NEW YORK (6/23/15)--A nascent movement encouraging young people to default on their student loans is starting to gain media exposure, and if it gains traction, it could spell doom for thousands of borrowers’ finances.
In a widely circulated opinion piece titled “Why I Defaulted on My Student Loans” that ran in The New York Times earlier this month, writer Lee Siegel encouraged the millions of young people who collectively owe more than $1 trillion in student loan debt to follow his lead and stop paying them back (June 6).
“The Department of Education makes it hard for you, and ugly,” Siegel writes. “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.”
As many consumer financial experts quickly pointed out--this is truly terrible advice. Here are some facts Siegel failed to mention:
While there are special cases where students could argue their school defrauded them, such as the nearly 200 former students of the now defunct for-profit Corinthian Colleges Inc. who are stuck with worthless degrees and unmanageable debt, defaulting because you borrowed too much is unlikely to be met with any forgiveness from the Department of Education.
If you’re struggling with student loan debt, a better option is researching if you qualify for a better repayment option--or even a debt-forgiveness plan. You can also check with your credit union to see if there’s a way to refinance your student loan debt at a lower rate, depending on the type of loan you have.
Because credit unions are not-for-profit financial cooperatives, they also can help you with a plan for your other finances, so you can carry your student debt a little easier.
For related information, read “Beware Companies Promising Student-Debt Relief” and “Students: Easy Ways to Cut Costs” in the Home & Family Finance Resource Center.