By John Lawrence
With over a trillion dollars in outstanding student loans, young college graduates are being forced to take jobs they hate in order to pay them back. Their futures consist of debt peonage for as far as the eye can see. Some are opting out of a lifetime of death-in-debtorhood and choosing instead to start over living the life that they foresaw when they enrolled in college in the first place. Such a one is Lee Siegle whose June 6 opinion piece in the New York Times laid out his rational for defaulting on his student loan.
His decision was made based on choosing life over death:
[T]he Federal Government is actually making money off of student loan debt. … instead of subsidizing students, the government is profiting off them.
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.
Student loan debt is the only form of debt that can’t be discharged in bankruptcy. It will follow one for the rest of his or her life. Miss a couple of payments and penalties can add up to the point of doubling or tripling the amount owed. This debt is relentless and unforgiving. It is a trap unanticipated by the young person trying to better him or herself by getting a college education. A whole generation of debtors has already been created – debtors who will not be able to get married, take out a mortgage or have any freedom in their lives. Their freedom has evaporated by virtue of having signed on the dotted line. They have effectively sold their souls to the devil, the devil being the big Wall Street banks and/or the US government.
Siegle goes on to say
Forty years after I took out my first student loan, and 30 years after getting my last, the Department of Education is still pursuing the unpaid balance. My mother, who co-signed some of the loans, is dead. The banks that made them have all gone under. I doubt that anyone can even find the promissory notes. The accrued interest, combined with the collection agencies’ opulent fees, is now several times the principal.
What is little known is that the Federal Government is actually making money off of student loan debt. They are as culpable as any Wall Street loan shark or payday lender. The Congressional Budget Office has projected that the federal government would earn roughly $127 billion from student lending during the next decade. That’s right – instead of subsidizing students, the government is profiting off them. This infuriates liberals like Sen. Elizabeth Warren, who tend to regard the idea of a profitable student loan program as fundamentally indecent. “It’s billionaires or students. Where do we want to make our investment?” Warren asked a Washington audience recently.
Siegle has some advice to give to those who decide as he did to default on their student loans. For one thing their credit will be ruined so it’s smart to anticipate that in advance and take some defensive measures. He recommends getting as many credit cards as you can. Since credit card debt is dischargable in bankruptcy, it might make sense to get as many cash advances on those credit cards as possible, pay off your student loan and then go bankrupt which would get you out of paying off the credit cards.
Just because one defaults on a student loan does not mean that the creditor will stop trying to collect on it. For one thing they can garnish your paycheck. Since Congress controls how much your paycheck can be garnished there’s nothing to prevent them from raising the legal limit up to around 100% which would turn the worker into an actual debt slave. So the defaulter would probably have to go to an all cash personal economy and get paid under the table. Otherwise, the IRS could give you problems. They are even garnishing the social security checks of people in their 80s.
Siegle concludes:
If people groaning under the weight of student loans simply said, “Enough,” then all the pieties about debt that have become absorbed into all the pieties about higher education might be brought into alignment with reality. Instead of guaranteeing loans, the government would have to guarantee a college education. There are a lot of people who could learn to live with that, too.
Most European countries guarantee a free college education up through graduate school. The US has a better idea: turn students into debt slaves. But don’t be a dummkopf. As a foreigner you can go to college in Germany for free and take all your courses in English. Check out this article in the Washington Post: 7 countries where Americans can study at universities, in English, for free (or almost free):
Since 1985, U.S. college costs have surged by about 500 percent, and tuition fees keep rising. In Germany, they’ve done the opposite.
The country’s universities have been tuition-free since the beginning of October, when Lower Saxony became the last state to scrap the fees. Tuition rates were always low in Germany, but now the German government fully funds the education of its citizens — and even of foreigners.
Since 1985, U.S. college costs have surged by about 500 percent, and tuition fees keep rising. In Germany, they’ve done the opposite. The country’s universities have been tuition-free since the beginning of October …
What’s more, Americans can earn a German undergraduate or graduate degree without speaking a word of German and without having to pay a single dollar of tuition fees: About 900 undergraduate or graduate degrees are offered exclusively in English, with courses ranging from engineering to social sciences.
