How and why to default on your student loan

[CarlMud]

Who’s taking advantage? These loan companies aren’t enticing kids into a back room. These loans are sought out, applied for, and approved. The terms are written down.

The unconscionable terms of a contract are also written down. Being written down doesn’t change that. You could knowingly agree in a contract that someone could kill you if they don’t like you, but that wouldn’t make them murdering you any less immoral.

… but you’re taking your metaphor too seriously. No one “rigged” the college loan. The company offered money at specific terms and provided it. That the loan recipient used the cash to buy a subpar educational product, and regrets it, is not the fault of the loan company.

You continue to ignore statements that I’ve already made that address this. Fault isn’t the only factor. Knowingly taking advantage of someone is more immoral than breaking a contract that isn’t practical to fulfill and knowingly taking advantage of millions of people is more immoral than an individual breaking a contract with a corporation. The system is rigged against the borrower because the lenders have successfully lobbied to have their interests codified in the law, such as not allowing the debt to be discharged in bankruptcy in most cases, among other fixes in the game. The government is involved in the process and the enforcement of the terms and directly benefits from them as well and the terms are non-negotiable. No amount of this being “voluntary” makes it right. No amount of some people being fortunate enough to be able to pay off their debt makes the terms conscionable.

you have a moral obligation to discharge your debt if you are able.

It’s not that simple and you keep ignoring all the other involved factors. Nothing in life is that black and white. You also haven’t defined “able” in your perspective. You called what Siegel did “stealing.” I don’t think Siegel is the ideal example of a debtor since there are more recent students who took out much greater loans than he did who are likely getting screwed over more than he was. But that doesn’t make breaking a contract stealing and it doesn’t make the choice not to pay back something that you can’t practically pay back necessarily immoral, especially if the game is rigged against you.

[goodpasture]

@CarlMud

You could knowingly agree in a contract that someone could kill you if they don’t like you, but that wouldn’t make them murdering you any less immoral.

If both parties consent, why is that immoral?

@CarlMud

The system is rigged against the borrower because the lenders have successfully lobbied to have their interests codified in the law, such as not allowing the debt to be discharged in bankruptcy in most cases, among other fixes in the game. The government is involved in the process and the enforcement of the terms and directly benefits from them as well and the terms are non-negotiable.

None of this is a secret. None of this is hidden from the person taking out the loan. If the person doesn’t like the terms, he doesn’t have to take the money.

@CarlMud

No amount of this being “voluntary” makes it right.

Actually this is what does make it right. What’s the difference between an MMA fight and a vicious assault? Consent.

@CarlMud

You also haven’t defined “able” in your perspective.

Sure I have:

@goodpasture

Impoverishment is one thing, if someone simply cannot pay back the money; Lee Siegel and others in this thread are arguing in favor of the other thing, of purposefully defaulting, even though they could theoretically pay

See? If you aren’t impoverished, you should pay back your loan.

@CarlMud

something that you can’t practically pay back

@CarlMud

breaking a contract that isn’t practical to fulfill

Plenty of people find ways.

[MikeTheBard]

@goodpasture

If both parties consent, why is that immoral?

Because- And bear in mind that I’m agreeing with you on principle that reneging on a deal is unethical- We have rules regarding consent. A strong argument can be made that those rules are being violated in spirit, if not letter.

Our understanding of consent acknowledges power differentials. We don’t allow adults to have sex with minors because of this. In fact, even when both parties are adults, we move the goalposts when a power dynamic is in play: Many states raise the age of consent when one of the parties is a teacher, coach, or otherwise in a position of power; And an otherwise consensual relationship can be called into question if it’s between an employee and their supervisor.

In these loan agreements, one of the parties has more to gain from the other. That party is also the one who decides the terms of that agreement, has a small army of lawyers and MBAs to write that agreement in a way that favors them, and has the clout to see that even the law itself favors them in the event of a dispute over said agreement. They have done this hundreds of times before, and it is literally their full-time job to understand those contracts.

The other party is often someone just out of high school, often still literally a teenager, with no training in business or contract law. We do not even recognize them as having the ability to make an informed decision about alcohol for another 2-3 years. Most of them haven’t even moved out of their childhood bedrooms yet.

These people are not equal in this transaction. It is simply not genuine to insist that they both have the same level of informed consent.

[CarlMud]

If both parties consent, why is that immoral?

I didn’t say that the contract was signed by someone who wanted to die. But even then, if you want to compare taking on student loan debt with assisted suicide, I’m not going to fight you on that one.

