Set to Default

S

For some reason I end up writing about debt far more frequently than my expertise should allow, but the beauty of having a blog is that no one can stop me. A rather silly article written by a man who should know better has been making the usual circuit, this time lauding the decision to willingly default on student loans. I say that the man should know better partially because he has surely lived long enough and written long enough to recognize the fallacy of the false choice, yet this article is positively brimming with that fallacious mode of thought.

What is far more concerning, however, is that this fallacious mode of reasoning culminates in some rather dubious advice that should best be avoided. But let’s dive in anyway.

ONE late summer afternoon when I was 17, I went with my mother to the local bank, a long-defunct institution whose name I cannot remember, to apply for my first student loan. My mother co-signed. When we finished, the banker, a balding man in his late 50s, congratulated us, as if I had just won some kind of award rather than signed away my young life.

By the end of my sophomore year at a small private liberal arts college, my mother and I had taken out a second loan, my father had declared bankruptcy and my parents had divorced. My mother could no longer afford the tuition that the student loans weren’t covering. I transferred to a state college in New Jersey, closer to home.

Given that only two sentences in and we already have a perfect caricature being created, one might hazard a guess at where this is going. But before leaping ahead to what would be the vindication of that assumption, it is probably worth noting that the author uses the term “apply” in relation to his student loan, which implies that the decision to take it out was made willingly (and then made again further into the education). More on this later.

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.

And now we get to the fallacy of the false choice.

The first flaw in reasoning here is that the choice presented here is one that is forever, but that need hardly be the case. Years of sacrifice are often required (whether in paying off debt, building a business, etc.) to be able to make one’s vocation into one’s actual employment. Presenting the choice here as permanent is merely a fatalistic rationalization.

Another false choice is that one must either have a particular vocation or unrelated employment so as to make the money to fulfill one’s financial obligations. Often the best way to make one’s employment as lucrative as possible is to use the skills and talents that one already has and find a way to employ them in the marketplace. But this also requires wisdom, specifically in not accumulating financial obligations that make one’s vocation more difficult to achieve.

After all, if one believes oneself to have a particular vocation, wouldn’t it be in one’s best interest to do everything in one’s power to facilitate it both positively (in regards to gaining the skills and experience necessary to make it a viable vocation) and negatively (in the sense of avoiding obstacles to pursuing that vocation)? It is here that there is a huge disconnect with the author’s rationalizations, because an integral part of pursuing any vocation is wisdom, which holds both aspects in balance and realizes that- given that we are finite begins with finite resources- we have to pursue vocations with wisdom so that we don’t eventually get run into the wall by math.

It is also worth noting that the author here mentions that he had accumulated a huge debt from college and graduate school. One might wonder whether the barrier of debt to the vocation was actually considered before beginning graduate work? After all, if the author realized that his vocation could not make the payments, what compelled him to take them out in the first place or think his vocation would bring him the necessary resources to deal with them effectively?

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.

One point I think might be worth pointing out before going any further is how the framing of the actions throughout engage in creeping victimization. He went with his mother to apply for a loan; she co-signed (thus tacitly approving of the action); they both had taken out a second loan; his father declared bankruptcy; his mother could no longer afford tuition; he found himself confronted with a choice; he could choose what he had been led to believe.

No doubt all of these experiences are real, but the choice of language to buttress the rationalization for the eventual defaulting seems to frame the entire set of choices in a passive light, as if each decision more or less happened to him. To be sure, some of the events were beyond his control, but the choices he made were actually his, and thus there is some measure of responsibility that he bears. Yet nowhere do we actually find any sense of responsibility. Rather, it was a balding banker who trapped him in his loans; it was parents who should have provided for him who weren’t able to; it was a choice between life and debt; it was an educational system that tricked him into wanting more but denied him that because of his origins.

As I have mentioned elsewhere, peer pressure and cultural pressure is real, but it doesn’t absolve us from making wise decisions, nor does it relieve us of taking responsibility for our actions. As St. Paul said: “Bad company corrupts good character,” which means (among other things) that we have to be very careful about the things we are led to do and led to believe, since our decisions have a tendency to be influenced by a wide variety of factors.

