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June 08, 2015

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BoredJD

For more recent graduates with huge balances (150K or up) the other, perhaps apocryphal, method for avoiding repayment I've heard is to emigrate, preferably to an East Asian or South American country, and teach English or hold some other kind of expat job. No idea whether any significant number of students have tried this or not or what the consequences would be if you wanted to come back to the country to visit family or something.

As a political move, if the goal is debt relief for a significant amount of students Siegel's kind of individual civil disobedience is likely to do more harm than good since it will provide actual anecdotes of student loan deadbeats getting expensive educations and then footing the taxpayer with the bill. Organized, targeted efforts by students at bad apple schools like Corinthian will have a much more positive effect, and I'm glad to see that they have made some progress.

Derek Tokaz

Jeff,

I don't know if you can really separate the moral decision from the financial one here. Siegel isn't planning this scheme in private. He's advocating it in a widely read newspaper. Because of that, we have to think about not only the personal consequences to someone following this scheme, but also the consequences to the market at large and in the long term if many people follow it.

Perhaps this is overly simplistic, but if enough people don't feel the need to repay their debts this changes the incentives to loan. Either loans will come with much higher interest rates and penalties, or loans will simply not be given at all.

There are undoubtedly many situations where people can be financially better off by ignoring their obligations (just think of every at-will employee who actually gives two weeks notice instead of immediately starting their new job), but fulfill their obligations for moral or psychological reasons. It's that latter force, not the financial one, which greases the wheels of the economy.

Could Siegel's plan work? Maybe for a few people. But if it ever catches on, it'd certainly stop working very quickly because the rules of the game would change, and not for the better.

Jeff Redding

BoredJD: It always amazes me that more people don't just move countries and walk away from their debt. We're finally starting to see significant and growing numbers of Americans doing this with respect to taxes, i.e. giving up American citizenship to avoid the U.S.'s outlier taxation of overseas income, but we're not there with debt. Obviously though, that's a long conversation.

Derek: I think I'm going to open up a different thread in a couple of days on the 'morality' of Siegel's proposed default route, and I agree that morality is not neatly separable from feasibility, but I was getting tired of hearing "he's a bad and irresponsible guy and should just pay his debt" crapola, so I had to intervene.

Derek Tokaz

I don't find it at all amazing that more people don't move to another country to avoid their debts. Or to put it another way, I don't find it amazing that more people are not unsentimental, profit maximizing mercenaries.

A lot of people feel a pretty strong connection to the place they live, their friends, and their family. Debt relief isn't enough to make them sacrifice everything else.

It might also just not be economically feasible. It takes a lot of money to pack up and move across the world, and most people drowning in debt don't have substantial savings. On top of that, they may find themselves cut off from the financial support they do have. If you've moved back in with your parents, you're getting free room and board. Move to Thailand or Mexico, and I doubt your parents are going to go with you.

Michelle Meyer

FWIW, below is CNN's rush transcript of a brief interview Siegel did this morning with Carol Costello. Take aways: Apparently NYT's Ron Lieber is planning some sort of response based on his perusal of Siegel's financial records (and Siegel is getting abusive phone calls to his home). Siegel says that although he still owes 150K he "did pay. I paid my dues. Columbia University sued me, froze my account when I was making $25,000 a year. I ended up paying that back that particular loan. Took me 20 years to do it. I paid back that loan. I paid my dues." He also says that rather than wanting to be a writer, he actually "wanted to become an academic. You need a Ph.D. to become an academic. You need three degrees to become an academic. These were three degrees. Not three Audis. Not three country houses." (Pro tip for wannabe academics: you generally do not need to pay for, or fail to pay for, *any* Masters degrees in order to be an academic, much less two.)

For my money, though, the best part is when Costellos says "I wanted to be a writer too. But it's difficult to make a living being a writer, so I became a journalist." Ouch.


COSTELLO: If you owe money on your student loans, you're certainly not alone. You're in the company of more than 40 million Americans. To put that into perspective, that's more than the population of Canada, Australia, Poland, and North Korea.

Here's another sobering fact. Nationwide, student loan debt adds up to more than $1 trillion. In a controversial "New York Times" op-ed, author Lee Siegel writes this about his student loans. Quote, "I chose life. That is to say, I defaulted on my student loans. 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."

He goes on to say this. Quote, "It stuck 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."

Siegel isn't alone. About 7 million people have also defaulted on their student loans. And, by the way, Siegel has three degrees from Columbia University. He joins me now to talk about this.

Good morning.

LEE SIEGEL, SOCIAL CRITIC: Good morning.

