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Valorizing Deadbeats

Willful default on student loans: why the hell not? So says scofflaw writer
Valorizing Deadbeats

Had a long, intensely interesting conversation over the weekend with Raskolnik, who is a PhD student, and with “Francis,” an Ivy League master’s degree holder, trained in finance, who is his in his twenties (as is Raskolnik), and who also came in for the Walker Percy Weekend. The topic: the future of higher education.

I’ll let Raskolnik lay out his own ideas in the comments section if he so desires. Francis and Raskolnik agreed on a lot, actually, and the main thing they agreed on is that the current model of higher education is absolutely unsustainable and is headed for a major crash. They both went into considerable detail about how it makes no financial sense, in the sense of the cost of a college education having grown far, far out of pace with inflation. We are having students take on mountains of debt for jobs that may not exist at all, or if they exist, will not allow them to pay off their debt anytime soon. Raskolnik said, for example, that the country currently turns out twice the number of lawyers annually than there are jobs for lawyers.

Herbert Stein’s Law: If something cannot go on forever, it will stop. According to Raskolnik and Francis (who indicated that he is groaning under his own student debt), we are very close to the breaking point.

“What advice would you give us as parents with three kids, all of whom who will be in college within the next decade?” I asked.

“I would tell parents and students to do everything humanly possible to avoid debt,” Raskolnik said, then elaborated on strategies to accomplish this. Francis agreed. It was all extremely sobering.

All of that was on my mind late last night when I read Lee Siegel’s op-ed arguing that people should start defaulting on their student loan debt, as he has done. Excerpts:

Years later, I found myself confronted with a choice that too many people have had to and will have to face. I could give up what had become my vocation (in my case, being a writer) and take a job that I didn’t want in order to repay the huge debt I had accumulated in college and graduate school. Or I could take what I had been led to believe was both the morally and legally reprehensible step of defaulting on my student loans, which was the only way I could survive without wasting my life in a job that had nothing to do with my particular usefulness to society.

I chose life. That is to say, I defaulted on my student loans.

As difficult as it has been, I’ve never looked back. The millions of young people today, who collectively owe over $1 trillion in loans, may want to consider my example.


When the fateful day comes, and your credit looks like a war zone, don’t be afraid. The reported consequences of having no credit are scare talk, to some extent. The reliably predatory nature of American life guarantees that there will always be somebody to help you, from credit card companies charging stratospheric interest rates to subprime loans for houses and cars. Our economic system ensures that so long as you are willing to sink deeper and deeper into debt, you will keep being enthusiastically invited to play the economic game.

I am sharply aware of the strongest objection to my lapse into default. If everyone acted as I did, chaos would result. The entire structure of American higher education would change.

The collection agencies retained by the Department of Education would be exposed as the greedy vultures that they are. The government would get out of the loan-making and the loan-enforcement business. Congress might even explore a special, universal education tax that would make higher education affordable.

There would be a national shaming of colleges and universities for charging soaring tuition rates that are reaching lunatic levels. The rapacity of American colleges and universities is turning social mobility, the keystone of American freedom, into a commodified farce.

Read the whole thing. Boy, do I have a conflicted response to this piece. Here’s what I think.

On the one hand, I find Siegel’s argument self-pitying and repellent. He voluntarily took on that debt. He personally decided that he just had to be a writer, because taking a job that might allow him to pay off the debt that he freely incurred would be beneath his dignity. How dare the people who loaned Lee Siegel the money to become Lee Siegel expect Lee Siegel to repay them! Collection agencies — “vultures” — are people whose job it is to make Lee Siegel be a man of his word. Worse than Lee Siegel’s burden of debt is his burden of moral entitlement.

On the other hand, we really do have an immoral economy when it comes to making it easy for people to get themselves in deep over their head financially. Yes, with freedom comes responsibility, but the institutions that entice people into taking on debt that they couldn’t afford — the US government, banks and lending institutions, and, in the case of college loans, colleges themselves — never seem to be held morally responsible for their actions.

I despise governments embracing gambling, not because I think gambling is in principle immoral, but because gambling revenues are primarily a tax on those least able to afford it, and with the least ability to resist its allure. We live in a society that tells people at every level that they can be, and can have, anything they want, and that any limits that would deny them the fulfillment of their desires are illegitimate (hence Lee Siegel’s whining that the lending institutions holding his student loan debt should just eat it, because it is cosmically unjust that he should not fulfill his desire to be a writer, even if it means welshing on his debt).

The truth is, I could have easily been Lee Siegel if it had not been for my father being a hard-ass about not letting me take on student debt. Back in the 1980s, when I was preparing for college, everything in the system told me to take on whatever debt was necessary to acquire the education to which I believed I was entitled. Hell no, said my father; you go to LSU and get an education you can afford. And this, you see, made him the meanest man in the world. He just didn’t understand that it was my destiny to go to Georgetown! Years later, when I had graduated and was gainfully employed doing what I loved (writing), and owed not one cent of student loan debt, I was unbelievably grateful to that child of the Depression for standing firm. He was not only holding the line against his son’s sense of entitlement. He was also holding the line against an entire social ethos.