Yet at the same time we are responsible for those decisions, which puts a premium on wisdom, since the hallmark of our race seems to be making stupid decisions because everyone else is making the same stupid decision or telling us to do so.

But back to the article. There is a bit of a false choice presented here in regards to defaulting on debt. The author presents it as an absolute (i.e., defaulting is always morally reprehensible), when in fact it is not. Of course, he does so under the form of what he had been led to believe, which is interesting because even though he believed it to be reprehensible, he evidently did it anyway. At any rate, the false choice here is that he could either choose to pay his debts and waste his life, or do what was morally reprehensible and have a life and survive, the latter of which is merely a subtle way of suggesting that it isn’t actually morally reprehensible, especially since it was something he apparently got into passively, as noted above.

However, not all default is created equal, and in fact some types of default may be morally reprehensible while others may not. As an obvious example, if one simply does not have the money, defaulting on debt happens, well, by default. There is nothing necessarily morally reprehensible about this position, since sometimes math and life collide and math wins.

On the other hand, if one actually does have the money or the ability to pay what one has agreed to pay, then to willingly default in this situation would potentially be morally reprehensible. However, eliding the distinction between these situations is simply intellectually dishonest.

One further (and crucially important) point: sometimes the decisions we make mean that we cannot make other decisions later. This is often especially accentuated when those decisions are stupid. Accumulating large amounts of financial obligations at any point- but especially before one really has an established career, stockpiles of cash, etc.- is a nearly sure-fire way to ensure that some decisions are simply out of reach for at least some portion of one’s life. One might have a strong sense towards a particular vocation, but large amounts of debt can (and often will) keep one from pursuing that vocation until the financial obligations are met, regardless of the usefulness to society.

Lastly, it is another false choice that working in a job that does not line up with one’s vocation is tantamount to or equivalent with wasting one’s life. If life were simply one moment that is repeated over and over, then yes, this might be true, but it actually is a series of events and decisions that can go in many different ways, and we simply do not know where we will be in the future or how things will turn out.

There is thus a two-fold dynamic here: We don’t know how things will turn out, so it is simply impossible to say that a temporary situation to meet an obligation will result in wasting one’s life. But on the other hand, the decisions we make at one point will often have dramatic effects on the decisions we can make later, which places a premium on making wise choices at all times, especially when it comes to financial obligations.

I chose life. That is to say, I defaulted on my student loans.

He also chose to frame his rationalization by means of a logical fallacy, as already noted.

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.

If I’m reading this correctly, the example one is to follow is to eschew responsibility for the decisions one has made, engage in logically fallacious rationalizations for one’s poor decisions and then take actions that one thinks are morally reprehensible?

It struck me as absurd that one could amass crippling debt as a result, not of drug addiction or reckless borrowing and spending, but of going to college.

This is a wildly intellectually dishonest framing of the situation. After all, going to college does not necessarily entail amassing crippling debt. Education, like anything else, is a good which takes time and resources to obtain, and this is especially true with higher education. Simply because education might seem like a more noble use of money (or of debt, if there is such a thing as a noble use of debt…) does not mean it somehow offers an exemption from either what one must do to obtain it or the obligations one might oblige oneself to in its pursuit.

Further, I find it interesting that he sets up a line of demarcation here between reckless borrowing and going to college, when in fact it was reckless borrowing that was a part of his college and graduate experience. After all, if one does not have the money for a particular thing, racks up large sums of debt for that thing, and has little prospect of receiving a good return on the investment the loans presume, how else would one characterize that but as reckless?

The commonality here between the situation of drug addiction and reckless borrowing (which he did for college and graduate school) is that they both are stupid decisions, and thus it is not really absurd that one could amass crippling debt as a result of going to college and graduate school, since reckless borrowing is often (unfortunately) part of that. What is probably the absurdity is that he not only did this once, but then (presumably) doubled down on it again for graduate school.

Having opened a new life to me beyond my modest origins, the education system was now going to call in its chits and prevent me from pursuing that new life, simply because I had the misfortune of coming from modest origins.