COSTELLO: OK, there's been a lot of backlash after your op-ed. Did you surprise -- are you surprised by that?

SIEGEL: Shocked, really. I knew it was controversial, but I never expected the hostility and the anger. Someone's been calling our home, got my wife on the phone, spoke abusively about me to her. I just got an e-mail, just now, just before going on the air, from Ron Leber of "The New York Times", a money columnist, telling me he has gone into my public records and he is going to write a column exposing my personal financial history, every bit as though I were Marco Rubio or someone running for president.

COSTELLO: Well, but -

SIEGEL: He's going to talk about my struggle to pay my taxes and he's going to hold me up as an example of financial mismanagement. And this is wrong. I'm an example of a middle class person who's having trouble getting by and I wrote this column to connect to all the other millions of other people in this country who have trouble getting by.

COSTELLO: But there are a lot of people out there who say it's irresponsible to walk away from loan. Because you knew you were taking out the loan. You knew you were going to owe this money, and it's your responsibility. And most people don't walk away from their monetary obligations.

SIEGEL: I understand that, but I didn't walk away. And I didn't say that in the piece.

I said that I refused to take a job that I didn't want and that I would have, I felt, crushed my life, or to go into the army, which I was not suited for. I refused to do that in order to pay my loans. I tried to pay my loans and I couldn't. And I stepped into default. As a result, my credit was ruined. I wandered in the financial wilderness for years.

COSTELLO: How much money do you owe?

SIEGEL: $150,000.

COSTELLO: $150,000. You have three degrees from Columbia University, which is very expensive, mind you.

SIEGEL: Yes, and I want to say something about that. I wanted to become an academic. You need a Ph.D. to become an academic. You need three degrees to become an academic. These were three degrees. Not three Audis. Not three country houses. I worked my way through school. I've worked all my life. I - and in fact, the government did not pay for my school. Columbia paid for my school. The government paid - I took out loans --

COSTELLO: Well, let me ask you a difficult question. Columbia is an expensive university. It's very expensive to go there. Why not choose a cheaper university?

SIEGEL: This is something else I wanted to address, and I think this shows a heartlessness at the heart of the country. I had so many journalists who I know come from wealthy and elite backgrounds, say --

COSTELLO: Well, you're not looking at one of them because I didn't go to Columbia.

SIEGEL: Well, I forgive you. Saying that I should not have looked beyond my origins, I should have stayed at that public university. I should have stayed at that shoe store. In saying that I wanted to get beyond the shoe store, I was being disrespectful to people who sell shoes.

Well, they didn't sell shoes. I sold shoes for a living. I sold shoes for a living for quite some time. And I can assure you that nobody wants to sell shoes for a living. Having had the opportunity to better myself, I seized that opportunity.

COSTELLO: You wanted to be a writer, and that's a very difficult profession.

SIEGEL: That's right.

[09:50:00] COSTELLO: I wanted to be a writer too. But it's difficult to make a living being a writer, so I became a journalist, and I've been very lucky.

But I think when you choose a profession like that, you got to know that, in the back of your mind, you're going to have to work at a job you might not like so that you can support your writing career. Why not go --

SIEGEL: But I did do that.

COSTELLO: Why not continue to go that route?

SIEGEL: I did work at jobs I didn't like. I taught English as a second language. I copy edited, I proofread, I wrote speeches. I took two, three, four jobs on at a time.

What I said was I did not want to go into a lucrative career that would have crushed me and would have taken up my time and would not have let me grow as a writer. And instead I'm turned into some sort of welfare queen of the student -- of the college debt crisis.

COSTELLO: That's because many, many students who have massive student debt are struggling and they are paying and they look at you and they say --

SIEGEL: And that's why -- but I did pay. I paid my dues. Columbia University sued me, froze my account when I was making $25,000 a year. I ended up paying that back that particular loan. Took me 20 years to do it. I paid back that loan. I paid my dues.

I wrote this for those students. I said everyone should put their foot down. Why is it that a rich person can go to college in this country of their choice, and a talented person at a public university where we know the degree is not as valuable as a degree from another college -- we know that. We don't want to say it, we're good liberals, but we know that.

And why can't we tell that 18-year-old woman, young woman at a public university, you can go to the same school as a rich kid? Because you have the talents We're not going to prevent you because you don't.

COSTELLO: I understand .

SIEGEL: Why aren't loans discharged through bankruptcy?

COSTELLO: Thank you so much for stopping by. I really appreciate it. Thank you so much, Lee.

Former Editor

Michelle,

Thanks for sharing that. I particularly loved "COSTELLO: Well, you're not looking at one of them because I didn't go to Columbia."

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