Some other countries that also offer free or almost free college educations in English: Finland, Norway, Sweden, France, Brazil and Slovenia.
Siegle makes an interesting point though. The conventional wisdom is that a college education will elevate your position in society. That combined with the temptation of easy money and a “that’s the way it’s done” mentality combine to lead young people down the primrose path, promising them that if they only mind their own business and work hard, they will have a wonderful future. But this is really snake oil and bullcrap. Instead of a rosy future, student loan debtors are finding out that the only ones with the rosy future are the Wall Street bankers they owe their money to.
A better alternative is to forgo college altogether and learn a marketable trade, something that produces revenue based on work in the local economy, something that is useful to society unlike many of the vocations that a college education prepares you for which are, supposedly, to “compete in the global economy”. In fact the only reliable job market for college graduates is in financial services, fossil fuel production and the military-industrial complex. All of these jobs could be considered unethical in terms of their ultimate goals of predation, destruction of the environment and murder of innocent civilians. If you want an ethical profession, become a carpenter or a plumber (Albert Einstein’s choice if he had a do-over) or an electrician. At least you would be creating and servicing something that addresses valid human needs.
In March Republican Senators blocked Elizabeth Warren’s plan to lower interest rates on student loans:
Warren’s amendment would have allowed people with college loan debt to refinance at interest rates from the 2013-2014 academic year. The Massachusetts Democrat … said the move would allow undergraduates to refinance their loans to a 3.9 percent interest rate, with a “slightly higher” rate for graduate students.
“Millions of borrowers are still stuck paying interest rates at 6 percent, 8 percent, 10 percent and even higher,” she said.
Her plan would have been paid for by requiring millionaires to pay at least a 30 percent effective federal tax rate.
“The amendment would save borrowers hundreds, if not thousands,” Warren said. “We have a choice: protect a tax loophole for billionaires or give millions of middle class people a chance to build some real economic security. … Congress has worked too long for the billionaires”
For those seriously considering defaulting on their student loan, it might be provident to consider the implications of default. Youth should want to know: what happens when you default on a student loan?
A college diploma does not guarantee you a job. It’s a ticket of admission only.
VICE recently talked to Heather Jarvis, a self-proclaimed student-loan expert who graduated from Duke Law School with $125,000 of debt and has been an advocate for borrowers ever since.
According to Jarvis, if you decide one day to stop paying your federal student loans, after 270 days the loan will default, at which point the government will start garnishing your wages, seizing tax refunds, and intercepting government benefits (like social security) without a court order. The government may also sue if they think it will give them access to your assets.
“They can and do — literally do — pursue debtors to their graves,” Jarvis said.
Ouch. It might not be a good idea to be on the Federal Government’s shit list for the rest of your life. It would entail going to an all cash economy and risk being jailed for tax evasion. Having your social security check garnished would not be fun, but you wouldn’t even have a social security check if you never paid into it.
The only rational solution to this problem is to not go into debt in the first place. If that means that you don’t go to college, so be it. Tons of successful people never graduated from college including high tech billionaire Jack Dorsey, co-founder of Twitter and inventor of the Square, a mobile credit card payment tool. In the tradition of other computer science billionaire entrepreneurs such as Bill Gates, Larry Ellison, Steve Jobs and Mark Zuckerberg, Dorsey dropped out of college before receiving his degree.
I did a blog once on 10 Reasons Not to Go to College. A college diploma does not guarantee you a job. It’s a ticket of admission only. You’re putting your economic future in the hands of some corporation which is only interested in you if you can add value to that corporation. When more recent college graduates can add more value, you’re gone. How does that feel if you’re 50 years old and nobody wants to hire you?
If you’re going to go into debt, you’re better off doing it in order to start a business rather than in pursuit of a college degree which in the long run is just a worthless piece of paper. At least, if the business doesn’t go well, that debt is dischargeable in bankruptcy and you can start over again debt free.