The interesting thing about this argument is that is was apparently through amassing crippling debt that this “new life was” opened to him. And much like the caricature of the banker who lulled him into debt, the “education system” now plays the bogeyman, snatching this new life away, yet another slight to the perpetual victim.

However, as much as the system of higher education is broken, he still agreed to be a part of it, and apparently thinks it is still something worth keeping around since it was- as he has described it- evidently his only way into a new life beyond his modest origins. After all, if this system didn’t exist, it seems (from his perspective, as far as we can gather) he wouldn’t have had this new life opened to him.

Of course, that last argument on my part is meant to be a caricature of the false choices presented thus far, since a “new life” beyond one’s origins does not necessarily run through academia, nor if it does does it necessitate amassing massive amounts of debt.

Am I a deadbeat? In the eyes of the law I am.

And since his student loans are guaranteed by the federal government, and thus by taxpayers, it’s not only in the eyes of the law. The fascinating thing about his argument is that he finds it absurd that his decision to borrow money for college should land him in crippling debt, but apparently sees no absurdity in eschewing his responsibilities so that everyone else can pick up the tab, a reality in which they have no choice. As I mentioned at the beginning, one would think he is old enough to know better.

Indifferent to the claim that repaying student loans is the road to character? Yes.

Ah, we’ve moved on from false choices to straw men. I’m not sure that any one is arguing that there is anything specific to paying back student loans that is somehow indicative of character. Rather, the issue is that he chose to take out the loans, had the responsibility for paying them back, but then willingly chose not to. There is nothing about the student loans per se which has anything to do with character, but rather the series of decisions he has made.

Blind to the reality of countless numbers of people struggling to repay their debts, no matter their circumstances, many worse than mine? My heart goes out to them.

Ah, nothing like asking oneself softball rhetorical questions that make oneself the angel and the opposition the devil!

To my mind, they have learned to live with a social arrangement that is legal, but not moral.

I actually find myself somewhat sympathetic to this argument in some respect, in that I would have to agree that many respects of this particular social arrangement are not moral. I would actually go further and argue (no doubt beyond my competency) that student loans are actually usurious, as they have recourse only to a person rather than to a good. In that sense, the social arrangement has a fundamentally unjust quality to it. However, the corollary of this reality is not to advocate for default, but rather to advocate that student loan debt be avoided en toto, and that the cultural link between the necessity of taking out loans and the option of higher education be severed.

Maybe the problem was that I had reached beyond my lower-middle-class origins and taken out loans to attend a small private college to begin with.

More creeping victimization. The problem here has little to nothing to do with lower-middle-class origins and more to with the latter half of this statement: taking out loans to attend a small private college. Yes, that is (at least part of) the problem. I’m not sure why it took nearly half of this article to reach this quasi-admission.

Maybe I should have stayed at a store called The Wild Pair, where I once had a nice stable job selling shoes after dropping out of the state college because I thought I deserved better, and naïvely tried to turn myself into a professional reader and writer on my own, without a college degree. I’d probably be district manager by now.

And more creeping victimization with more false choices thrown in. Is it impossible to become a professional writer without a college degree, or without a degree from a small private college that you can’t afford? Is it impossible to work for a few years to save up money to go to college without crippling amounts of student loans? There are lots of other options and choices available here, but the author presents this entire situation as a false choice between working at shoe store forever and taking out lots of loans to live his dream. Is he so seriously lacking in imagination (and him, a writer!) that he cannot conceive of choices beyond these?

Or maybe, after going back to school, I should have gone into finance, or some other lucrative career. Self-disgust and lifelong unhappiness, destroying a precious young life — all this is a small price to pay for meeting your student loan obligations.

More false choices; he’s really taking this theme and milking it hard.

Some people will maintain that a bankrupt father, an impecunious background and impractical dreams are just the luck of the draw. Someone with character would have paid off those loans and let the chips fall where they may.

What has been noted above concerning the distinction between modes of default is of course pertinent here, but the author once again elides the distinction to buttress a rationalization and the creeping victimization.

But I have found, after some decades on this earth, that the road to character is often paved with family money and family connections, not to mention 14 percent effective tax rates on seven-figure incomes. Moneyed stumbles never seem to have much consequence. Tax fraud, insider trading, almost criminal nepotism — these won’t knock you off the straight and narrow. But if you’re poor and miss a child-support payment, or if you’re middle class and default on your student loans, then God help you.

