Roughly twice as many people have student loans as there are college students. It’s tough to list all the reasons for this, but I’ll hit the highlights:
First, higher education is, in many cases, wildly overpriced. Second, most jobs you can get with “generic” degrees can’t pay off the loans. Third, most loans are for four years, while degrees take six years—it’s easy to spend years in college and exit with nothing to show for it but debt and no degree to help pay it off. Fourth, loans go to anyone who can click a box saying he wants a degree, so lots of folks are being loaned money for no good reason. Fifth, college administrators, eager for growth, have annihilated standards so that it’s easy to get into a college, so more people are taking loans. Sixth, accreditation, which is supposed to restrict loans just to schools which are interested in education, has been subverted by college administrators so that there’s nothing stopping a bogus school from raking in billions in loan money. Those are just off the top of my head, but then there’s the big reason:
No matter how desperate your financial situation, the only way to be rid of your student loans is to pay them off. There’s no bankruptcy protection against student loans. Pay them off, or keep paying what you can until the day you die. These loans are forever, for many people lured into this system.
That said, there are a plethora of loan deferment programs that let you put off when you need to start paying, or to pay less now for bigger payments later, or whatever. However, many people see their minimum wage (or less) paychecks, look at the expected monthly payment on the student loan for the education that is only worth minimum wage, and say “this is ridiculous, I’m just not going to pay.”
A recent NY Times piece discusses one person’s journey into deciding to simply default on the loans:
Years later, I found myself confronted with a choice that too many people have had to and will have to face…
I chose life. That is to say, I defaulted on my student loans.
Now, I’m not necessarily recommending this. “This’ll ruin your credit,” is the most common threat against defaulting, but I’m not so sure this is much of a penalty. If you have a massive debt hanging over your head, your credit isn’t that good anyway. At least, in theory.
There’s a moral issue to not repaying loans, but student loans are a very different matter than other consumer loans. Much like cigarette addiction, these loans are generally inflicted on the young, who simply don’t realize what they’re signing up for. Just as tobacco company executives are viewed with disdain for targeting children for their product, so too can a case be made that college administration’s efforts to trap people into these inescapable debts is also immoral. In many cases the infliction of these loans has been unconscionable, so defaulting on these loans is no more immoral than being addicted to smoking.
The person who’s decided to default, by the way, is no kid, and has made the decision to give up on paying off the loans after careful deliberation:
Forty years after I took out my first student loan, and 30 years after getting my last, the Department of Education is still pursuing the unpaid balance. My mother, who co-signed some of the loans, is dead. The banks that made them have all gone under. I doubt that anyone can even find the promissory notes. The accrued interest, combined with the collection agencies’ opulent fees, is now several times the principal.
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Originally Posted by Zippyjuan
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