
Giving Up Paying Off $186,000 Student Loan Debt - dlf
http://www.businessinsider.com/ive-given-up-on-my-student-loan-debt-2013-5
======
obviouslygreen
To me, this is the flip side of the "predatory lending" coin: People who did
it to themselves. I'm not even sure what the point of the article is supposed
to be, if not a warning against financial irresponsibility.

This person made mistakes. Yeah, we all do that, and some people's have worse
consequences than others, but we're all pretty much stuck with them. In this
case, someone went to law school, made some very contradictory life decisions
(having kids -- and failing to prevent having more -- kind of takes away
whatever victim angle might have been there), realized they were doing _very_
poorly but kept going anyway, and then... for years and years... did not
pursue a career that could possibly have any chance of addressing the debt
before the rates ballooned.

So we end up with someone who screwed up, screwed up some more, and then
decided she'd screwed up so much that she's going to screw up again, by just
not even trying to address the negative results of the previous screwups.

Not very responsible, in my opinion, and certainly not a good lesson to pass
on to your kids (along with your debt, because guess where that's going when
you die, since you've decided not to pay it off?).

I guess I'm still just not sure what the article is going for.

~~~
dlf
Public loans are discharged upon death, so there's that. Private loans are not
though, and there can still be tax consequences for public loans.

I think the most important theme to this article, aside from the individual
story of debt and irresponsibility, is that this looks an awful lot like the
way the housing bubble came about. Cheap debt that the borrowers are unable to
afford long term. The difference here is that student debt cannot be
discharged in bankruptcy, so it seems there would be more people defaulting.

As a side note, the price tag of a degree should not be so high that a career
with that degree cannot pay back the debt. This story is unique in that the
debt is much older and ballooned due to interest accrual, but there have been
a lot of recent graduates with high debt right out the gate with degrees that
are much less employable than they used to be.

~~~
csense
> Private loans are not though

Really? Who takes responsibility for the deceased person's loan?

~~~
dlf
The estate, just like with other private debt.

------
Irregardless
> _She graduated in 1994 with more than $100,000 of debt. Within three years,
> she had one daughter, a surprise set of twins, and was earning less than
> $50,000 per year._

3 kids while earning < $50k and trying to pay off > $100k in debt? If that's
not the embodiment of America's dire lack of financial and family planning
skills, then I don't know what is.

> _"I’ve stressed to my daughter the importance of not borrowing any money."_

Maybe she should just teach them to make responsible decisions instead?
Borrowing money can be the right thing to do, but you need to carefully
measure the costs and benefits.

Also, it would help not to have 3 kids when you're up to your ears in debt and
only earning enough money to support yourself.

~~~
yoloprocro
Your primary moral duty is to repay debt, eh?

Unimportant things like "giving your life meaning" are unimportant.

~~~
mc-lovin
As a consumer your only duty is to obey they law.

However, moral duty is relevant when it comes to how society should think
about debt. Everyone has things they would like to do if they had more money.
Society should not be arranged to give people a free pass just because they
_want_ to do something that requires money.

~~~
rayiner
> However, moral duty is relevant when it comes to how society should think
> about debt.

A debt is a contractual obligation and should be treated as such. One should
not moralize contractual obligations.

E.g. During the housing crisis, there was a lot of moralizing about homeowners
walking away from their underwater mortgages. Moralizing about debt in that
way is bullshit. When lenders make a loan secured by collateral, they take the
risk of the value of that collateral dropping. There is absolutely nothing
immoral about forcing a lender to eat a risk it knowingly on.

Similarly, a corporation would not hesitate for a second, on moral grounds, to
restructure its debts through bankruptcy, and neither should individuals. No
moralizing needs to enter the equation. There is a penalty for declaring
bankruptcy and failing to pay your debts, and that is future lenders being
wary of lending you money. There is no need to add a moral dimension to the
issue.

~~~
grecy
> _a corporation would not hesitate for a second, on moral grounds, to
> restructure its debts through bankruptcy, and neither should individuals._

I see what you're saying, but I really dislike that way of thinking, because
it's justifying something bad by saying "That's what others are doing"

That's like saying that because BP are spilling oil into the oceans and
getting away with it, you shouldn't stop doing it yourself.

The world would be a better place if morals were used in more decisions, not
less.

~~~
rayiner
You're begging the question. Spilling oil into the oceans inherently hurts
people and the environment in an uncompensated way. Bankruptcy, meanwhile, is
just part of the rules of the game, just as much as enforceable debt
obligations are part of the rules of the game. Everyone knows, a priori that
repayment obligations can be enforced by recourse to the courts, and everyone
also knows, a priori, that those obligations can be discharged by those same
courts (what the federal court giveth it can taketh away). Because bankruptcy
is part of the rules of the game, it's priced into interest rates. When a bank
loans you money, it expects you to default with some probability and charges
you a premium for that risk. There is nothing immoral about forcing them to
eat the consequence if the risk you compensated them for.