All of this is simply a smokescreen to elude the reality that, whatever sorts of rationalizations he made have had when younger to do what he did, he still chose to take out the loans he did for the service he received. He also received the education he took out the loans for, and was able to engage in the vocation he desired. Nowhere in all of this was he coerced into anything, but freely chose the paths he did and is responsible for them.

If he was unable to pay them, then default would not necessarily have anything to do with character but rather with math. Instead he chose to willingly default which is potentially a character issue, so it’s difficult to see what any of the preceding has to do with his refusal to accept responsibility for his actions.

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.

Even the Internal Revenue Service understands the irrationality of pursuing someone with an unmanageable economic burden. It has a program called Offer in Compromise that allows struggling people who have fallen behind in their taxes to settle their tax debt.

The reason the IRS would settle on tax debt is because they realize they can only get what somebody actually has. This isn’t a terribly good parallel, however, since federal student loans are never settled (excepting death and disability) because they are guaranteed by the federal government, which means that every loan which isn’t paid ultimately falls on the taxpayers.

The Department of Education makes it hard for you, and ugly. But it is possible to survive the life of default. You might want to follow these steps: Get as many credit cards as you can before your credit is ruined. Find a stable housing situation. Pay your rent on time so that you have a good record in that area when you do have to move. Live with or marry someone with good credit (preferably someone who shares your desperate nihilism).

And now we get to the scariest part of this entire article. Nearly every argument offered so far has been predicated on a logical fallacy; now all of this will culminate in some breathtakingly bad advice.

Loans were the underlying problem in this whole experience; now the author is seriously suggesting that people with student loan debt get as many credit cards as they can before they choose to default and ruin their credit. His advice thus boils down to escaping the threat of debt by taking on more debt and using the prospect of further debt (with even more ridiculous interest rates!) to survive.

Yeah, not a good plan.

The housing advice is fine, and paying rent on time is obviously always a good move. But it is interesting that he then goes on to reduce interpersonal relationships to their ability to have good credit. Really? The difficulty here is that as much as the author thinks his student loan debt absurd, his entire perspective on the intersection of life and money seems to revolve around using debt, the very thing he is claiming to have escaped through default.

When the fateful day comes, and your credit looks like a war zone, don’t be afraid. The reported consequences of having no credit are scare talk, to some extent. 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. Our economic system ensures that so long as you are willing to sink deeper and deeper into debt, you will keep being enthusiastically invited to play the economic game.

This entire paragraph is so incoherent, that I suspect it is meant tongue-in-cheek or as some sort of satire. After all, he begins by advising someone to not be afraid about defaulting because they can still get stuff, but then offers only the stuff that is the worst and most stupid stuff one can get.

It is also somewhat inaccurate. Having old bad debt won’t necessarily give you no credit score, but rather a poor credit score. No credit score is actually probably a better indication of financial health since it implies no interaction with debt.

Further, he seems to conveniently leave out that defaulting on student loans means that your wages can potentially be automatically garnished without it even going to court. That he (presumably) avoided such a situation is perhaps lucky, but his advice is merely asking for trouble.

I am sharply aware of the strongest objection to my lapse into default. If everyone acted as I did, chaos would result. The entire structure of American higher education would change.

It would also shackle generations to come with higher taxes since they’d be forced to pick up the tab, which is a far sharper objection. I would not necessarily be opposed to changing the entire structure of American higher education. Default, however, is not the way to do that.

The collection agencies retained by the Department of Education would be exposed as the greedy vultures that they are. The government would get out of the loan-making and the loan-enforcement business. Congress might even explore a special, universal education tax that would make higher education affordable.

Some of these may be good things, especially getting the government out of the loan-making business. However, I find it interesting that he (rightly) decries the government’s involvement in insuring student loans, but then seems to think that this same government (you know, the one which has had a very large part in creating the very problems he wants to change) should be the one to fix the educational system by funding it.

