but as someone who paid their student loans, pays their mortgage, and other bills, I sure feel like I'm getting the raw end of the deal for honoring my commitments.
Making it acceptable to default on or get bailed out of debt (whatever the source) is a recipe for financial ruin for us AND our children.
In the end, your decision to take a loan commitment (under whatever pretenses or promises) and then default, is fucking the honest American. Thanks!
A mortgage, however is a secured loan with an interest rate tied to the risk of the loan. Especially if you're paying points, PMI or a higher interest rate, the chance of default is already calculated into the house and is part of the risk that the lender's responsibility. They also made a commitment to take it back if you don't pay (and you've paid for that privilege, perhaps dearly.)
Student loans are a bit different because some interest rates are heavily subsidized (some are not). If you're paying a high interest rate, then you are paying for someone to accept the risk of not getting paid back. Default, they get punished, they stop making bad loans, the market corrects.
Instead we've jammed a penny in the circuit breaker and loans must always be available and are near impossible to discharge. Government backs or bails lenders out and nobody gets punished for contributing to the mess (and driving up prices for cash payers too).
edit tldnr -- Loans are not priced based on moral commitment to them. If you get a loan priced as such (interest free from a friend) honor that commitment. If you pay extra for the inherent risk, let the risk taking parties honor their commitment, too.
Sometimes I wonder if taking on debt at all is the actual "recipe for financial ruin". Years and years ago, back in undergrad, I sat through a course on mankind's economic history. It was that course that really made me aware of, and made me think about in an analytical fashion, the ancient admonitions against debt and usury. That class made me pretty sure that there was a certain wisdom in those admonitions.
One can argue that those who pay off a $250k college loan to a small liberal arts college are creating a moral hazard for loan issuers and college adminstrators who keep jacking up tutition.
The article proposes that if everyone were to default, educational costs would be returned to a more rational level.
Personally, I think that the cost of college education will continue to increase to a significant fraction of the value of the college education, to somewhere around half a million dollars. This is basic economic theory, and will result in fewer students finishing college, and a continuing increase in crushing debt.
Defaulting on the loans will likely just lead to another government bailout, and sky high tuition will continue.
Marketplace dynamics are weird like that. They often the OPPOSITE behavior of what you'd expect.