None of this is a secret. None of this is hidden from the person taking out the loan. If the person doesn’t like the terms, he doesn’t have to take the money.

You’re still ignoring earlier responses to this claim. I’m not going to repeat them.

Actually this is what does make it right. What’s the difference between an MMA fight and a vicious assault? Consent.

I disagree. An MMA fighter would be acting immorally if they agreed to fight an out-of-shape 18 year old kid who’s never been in a fight. No amount of that 18 year old kid wanting to participate in such an event makes beating the kid to death or at least causing brain damage and significant injury morally okay just because he consented to the fight.

Lee Siegel and others in this thread are arguing in favor of the other thing, of purposefully defaulting, even though they could theoretically pay

What amount of hardship is acceptable to you before it becomes impoverishment? Siegel has let his loans go for 30-40 years. Should he live at the poverty level and work until he’s dead in order to pay them back, plus the massive amount of interest that has accrued since? If he has a wife and kids, should his moral obligations to their well-being be considered less important than his moral obligations to banks that no longer exist?

Plenty of people find ways.

Did you actually read the examples you referenced?

One is an anecdotal advertisement and doesn’t actually explain how they paid off their loans. Another is a person who got an MBA but apparently already had a decent-paying job and a strategy before getting his loans. Another is a veterinarian who got an above-average paying job right out of school and started making more money very quickly, according to her account. And another involved using and selling snake (erm, essential) oils and having already had a lot of savings to start out with and, though they didn’t seem to explicitly say it, having enough income to be able to afford to pay off their debt and invest and rebuild their savings. And it’s also another anecdotal advertisement for the same Dave Ramsey method. Are you a salesperson or just lazy in finding examples?

But, alas, four examples of people who were older than 18 when they incurred their debt or were talented or fortunate enough to find good opportunities doesn’t equal “plenty” and doesn’t represent those students whose degrees aren’t as profitable. And if it’s so easy, why are you still in debt?

[hmclachlan]

[quote=“JonBristow, post:212, topic:59163, full:true”]
This whole thread, and no one mentioned that contracts are designed to inherently remove the “morality” involved in keeping or breaking your promise? […]
If you are underwater on your loan and have no hope of surfacing, the moral thing to do in capitalism is to take the hit to your credit and walk away.[/quote]
Kinda sorta, but your point is right. Loan contracts are designed so that default is taken into account; there are default penalties and recovery protocols written into them. Lending institutions value their loans in bulk, based not only on the notional amount to be paid on them, but on expected rates of default and delinquency. Going on and on about this very well calculated business in terms of “morality” is bullshit.

The big problem today is that lending institutions have been backstopped by the government – essentially insured – by laws that create onerous, socially counter-productive lifetime burdens for educational loans. There are other types of unsecured loans out there on the market, many of which involve sums just as large as those lent to students. Few of them are as eternal. Most can be & are discharged in personal bankruptcy.

Private student loans have comparatively high interest rates today (unlike in Siegel’s era) and have been aggressively promoted by universities and finance companies, because they are a very good deal for lenders compared to their other options in our modern, low interest rate world.

As someone mentioned above, individuals with very little power or knowledge of finance are legally on the hook for these loans. However, they face dismal opportunities as a whole if they do not use them. The fact that some ~5% of them would be better off in a trade program is beside the point (especially since most trades today require some junior college level of certification before you can step into them. The welding trainees I know need hundreds to thousands of dollars of course work before they’re certified to work.)

To the extent that morality come into play in all this, it falls heavily on those who have the most power. It’s distinctly immoral for men of means and high position to facilitate debt servitude in the next generation. Going on at length about the moral responsibilities of defaulting individuals, while ignoring the far greater moral dereliction of the haut doyens of finance… is just horseshit.

[davide405]

@MikeTheBard

These people are not equal in this transaction. It is simply not genuine to insist that they both have the same level of informed consent.

You have just described the key point in the difference between Neutral Good and Lawful Stupid.

[lolipop_jones]

At the time you started that masters’ program, what sort of job were you anticpating? Did you investigate the supply and demand for that job?

[enso]

@lolipop_jones

At the time you started that masters’ program, what sort of job were you anticpating? Did you investigate the supply and demand for that job?

At the time of my Master’s program, I was fully employed by Microsoft as a QA manager. I got the degree because I felt like it, not to further a career. I’ve not had a job for all of two weeks in the last 18 years.