The amusing thing is that it essentially already is funding higher education universally, just not in a manner he desires. Federally insuring student loans is simply an indirect means of funding it. The defaulting option he has suggested would most likely result in a two-fold tax increase, both to pay the balance of defaults on educational loans and then to further fund additional education. Essentially, he wants to evade the responsibility of paying his loans (which, again, were his choice) by shackling future generations with massive taxation that they have no choice in, thus further limiting their choices from the start.

There would be a national shaming of colleges and universities for charging soaring tuition rates that are reaching lunatic levels. The rapacity of American colleges and universities is turning social mobility, the keystone of American freedom, into a commodified farce.

Yet a large part of why soaring tuition exists is because they are essentially given a blank check as a result of federally insured student loans. The amusing thing is that he thinks the dynamic will somehow be changed if the insured loans are swapped for universal educational taxation.

Because the government has never been known for rapacity…

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.

There is a lot to agree with here, but the most unfortunate thing about this article is that while the author sort-of decries the pieties, his argument really misses the point. We do not see any hint that any of this mess is in any way even partially his responsibility. Rather:

  • It is a mom who took him to get a loan and co-signed.
  • It is a caricatured banker who makes him think he won the lottery by taking out loans.
  • It is a false choice between life and responsibility.
  • It is a culture which tells you that you can only be something if you get a higher education.
  • It is cultural-mindset which insists student loans are necessary for that higher education.
  • It is the rapacity of the higher educational system this bleeds students dry with soaring tuition.
  • It is greedy collection agencies which make life miserable for those who owe money.
  • It is a government which exacerbates the problem (but which apparently will also solve it?).

And all of these things are probably true to one extent or another. But this litany of oppressors merely serves as the foil for a kind of pathetic sense of victimization whose fatalism seems to exist only to evade responsibility for some poor choices.

These dynamics are real and they exist, certainly, and there are a lot of changes that need to occur in the realm of higher education. That is probably the most uncontroversial statement ever. But the reality is that we are each responsible for our actions, even if they are massively stupid.

Further, if we are going to get rid of some pieties, then perhaps we should also get rid of some of the author’s own pieties. For example, the false choice that one must either pursue one’s vocation or waste one’s life. Or the notion that one cannot become a professional at anything without attending the school of one’s choice. Or that a career other than one’s desired field represents self-disgust and lifelong unhappiness.

Like other articles of this nature, the most disappointing part is that the author has chosen to forego a wonderful opportunity on a large platform to use his pain and his experiences as a way to beg and plead with future generations (and even those within higher education right now) to avoid student loan debt at all cost.

Conversations about the brokenness of the educational system certainly need to happen, and probably at some point and on some level math is going to catch up and the bubble will pop. And since the educational system is in such disarray, and since massive student loan debt can represent such a crippling blow to young lives, there is more and more a pressing onus on those who have experienced the pain of those mistakes to share those experiences as a way to educate and help others avoid the very mistakes they made, to accept responsibility for their lives and choices and to not accept the fatalism that these sort of rationalizing articles represent.

 

2 comments

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  • Yep totally agree with you. I have a daughter that made some of those bad choices and is paying for them now. Not defaulting but living in poverty to pay them. She learned the lesson the hard way but I admire her steadfast commitment and it’s getting better every day. I only “agree” that there are some predators out there convincing students to “finance their rent” so they can concentrate on school etc.. This makes the debt so huge that I think it should not be allowed. Financing school should be for school only. Direct financing to the school for tuition and books.

    • Hey Frank- thanks for the comment! Sorry to hear that your daughter is facing that, but I second your admiration for her commitment to fight through it. I would definitely agree that there is, in some quarters at least, some amount of predatory lending, although I think in many ways it may even be more subtle in that there is kind of a cultural mindset/norm- among both lenders and students- that student loans are meant to cover it all, and I think this makes it very easy to slide into taking out more than one should, and even lending more than one should. Of course, many universities and colleges market themselves according to lifestyle rather than (or at least more than) academics, and this is often reflected in the sheer amount of amenities (among other things) available at modern universities, which IMO only reinforces this dynamic. All of this of course makes it all the more pertinent that we teach the next generation to be extraordinarily wise about the financial commitments they make.

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