Why I Defaulted on My Student Loans

I absolutely would pay the loan back. Apologize if I somehow indicated otherwise.

 

Nah. I was just trying to paint you into a moral quandry and failed.

 

I think it's a policy problem, too, but I come at it from a different angle. Let me tell you a story ...

Just down the road there's a perfectly good community/junior college. My older daughter has taken (and my son will take) a few general ed requirements there. The credits are dirt, dirt cheap (and probably priced about right as their quality goes). But it's the case that any number of students are enrolled there in actual degree or certificate programs. One of these programs is for an associates of applied science in aviation (professional pilot). It's a two-year program. Completing it will run you around $7K to $10K before any living expenses are considered.

A few miles down the road, there's a pretty well-regarded private university that offers a wide variety of majors. One of the undergraduate majors offered is journalism. Not counting any school-provided financial aid (grants, scholarships, etc.), completing it will run you about $120K

Finally, a few miles down the road (in the other direction) there's an upmarket private university with a fairly well-regarded (say Top-25) law school. Taking a JD there will run you about $150K.

Why do I discuss these three very different schools/programs? Because in every one of them (and plenty more just like 'em), students can run right up to the federal limits on student debt without there being a chance in hell of the degrees actually paying off.

It's a stupid idea to borrow $30K to $40K to pursue training that gives you a one-in-a-hundred shot at a $20K starting salary. It's a stupid idea to borrow $30 to $40K to pursue a journalism degree. And it's a stupid idea to borrow $150K on a mid-market law degree.

But that's not the way the student loan program works. If you want it, but ain't got the money for it, Uncle Sammy's standing there with his credit card ready to co-sign for you. No questions asked. No real assessment as to whether such a loan is a good risk, or a good idea for the borrower.

I understand why this is the way it is. The hew and cry over a legitimate student loan program -- one in which real lending, with underwriting on the one side and market-priced rates/terms on the other -- would be tremendous from certain quarters: What do you mean I shouldn't be able to borrow $100,000 to study underwater basketweaving at Mayflower Society University? I guess that's only for the privileged classes!" I can see those dogged defenders of the underclasses, holding their hearings in the cloister of their righteousness.

At the heart of it, though, that's the policy problem. The problem isn't that the program is badly structured, that it has poorly designed incentives. It's that there's such a program to begin with. Once you take what should be a fairly noncontroversial idea -- in some cases it might be a good idea to lend someone money so that someone can greatly enhance his/her earnings power -- and put it into the political realm, it gets all screwed up.

 

OTOH, is it better to have more college educated people in the United States, even if some owe on loans years later or some default on loans?

Or have fewer college educated citizens because the free market, asshats who default on loans and stagnant wages led to fewer people who could afford or qualify for college loans?

 

You're not really borrowing that much money, though. Under the income-based repayment plans, you're basically signing up for a 10 percent tax on your earnings for 20 years.

 

You don't see it as a problem, and you would likely be among those who did have a problem with any attempt to make the penalties tougher.

 

Yes, DQ, but to take one of your examples.

The world still needs pilots. Unless you are a pilot in the military (very difficult to achieve) it's a pay-your-dues-and-log flight-hours proposition.

That $7-$10K community college program may be a great deal for someone who wants to be a pilot and would have to pay to rent a plane and/or go up with an instructor hours and hours. (I know. My brother did it.) And if you start off making, $20K hauling checks in a turboprop, well you move up from there.

 

I don't have a problem with making the penalties tougher.

 

People take on burdensome debt all the time for things for foolish purchases that don't have the upside of a college education.

I know, because I have plenty of debt but graduated college with no loans.

 

I remember reading an article relatively recently that showed why it's no longer possible to be 100% self-sufficient AND go to college, unless you take the one-class-at-a-time rout. I don't remember specifics but it pretty much boiled down to the fact tuition had gone up so much - on top of the cost of living - that jobs one without a degree can get wouldn't pay enough.

It's not absolute, of course, but it chaps my hide when I hear older folks pull the "I did it myself!" card when today's college kids aren't playing with the same deck.

Hell, my own mother does the "nobody helped pay for my college education, so why should I help anyone else" routine when debating on how college should be paid for, ignoring the fact she married an older, well-established man who financially supported her when she went back to school.

 

As Ragu noted, a big part of the problem is that college costs have risen disproportionately because people have been handed something of a blank check to pay for it. There is little incentive for schools to try to hold down costs because literally anyone can borrow and/or be given enough money to pay those costs, almost regardless of how much they are.