It's not a matter of ignoring morality. It's a matter of not ascribing a moral
dimension to something that doesn't inherently have one.

In that vein, Google "efficient breach."

~~~
jack-r-abbit
But by your own words, this woman's bankruptcy does hurt other people... the
people looking to get a loan later. They are now paying the even higher
interest rate due to her bankruptcy being priced in. The more people that
default, the higher the probability that the next person will default and the
higher the premium the bank charges for that risk.

~~~
rayiner
The rates for subsequent borrowers will only go up if her bankruptcy was
unexpected. That is to say, if the bank charged her interest assuming 10 of
100 loans would default, and she is one of those 10, then her bankruptcy does
not change the interest rate the bank charges. On the other hand, if the
default rate is higher than the bank expected, whose fault is that?

~~~
jack-r-abbit
They can only do so much to predict the future based on the past. When they
fund loans today based on today's default rate they have no way to know what
crisis hits in 3 years to cause a spike in defaulted loans. The system must
correct itself with enough padding to cover the smaller fluctuations.

------
elmuchoprez
This story is mostly about TERRIBLE money management, not the cost of
education. Her parents paid for her undergrad in full and she got a full
scholarship to law school. So really, none of this money went directly to
education.

Apparently she couldn't work and focus on school at the same time, so she
started taking out loans to cover living expenses. She took out $26k in
federal loans each year (starting in 1994) to cover these expenses. Factoring
in inflation, that would be like taking out a loan for nearly $41k/year in
2013 dollars. I think it's a hard argument to say that was even close to
reasonable.

The article doesn't say how long she was in school, but if I'm doing the math
right, it took her at least three years (isn't that a long time for a full
time law student with no other job?).

Then, after school while she's studying for the BAR, she takes out another
$20k in private loans to cover living expenses ($31k in 2013 dollars).

She screwed herself, plain and simple.

~~~
sparky
> it took her at least three years (isn't that a long time for a full time law
> student with no other job?).

Nope, that's the standard.

------
rayiner
I have seen a lot of these articles on student debt, and they use the most
bizarrely unsympathetic subjects. The meat of this article is not that student
loans are bad, but rather that you shouldn't go to law school (or any graduate
program, in my opinion), without first deciding what you want to do and your
priorities in life. It's way too common to see people watch a lot of Law &
Order and go straight through from college (my wife calls them "K-JD's") and
then realize that $200k of debt is a lot and they really don't like working
12-14 hours a day at the beck and call of clients. Your first 80 hour work
week sleeping with your Blackberry under your pillow is a shock, and you
should really get it out of the way and decide if you're okay with it before
you're $200k in the hole.

------
kefka
Wow. She can cry me a damn river.

She HAS a degree. She HAD a 6 figure job that she quit because it was "too
hard" She still HAS debt.

Me? That's right. Injured, under Voc rehab. I'm going to a 2 bit state school
(drafting, cad). Right now, I can't afford the GAS to get to and from school.
Voc rehab (state agency) will pay for it, only after a 6 week wait. And I
don't have the money.

What I'd need is a few hundred to get to and fro school. Food would he nice,
but soup kitchens provide that. I can sleep in my car to reduce trips.

Where's the help for people like me?

~~~
rollo_tommasi
It's not coming, because the business media intentionally uses articles like
this in order to pit the members of struggling underclass against each other
(and it doesn't matter what your job title is, if you have >$100,000 in non-
dischargeable debt you are a serf).

------
Glyptodon
If she had a full tuition scholarship how did it cost $26k a year to live in
the '90s? I started college in 2005 and could get by spending $11k to $15k a
year for rent, food, books, and such. It ought to have cost even less in the
'90s... (Of course I did without a car for nearly 4 years and lived in cheap
apartments and such, but that seems pretty normal. And I'm pretty sure my cost
of living wasn't even as frugal as some.)

------
gangst
Son of a bitch that is a lot of debt. It stresses me out just reading about
it. I guess few people do the math correctly when they go get a degree.

Can anyone here who opted to take a student loan for a technical degree speak
to whether it is daunting to them or they are comfortable with the trade?

~~~
kclay
It was the worst thing I ever did. I'm not as bad off as this women but I have
around 80-90k in debt for school loans and whats worst is one of them is a
private loan so it has some ungodly high interest rate compare to my others.

~~~
saalweachter
Pay close attention to politics.

The reason your federal loans don't have an ungodly interest rate right now is
that as part of the economic stimulus student loan interest rates were
lowered. The temporary extensions have kept it down since then, but they could
jump back up at almost any moment.

~~~
joeblossom
That jump is for new loans, fortunately. All previous federal loans are locked
in at the rate they were originally signed for.

------
qdog
This is a pretty fluffy article. It says she borrowed $26k/year during law
school, even though she was on a scholarship with tuition paid, and took out
another $20k in private loans.