Be the first in your family not to go to college at least not in the US. That doesn’t mean that you shouldn’t have a plan: a plan for remunerative work and a plan for improving your mind. In fact I maintain college will obstruct and obfuscate both of those things. You will be better educated than most college graduates if you just read one good book every month. In fact the debt based college solution is a will-o’-the-wisp, a phantasmagoria, a mirage. Don’t fall down the rabbit hole.
John Lawrence
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Great piece. One of our most pervasive public failings (the old/new domino theory was one) has been the steady movement toward monetized education. It’s gotten so far that administrators at state colleges and universities will speak of jobs and earnings levels while they’re selling education. And so, education has been dragged into the marketplace as a commodity when it should have stayed up on the hill. Success in education must now have a dollar denomination. We can’t undo the engineering schools at UCSD, they have been the moneymakers there as much as football is at SDSU. Once education becomes a profit center education suffers, though. The humanities, where we learn the values of right and contemplative living, don’t attract money gifts from… corporations, because… no returns on investment.
But, John Lawrence, to say that if a huge student loan “means that if you don’t go to college, so be it” tells me your own thoughts have been influenced by the monetary culture. I’d bet students with a serious interest in learning could ensure themselves a good education at local community colleges. A real student just needs a little help, now and then, at the right moments. And money sure as hell won’t guarantee that.
The idea of skipping college and starting a business ignores the reality that starting a business is far from easy and most markets have such heavy saturation right now that there is no hope for success without extensive knowledge of technology, security, safety, materials and chemistry, laws and patent issues… No 18 year old kid is really going to know this and most will find once they get the first taste of success the government or competitors will squash them like a bug.
But Melvin, business is not the only alternative to college. Unions have training courses. Delivering for UPS or FedEx provides exercise and money. Community Colleges have industrial programs and commercial programs, and those include technology. But, then, you might be talking about Wharton’s or Harvard’s or Yale’s business programs, and those aren’t really necessary to make a buck, are they?
Lee Siegel’s approach is interesting, but that wasn’t the case with me. I just never found work that paid enough to service the debt. And yes, if I could go back in a time machine I would have never gone to graduate school. The morality of it doesn’t matter, it is just the debt that is the reality. In about a decade, this debt monster is going to seriously compromise the elderly on a large scale in the form of Social Security garnishments. We see the start of that now. How much more absurd can this situation get? I mean, life destroying debt from post adolescence into old age is like uh? OK?
What really makes it sinister is the government’s teeth are doing all the damage. Our own government is why this one form of gambling debt can’t be wiped, but if I owed the exact same balance on a master card I could wipe it tomorrow and nobody would care. We let businesses welch on taxes and file for bankruptcy every day but students who usually had no choice but college to try to survive are going to be punished for life.
Read my post and link below. That’s the myth is that there was no choice but college.
Dandy, but what about the millions already in default and the tens of millions who are doomed to end up in default regardless of what they do. A lot of older people figure the IBR is a perfect solution but it doesn’t help at all if you have private loans, which most large borrowers will have, and it also requires constant updates and paperwork that nobody is going to bother with for decades.
There is a massive shortage of workers in the trades. It is certainly an alternative to a university degree. At the very least one could go into these for awhile and take college classes at night and eventually earn a degree if they don’t’ want to work blue collar all their lives. High schools need to bring back shop classes. http://www.forbes.com/sites/emsi/2013/03/07/americas-skilled-trades-dilemma-shortages-loom-as-most-in-demand-group-of-workers-ages/
This is from your link, Goatskull:
“For two or three generations, the focus has been to go to college, get a degree and in doing so you will ensure a brighter future with more access to employment,” Genevieve Stevens, interim dean for instruction at Houston Community College’s central campus, told the Houston Chronicle. “We started focusing on academic instruction, but left behind the notion of work-force education. However, in a two-year institution that costs less, the average work-force student can come out of that program with skills to gain immediate employment.”
The beauty of a skilled trade is that you can be self-employed, i.e. in control of your own business, you can do something practical that provides for a real human need and you can do something ethical. It’s called honest work. A college degree is just a ticket of admission to be employed by some corporation. It means you have to kiss their ass in order to keep your job.
