On Thursday night, I tried to explain the ups and downs of living your life under constant threat from debt collectors. Based on the reaction to the post, I have to say that the reading comprehension of my post was poor, even by “internet commenter” standards. Even Megan McArdle in The Atlantic missed some of the key points in my post.
Mostly, I blame myself. When that many people gloss over things in your post, chances are you didn’t make things clear enough. So allow me to correct that problem now. This time, I’ll use capital letters and aggressive fonts to make sure we’re all on the same page: when it comes to negotiating down your educational debts for less than the principal, I AM NOT TALKING ABOUT FEDERAL LOANS. You should never, ever mess around with your federal debt because Uncle Sam ALWAYS GETS HIS MONEY.
Are we clear?
McArdle also claims that she doesn’t know anybody who successfully negotiated down their student debts with their lenders (missing again my point that my debts had already been sold to a collection agency). McArdle’s skepticism sounds to me like a person who goes to a car dealership, pays sticker price, and then wonders why everybody was high-fiving the dealer as she drives off the lot.
But these factual issues are not what interested me about McArdle’s post. What I found interesting was the subtle scorn she (and many commenters) had for those who do not pay back their debts. I should have included that scorn in my list of things that happen when you default on your loans…
When confronted with my alternative path to debt repayment — again, for the record, a path that I do not advocate — McArdle had a response that is very typical of people who were able to pay off their debts. She writes:
As someone who graduated from business school with nearly $100,000 in student loans, and whose first permanent full-time position paid $40,000 a year in New York City, I feel entitled to say that for anyone with a professional degree, defaulting on your loans is a choice, not something that just happens to you.
Yes. Good for Megan McArdle. I am glad that she was smart enough and made wise decisions and figured out a way to avoid having her loans go into default. I’m serious. If you had to choose a debt repayment path, you really should try to walk in McArdle’s footsteps.
Unfortunately, some of you out there are not practically perfect in every way. Some of you will bite off more than you can chew. Some of you won’t have other friends or family members around you giving you sound financial advice. Some of you will be totally unprepared for the economic realities of your first full-time position. And yes, some of you will be like me and make admittedly terrible financial choices in your twenties.
What will become of you? Should you just give up and kill yourself? Should you start hooking? Or should you, like many of the commenters, shackle yourself to a practice you don’t like in a job you don’t want while leading a life you can’t stand just so you can pay debts?
I say, “no.” I say, “there’s another way.” I say that living in default stinks, but it’s not the end of the world. I say your girlfriend won’t leave, and if she does, she was a probably a horrible succubus you are lucky to be rid of. I say your credit rating will tank, but you can live life without a credit card.
Some people think that I should have stayed in a job that paid me enough to pay back my loans. I say my first responsibility is to myself; my creditors don’t rank in the top ten.
Maybe sacrificing whatever you have to sacrifice in order to pay back your debts is the morally upstanding choice. Mind you, there is an entire financial industry that is invested in you paying back your debts (unless, of course, you are very rich, in which case it might just be a smart piece of business to avoid your debt obligations at all costs). But whether or not it is moral, the people who pay back their debts on time believe that it is the right thing to do. They have to: it’s the only way they can justify the sacrifices they’ve had to make to pay back their debts on time. They can’t allow themselves to acknowledge another way of doing things that doesn’t involve the hard work and sacrifice of timely debt repayment.
It’s kind of like how the most zealous non-smokers are always former smokers. A person who has never smoked before might say, “well, smoking just isn’t for me,” and move on with their day. But a person who used to smoke and then gave it up is the person who gets all up in your face about how “evil” it is to smoke. Remember, Mike “Don’t Smoke In My Air” Bloomberg is a reformed smoker.
Likewise, if you had parental support or whatever and were never in a bunch of education debt, you look at debtors like me with the same kind of fascination most people feel when the go to the zoo. Trust me, there are many days when Lat looks at me in the “ooh… it’s eating a peanut” kind of way. But if you’ve actually been through debt and come out clean on the other side, ye Gods do you feel superior about your choices.
Which is your right. You’ve earned it.
So I’m not surprised that Megan McArdle doesn’t know anybody who has negotiated down the price of their educational debts. In related news, I don’t know anybody who can score me some crystal meth in Indiana, even though I’ve lived there. But crystal meth and debt collection deals exist, you just have to live your life in a shady enough way so as to come across the right people.
And trust me, if you are desperate enough, the dealers will find you. It’s not pretty, but this is how the other half lives.
Don’t Count on Settling Those Student Loans [The Atlantic]