If I had not had my father, with his old-fashioned convictions, driving that train, Lee Siegel’s fate could have been my own. As it turned out, as I grew older, I observed that my father’s convictions about being morally responsible, about being a man of your word, also sustain me. All of Siegel’s rationalizing his default does not absolve him of the moral guilt. I would be deeply ashamed of myself had I done what Siegel did.

And yet, to have stood against the powerful cultural forces making the incursion of debt inevitable for many people would have required uncommon strength of character — which my father had, but many of us do not. During the inflation of the real estate bubble, it seemed like everybody you knew was taking on home financing debt that was ridiculous, but … normal. We bought a very modest house in 2005, in large part because we were terrified of debt, but even then we allowed ourselves to be talked into an adjustable-rate mortgage, which, had we held on to that house, would have been a nightmare. Within the social psychology of that moment, and given the massive incentives within the system to behave that way, it’s easy to understand why people did it — and why they do it.

We all believed the lie that real estate is an investment with which you cannot lose — just as people now believe the lie that a college degree will pretty much guarantee that you will be well on the road to the middle class and beyond.

Raskolnik and Francis both agreed that the only reason to take on a lot of student loan debt is to get an advanced degree from one of the handful of super-elite institutions. Depending on the field you enter, the social network you develop at those places gives you entree into the world of wealth. The catch, they said, is that if you do end up at one of those universities, chances are your parents are already part of that world, or at least have so many advantages already that you wouldn’t have much to worry about if you hadn’t gone there.

I am reminded of the Goldman Sachs executive testifying in 2010 before the Senate, trying to explain to Sen. Carl Levin why he and his team sold to unsuspecting clients a financial product that they all knew was a “shitty deal” (this was the phrase the man used in his e-mail to other Goldman execs). They didn’t care. They were rich, and their wealth was in part built on defrauding those suckers who didn’t have as much information or power as they did. And we all know how Goldman Sachs and its ilk suffered for their sins after the crash, and were held to account for their behavior. (Heavy sarcasm.)

When it comes to higher education today and student loans, who are the people within the systems — financial, governmental, educational — pushing deals they know are “shitty” onto students and their families?

Again, I don’t think this exonerates the Lee Siegels of the world. But it does make the problem far from black and white. I cannot see Lee Siegel as innocent. But I also cannot see that he is the only guilty party. I don’t have an answer to all of this. Do you? Let’s hear it — and please, do your best not to rail ideologically against one side or the other. This is a complicated matter. I would especially like to hear from college professors. You can speak anonymously here. What would you tell parents like me?

UPDATE: Raskolnik, who looks in person like he’s not a day over 25, writes:

I’ll just make two comments here:

1) I am actually ever so slightly past my twenties; and

2) The way I see it, leaving everything else aside, what is holding the whole house of cards up is the non-dischargeability of student loans in bankruptcy.

Universities get to keep charging obscene tuition, increasing annually at a rate of three or four times inflation, because they know private lenders will be more than happy to lend you whatever small or mid-size fortune the final bill ends up being. Universities are happy about this because it means they can keep perpetually expanding their managerial class with swarms of “Diversity Coordinators” and “Deans of Student Life,” “Directors of Assessment” and “Directors of Retention,” and so on and so forth. (For the curious, all of these are real salaried positions at my university, which also has separate “Multicultural,” “International,” “Diversity,” and “LGBT” administrative units—but of course they don’t have money to pay for tenured professors to teach undergraduates. And my university is not unique; this is standard practice in the academy.)

Getting back to the topic at hand, private lenders are happy to loan those small and mid-size fortunes to students, because they know that if those students ever want to buy a house or a car they will be on the hook for that debt for the rest of their lives. The federal government is complicit in this system because whoever is president gets to go in front of the TV cameras and smile and say how they’re making college available to the disadvantaged or some such claptrap. In fact the federal government’s interest is financial and political, since they both make money on public loans, and–more importantly–appease the private lenders who are making a killing, secure in the knowledge that whatever obscene amount they lend out will be repaid by their marks the students, on pain of never being able to receive credit for anything ever.

People can whinge about “moral hazard” all they want, the reality is that you can take out a $100,000 loan from a bank, blow it all during a debauched weekend in Vegas, declare bankruptcy, and immediately start rebuilding your credit. It’ll take 5-10 years but you’ll get there. Students do not have access to this pathway that we leave open to even the most degenerate and unreconstructed spendthrifts, which is why I have a hard time taking warnings of “moral hazard” seriously.

As soon as student loans become dischargeable in bankruptcy, all of a sudden lenders have to be far more selective about the amounts and purposes for which they lend. If you think it is hard getting your dad to pay or co-sign $200,000 so you can major in Victim Studies at Special Snowflake University, try convincing the actuary at Big Mean Corporate Bank Ltd. The end result of this is that the colleges and universities which survive the process (and many won’t) will be forced to charge realistic tuition, in line with a reasonable expected ROI.



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