Hard to judge anything just based on this article, but I'd have to say that if
you have a full tuition scholarship and still need to take on 100k in debt you
might want to rethink it. Also she had 3 children within 3 years of
graduating, which would make it impossible to pay off anything unless you get
a much higher paid job.

A friend of mine and his wife took out something in the neighborhood of
100k/each, so they have(or had, been paying a bit now) 200k of student loan
debt recently. I think it was a bit of a bad investment, since I think they
could have gone to cheaper schools, however they stayed in NYC and make enough
for this.

Short story: If you want to take on a big student debt, paying it off is going
to require you to go where the high paying jobs are. If you want to raise a
family and work for the state, don't take on the debt, your life will be
easier.

~~~
dkrich
_If you want to raise a family and work for the state, don't take on the debt,
your life will be easier._

If you have Federal Loans and hold a public service job for ten years (and
make your payments of I believe 10% of your gross income), your remaining debt
is forgiven. The same is true after 25 years if you aren't in public service I
believe and I think Obama just railroaded a change to make that 15 years using
Executive Order. This is the reason why if you are struggling with Federal
Loans DO NOT consolidate them through a private lender. Their terms will suck
for you if you think you will struggle to pay them off.

~~~
sp332
More details [http://finance.yahoo.com/news/student-loans-killing-heres-
li...](http://finance.yahoo.com/news/student-loans-killing-heres-
little-165103390.html)

------
steven2012
I'm not sure what sort of choice she has, besides not working again. You can't
clear student loan debt through bankruptcy, so unless she decides to not work
again, I'm not sure what her options are to never pay off the debt. Maybe this
is a negotiation tactic with the debtors to pay a fraction of the loan
instead?

~~~
chopsueyar
It wasn't until 1991 that student loan debt was no longer dischargeable
through bankruptcy.

So, although unlikely, she may have based her decision on the possibility
that, worse case scenario, she could have declared bankruptcy.

Now the $20,000 personal loan for living expenses, I assume would still be
dischargeable in bankruptcy.

~~~
danielweber
I read the article as her using student loans to cover living expenses.

Which made sense at the time, since it was being subsidized.

~~~
chopsueyar
I have a hard time believing she could obtain a student loan without any
further classes to attend, that is why I assume it is a private loan.

------
pragone
I thought this article was going to be somewhat insightful as to another
option for me, as, like many others, I have quite a bit of student loans.
Including interest, I owe about $250k (BS and MS). I don't regret going to the
school I went to - the experience and what I went through there was life
changing for me; however, it does put a severe stranglehold on what I am
actually able to do in life right now. I am basically forced to work for
others at a decent salary (which I am certainly very fortunate and thankful
I'm in the software engineering field) instead of being able to completely set
off on my own.

~~~
cityzen
I'll also add that I do understand what you're saying. I have been self
employed for 16 years and my wife worked as well so there was somewhat of a
cushion. Back in 2008, though, my first son was born 3 months premature and I
had this "oh shit" moment where I thought, "ok, wife isn't working, I have a
sick baby, we have a mortgage and two car payments, there is no way this is
going to end well". I stepped up my hustle big time and five years later we
have two kids, very little debt and things are fine. You really just have to
take look at the glass as half full. As a software engineer, you're in a
sellers market. There are SO many companies out there looking for people like
you, you just don't realize it yet.

Either way, best of luck. If you do want to strike out on your own, please
don't wait until you're "comfortable" because it will be too late.

------
cityzen
I'm sure we can all pick this apart and talk about all the bad decisions she's
made. The fact that she'd allow an article to be written about her regarding
this just shows that she's certainly not the sharpest tool in the shed. The
only thing I would ask is if she's not going to pay for her education, go
ahead and take down that law degree that your private practice is established
on and find some other kind of work. I know it sounds ridiculous, but so does
her whole story. Not going to pay for it? Don't use it. You can't have it both
ways.

------
MisterBastahrd
If you "give up," your lenders will eventually garnish your wages anyway.
Better to pay what you owe voluntarily than have the choice of how much and
how long to be taken away from you.

~~~
danielweber
She can just go the destitute route. If they will take N% of her pay, why
bother working at all?

------
manas2004
One of the great advantages of third world countries - good education is
cheap. A student at a top rated engineering school (iit/nit) in India pays
less than ~$2k/year in tution, and about ~$200/month in other expenses. Sure,
even this is not affordable to everyone without loans, but the salaries these
people draw make the ROI tremendous. No wonder these schools are so hard to
get into.

------
protomyth
Where exactly is the guy who fathered these three children? Is he at least
paying child support or am I missing a chunk of this story? It seems like with
that money she would have been able to get the loans paid with her own money.

The article sounds like bad career planning given the missing or unwanted
partner.

------
gte910h
Chapter 13 bankruptcy is practically made for her case: They can change the
monthly payment amount to something possible to pay.

Student loans have a high standard, but not an impossible one.

------
richkuo
I suspect this is a possible case incomplete journalism.