Yes I read this article back when it came out a few years ago and I may have posted it here before. I agree with what you said to a point. I think a skilled trade just like a college degree is not for everyone, but it’s centrally an option and for many a better one at that. Not every one has the manual dexterity (well depending on the specific trade). Still this is should a known chock and high schools need to get off the “all of our students deserve to go to college” mentality. Perhaps more would pick a skilled blue collar profession and that would mean less completion to get into the universities and just maybe it would drive the costs down for those who do choose higher education.
Seems we have become a nation of “get whatever money you can’ at any cost to our young people and society at large. Would we have tolerated this attitude 40years ago or does everyone feel so hopeless about the future that the only response many can have is to take the money and run? This type of materialist and lack of investment in future generations may be caused by many feeling that there is no future! Leadership in this country will have to be the type that actually solves big problems {like climate change and over population] if we are to regain a hopeful attitude towards the coming centuries. Perhaps then there will be an overall push to think of more than just “money grabs”.
Another and another great post in this column. This one shines a big light on predatory capitalism. I saw a workout fanatic in a t-shirt that bore the slogan, “Eat the Weak” at, of all places, the Hillcrest farmer’s market on a Sunday.
Funny, I saw that same guy but to be honest I didn’t think much about it other than it was just an off beat t-shirt.
Regardless of the t-shirt’s meaning I can say this. I’ve lived in HIllcrest for 11 years and despite socially liberal attitudes of most people who live there, greed is just a prevalent there as any other SD neighborhood.
I am a local Bankruptcy and Student Loan Lawyer. I help people manage their student loan debt everyday. The biggest problem I see with student loan clients in lack of information and understanding when it comes to repayment and default. One myth that I need to dispel is that student loans cannot be addressed in Bankruptcy. This is simply NOT true. A detailed analysis is needed without a blanket statement. In many cases I use the Bankruptcy System as a tool to address my client’s needs of student loan resolution.
Can you renegotiate loan terms? Or, do you advise them to go bankrupt and thus dispose of some of their debts so that they can pay their student loan debt more readily?
Thanks for another great article, John. I haven’t made a payment on my loans in almost two years. I also haven’t made much of an income and the government is finding it difficult to find me or my money (usually because I have none).
I say, go ahead and steal that admission ticket. Let the government support you for a few years while you study their system, while you gain so-called credibility with the letters behind your name. Then, use that knowledge in defense of what you love. Become a lawyer, deep ecologist, explosives expert, poet, whatever. Steal some training and then use it to fight like hell.
In the last two years, I have not held a steady job, but have been supported – by communities standing in resistance – in much better ways. When I was up on Mauna Kea, for example, once I demonstrated my willingness and sincerity to help, no one asked me to pay for anything. When I asked why I wasn’t allowed to pay for anything, everyone said, “You’re staying up here every night and writing about what’s going on. You’re doing your part.”
Because the government is profiting off us, I think we have a great opportunity to deal the government a crushing blow by organizing to withhold our payments. The government made $41.3 billion off student loans in 2013. Where else can we deprive the government of such sums legally???
It is illegal to withhold taxes, but it is not illegal to withhold student loan payments. Unlike other forms of resistance – where the State will use physical force to pacify us – the toughest obstacle we face in the student debt movement is material deprivation. We won’t own houses, get loans for cars etc. And, eventually they may come after our state-assistance. The vast majority of the world survives on less money than many of us pay in one month against our loans. You actually will not die if you don’t pay your loans back.
I know this is scary for many of us and I’m very privileged as a white, upper middle-class male, but ultimately, these sacrifices are going to be made for us as collapse intensifies anyway.
From an environmental perspective, we need to drastically re-organize society on more sustainable grounds and more importantly we need to dismantle the government responsible for destroying the world.
From this perspective, I think the student debt unions that have formed offer a unique tool. And, just like the unions of old, they require building cultures of resistance with deep support systems to help when the government cracks down.
Explosives expert?
Immoral!