New York Times Should Apologize for the Awful Op-Ed It Just Ran on Student Loans

If they're private loans that he defaulted on, nobody is "pickpocketing the government" — a bank made the wrong investment decision and lost money, which happens to millions of ordinary non-corporate people every day in a 401(k) somewhere. It's all just business until a real individual human being makes some bad decisions... at which point it's all his fault, it's a moral issue, he's a terrible person, and he better spend the rest of his life fixing this.

When US can borrow at negative rates charging high interest rates (6-8.5%) on college loans is also a business and immoral decision.

To his defense Lee Siegel, the author or the original article, happens to have a different class of loans that's being issued today. His likely don't have the benefits of forgiveness or income based repayment.

Given all the options available to students today, before you decide to default, make sure that you're on your way of your income earning peak potential first - as in, don't default at 26 - right after law school. You may switch careers (like me), and find a new start in job prospects and opportunity.

Original article: http://www.nytimes.com/2015/06/07/opinion/sunday/why-i-defau...

The reality is that lots of students are taking on way more debt than they can't handle. Because discharging that debt is not an option in most cases, bad debt remains on the books with the assumption that it's good debt and can be repackaged and priced accordingly. Say what you will about morality, this is a financial catastrophe in the making.

A huge amount of this debt will never be paid back. 50k at 9% can't be paid back by someone on a Starbucks wage. When letting the government garnish your wages becomes less expensive than servicing the interest on your student loans, only a fool would continue to pay on them. That's not a political opinion, that's math. We need to be realistic about this.

Frankly, if people walking away from their student loan debt does anything to deflate this bubble, I can only see that as a net positive.

I believe the student loan program has been harmful. I don't mind that "bankruptcy" has social and moral as well as financial implications, but I also agree that there are times when it is acceptable to fail to pay your debts, with regret.

This is why we have bankruptcy law. We accept that there are times where circumstance, usually combined with bad judgement, have put someone into a financial hole that they will never climb out of. We don't, as a civilized society, see much point in garnishing someone's wages for the next 50 years to pay off a debt (or perhaps only make a dent it it). We accept that after a total collapse and loss of all wealth, followed by period of credit purgatory, you may rejoin the economic world with a more or less clean slate. This has an additional benefit in that it forces creditors to be careful too, as they should be. I have no personal interest in watching my government's courts, resources and monopoly on physical force used to chase down payment of a foolish loan for decades and decades.

So to me, the real problem here is that the government guarantees the loans in exchange for a very unusual loss of bankruptcy as an option. This allows private lenders to loan money at low interest rates without fear of non-payment, but is that a good thing? I understand that there may be some social value in these loans, and that there is a greater risk of someone "walking away" (ie., they mythical med student with 200k in debt who declares bankruptcy, lives with his parents during residency, and starts making huge bucks just as the credit purgatory ends). But overall, I do think it's useful to ask "would it make any sense for a private lender, subject to normal bankruptcy laws, to make these loans?" 20k for a masters degree in engineering? Yeah. $150k for a masters in philosophy?

It gets worse. Because this easy but very dangerous credit was extended to students, Universities (in my opinion) raised their prices to reflect the availability of money. This reduced the available options for students who were clear-eyed about the debt they were taking on. It's still possible - in California, community college followed by a UC or State school can yield a very very high quality education, especially considering that half of UC students pay no tuition. But I think it's very likely that universities that would have looked for ways to offer lower cost educations instead charged more simply because now students could pay for it through these loans.

And because the loans couldn't be discharged through ordinary bankruptcy, the trap was now set. It doesn't help that these loans are also typically taken out for something that traditionally happens in your first year of legal adulthood. In short, at age 18, the very first year someone is even allowed to enter these sorts of agreements, we set them up to take out loans that can't be discharged through bankruptcy and will follow them their entire lives.

Ok, so, it's pretty clear I'm disgusted with the way student loans work (just to be clear, I think it's fine for the government to fund education, I just think that the student loan program, as it was implemented, ended up doing harm). But I'm also not impressed with the writer of this op-ed. He ran up a huge debt getting humanities or writing degrees, and then decided that because the debt would prevent him from becoming a writer, he just wouldn't pay it.

You know, there are lots of people who would like to be writers, musicians, or artists. They find a way to pay the bills and live, while pursuing their passion. Sometimes they have to give it up, other times they don't achieve what they would have otherwise. Many of them walked away from degrees that might have provided the career boost Mr Siegel got from having attended Columbia, understanding that the trade-off wasn't worth it.

In short, I think the NYTimes gave one of the least sympathetic or compelling people the bullhorn on this issue.

I'd love to read a compelling op-ed on this topic, but this wasn't it.