Like many of you, we here at RSI have been keeping close tabs on what’s going on with student debt in this country. Perhaps it’s our proximity to the mortgage foreclosure crisis and the improving yet ongoing fallout, but the similarities are a little too close for our comfort. Just as homeowners overleveraged themselves on the road to the foreclosure crisis, so too Americans now stand on the precipice of what could be an equally destabilizing student debt problem. As an organization that has made empirical research its bread and butter for over two decades, we are interested in pulling together all the relevant data we can to see if there is an escape valve for this high-pressure bubble.
What’s a little different from our previous research is our timing. Whether it’s been a response to an explosive crisis like the bursting of the housing bubble, or to more subtle issues, like the gradual erosion of access to courts for low-income litigants which has made ADR such an attractive alternative, we’ve come to study dispute system design as a solution to problems well underway. For the first time, RSI hopes to leverage its skills in designing, managing and evaluating ADR programs to provide insight into a situation that has yet to reach its tipping point.
We think America’s student debt industry could be a prime candidate for action sooner rather than later. For instance, we know that the majority of defaulting borrowers owe less than $10,000. Could courts adapt existing small claims mediation programs or create new, student debt-dedicated programs based on those models? A recent CFPB report highlighted a number of issues around borrowers’ access to information, including payment plan options and how to resolve servicing errors. Would providing borrowers counseling, or bringing borrowers and lenders together in a mediation to discuss their options, lead to better outcomes for all parties involved? These are just a couple examples of questions we hope to answer in exploring an educational lending economy that seems to offer lots of fruitful territory for ADR to have an impact. At this juncture, we want to figure out if there is an opportunity to develop these options before problems spiral out of control.
It is important to remember that ADR does not happen in a vacuum. As our Director of Research Jennifer Shack recently argued, ADR requires appropriate policies and procedures to truly offer access to justice. Part of the challenge in using ADR to address a relatively nascent issue such as student debt is one of reverse engineering: rather than designing programs to fit within a well-defined system of policies and processes, we are seeking to figure out how laws, regulations and policies can be framed to make ADR an effective tool in mitigating the potential fallout of a student debt collapse.
In the above CFPB report, mediation is mentioned a few times in passing as one potential tool. We suspect that ADR is still undervalued in this context, especially given the impact it has made in mortgage foreclosure cases, an area the CFPB knows all too well. As we continue to delve into this arena, we hope that our research will yield policy recommendations for legislators, regulators and court administrators, among others.