Default on Student Loans? Bad Idea

Writing in The New York Times, Lee Siegel encourages students to follow his example and default on their student loans. The four biggest problems with his piece are:

  1. Siegel is the wrong case study

Even if you are of the opinion that college should be free and student debt is immoral, Siegel is the wrong poster child to make your case. As Jordan Weissmann at Slate writes, “Lee Siegel is an award-winning critic and an unrepentant leech. After pursuing not one, not two, but three degrees from an Ivy League university [Columbia University], he chose to default on his student loans at taxpayer expense, because he felt that paying them back would have hampered his ambitions of becoming a writer….”

Successful cultural critics that went to one of the most expensive schools on the planet for three degrees do not evoke much sympathy. Moreover, as Megan McArdle points out, “He offered not one good reason that he couldn’t pay his student loans; the best he could do was to say he didn’t want to pay them.”

  1. Siegel offers bad financial advice   

Defaulting on student loans is bad financial advice the vast majority of the time, particularly for current students. If you default, 15% of your pay can be garnished, whereas if you enroll in the new Income Based Repayment plan, your repayments are capped at 10% (and your credit isn’t ruined).

  1. Siegel is confused about predatory behavior

Siegel writes that the consequences of defaulting are overblown, as the “reliably predatory nature of American life guarantees that there will always be somebody to help you, from credit card companies charging stratospheric interest rates to subprime loans for houses and cars.”

So according to Siegel, when you are free to shop around among credit card companies and mortgage lenders and are not forced to accept any of their offers, those making the offers are predatory. But taking out a student loan with no intention of paying it back is just?  To me, if anyone is being predatory in this situation, it is Siegel.

  1. Siegel distracts attention from the good ideas to address college costs and debt

Perhaps the biggest problem with the op-ed is that it distracts from productive ideas. There are plenty of potentially good ideas for dealing with college costs and student loan debt. Just to name a few, Susan Dynarski, Matt Chingos, and I have all put forward ideas that would be much more productive than encouraging people to default on their student loans.


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