The Consequences of Default
“I defaulted on my student loans,” said Lee Siegel in The New York Times. And “I’ve never looked back.” I find it absurd that I’ve been saddled with crippling debt not from “drug addiction or reckless borrowing and spending” but from pursuing an education and a better life. Sure, I could have taken a high-salary job that I hated in order to pay back the huge debts I accumulated in college and graduate school. Instead, “I chose life” and refused to pay. Despite what lenders tell you, you can survive life after default. Even when your credit “looks like a war zone,” you’ll always be able to find a subprime lender in our “reliably predatory” economy. Or, do as I did: “Live with or marry someone with good credit.” The millions of people who owe more than $1 trillion in student loans “may want to consider my example.”
“For the love of God, no they should not,” said Jordan Weissmann in Slate.com. The New York Times should apologize for publishing a “deeply irresponsible op-ed” that is full of “criminally negligent financial advice.” It’s true that the terms of many student loans are “irrationally punitive.” But that’s why it’s irrational not to pay them. “Siegel’s long-overdue loan payments might yet catch up with him,” said Libby Nelson in Vox.com. It’s almost impossible to get rid of student loan debt, which can’t be discharged in bankruptcy. The federal government can also garnish up to 15 percent of your paycheck and withhold tax refunds and even Social Security payments in pursuit of that money. Student loans will follow you, “literally, to the grave.”
There are better options than default, said Jillian Berman in MarketWatch.com. The Department of Education now offers income-driven repayment plans. Under one plan, borrowers pay 10 percent of their discretionary income, and after 20 years any remaining balance is forgiven. For those who have defaulted, there are loan rehabilitation plans allowing borrowers to resume payments and restore their credit.
Better yet, don’t take out a loan you can’t repay in the first place, said Shelly Banjo in Qz.com. Use a financial aid calculator to estimate the size of your repayment and the salary required to manage it. If the loans you want are too expensive, consider alternatives, like community college or “moving to Texas instead of New York after college.” Yes, the U.S. has a problem with student loans, said Megan McArdle in BloombergView.com. College costs are outpacing inflation, and employers demand impressive educational credentials while paying low salaries. But breaking your promises won’t change any of that. “The fault is ultimately with the colleges, and with the employers,” not with the bank “whose mistake was lending you money.”
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