupy Wall Street's Rolling Jubilee: Your questions answered." Nov. 16, 2012. (Nov. 29, 2012). http://finance.fortune.cnn.com/2012/11/16/occupy-wall-street-rolling-jubilee/
- Yglesias, Matthew. Slate. "Occupy Distressed Debt: Can We Save the World With Loan Forgiveness?" Nov. 9, 2012. (Nov. 29, 2012). http://www.slate.com/blogs/moneybox/2012/11/09/rolling_jubilee_occupy_wall_street_s_bailout_of_the_people_by_the_people.html