The Subprime Student and the Payday Loan

• In Event: 35.082 - Roundtable Session 14
  In Roundtable Session: 35.082-11 - Austerity Education and the Pedagogies of Debt

Abstract

Here I explore the highly profitable unbanked/underbanked/subprime consumer lending industry and what this means for already marginalized families and students in the US. I consider ways in which this industry is constantly redesigning products to make the most profit among dispossessed groups, including youth. In terms of the unbanked, I look at some of the largest payday loan centers -- such as Check City, Advance America, Metro Cash, and Easy Cash Advance. After describing the steps of the payday transaction, I will explain how the result is being charged up to 500% interest for a two week loan. Such entities strategically open in areas with the highest concentrations of low income people, and are modeled on convenience of access in terms of street traffic, bus routes, and often 24-hour service. Payday loan centers are rapidly shifting most of their business to mobile apps, which given the instant exponential market share and younger market appeal, is the clear direction of the industry. Collection agencies that specialize in purchasing overdrawn payday accounts from debt brokers are additionally a major growth area (Bergman & de Granados 2009; Hall 2014; Halpern 2010). In a post-Providian world, supported by re-written bankruptcy laws, traditional banks such as Bank of America monopolize the underbanked (and prime) market, through zip code-tailored credit card/debit card/pre-paid cards. Such products are debt-trap laden in ever-changing ways (Bergman & de Granados, 2009). Pre-paid credit cards are easily seen as a training ground for youth of all backgrounds to ensure a future vast subprime adult market. Given these circumstances, along with the rule of universal default, I assert through youth-oriented products students are being streamlined into a future of World Bank-style debt, in which they will perpetually chase late fees, breathtaking interest rates, and may never get to principle. Low income students live in communities that are saturated by these products, yet attend schools where private interests obliterate spaces for critique. The former middle classes are also increasingly entering the ranks of the underbanked/unbanked. An immensely important point is that half of the world population is unbanked and therefore dependent on subprime products. Any possible discussions to move forward must consider this. Moreover, as often the main and only caretakers of children and all the expenses that go with that, how these products translate into the lives of women (and children) can no longer be ignored.
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Author

• Julia Hall, D'Youville College