Is defaulting on your student loans your best option?

Writing for the New York Times, author Lee Siegel pauses in the middle of a recent op-ed to ask himself, “Am I a deadbeat?”

The column is about student loans; specifically, Siegel’s student loans, which Siegel stopped paying over 30 years ago, long before the debts were paid in full.

Does that make him a deadbeat? According to Siegel, the answer to that question is more or less irrelevant. In his eyes, defaulting on his student loans was the only viable recourse he had available all those years ago. And even though the government still pursues him for the money to this day (four full decades after he took out the loans), he doesn’t regret the decision. For Siegel, the consequences of not paying back the debt have been thoroughly outstripped by the benefits of ditching the unmanageable monthly payments that would have required him to move away from the career path that he had paid so dearly to pursue.

Scare talk?

In other words, Siegel’s degree could not sustain itself. He’d purchased a career on credit and then found out that career couldn’t pay back the investment. So he just stopped paying. And the financial consequences? Not that bad, to hear Siegel tell it.

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.

Siegel’s solution basically boils down to, “Abandon all hope!” And that’s an understandable sentiment. But those consequences he refers to aren’t “scare talk” so much as they’re legitimately scary. Because defaulting on your student loans will do real, lasting damage to your credit. And yes, even the riskiest borrowers can still get money, but the cost can be staggering.

Bad credit buys you more bad credit. The fees and conditions lenders place on high risk loans to protect themselves can be severe, which just makes those loans all the more difficult to live with. There’s a reason payday loan customers often end up in an endless loan cycle – bad loans and credit cards make it almost impossible to get back to financial square one.

You can walk away…but your loans will follow

Setting aside the impact to your credit, student loans are exceedingly difficult to just ignore; federally-backed student loans even more so. Why? Because as student loan expert Heather Jarvis explains to Vice.com, “The federal government has extraordinary collection powers…They can and do—literally do—pursue debtors to their graves.”

Student loans may be the stickiest kind of debt there is – they simply don’t wash away. You can’t wait them out. They don’t disappear, even after decades. Most aren’t even eligible to be included in a personal bankruptcy.

Federal student loans are appealing because they’re more likely to be eligible for special repayment or even forgiveness plans. The trade-off, however, is that the government works hard to get that money back.

“They can garnish wages without a court order,” says Jarvis. “They can seize tax refunds, even intercept a portion of government benefits including Social Security...When it comes to federal student loans, they will get their money and never leave you alone.”

In Jarvis’ opinion, when push comes to shove, your federal student loans are the last debts you should stop paying.

Navigating the minefield

Of course, many student loan borrowers don’t feel like they really have a choice in the matter.

As of 2014, the national student loan default rate was 13.7 percent. Of the 4.7 million student borrowers whose loans came due in 2011, approximately 650,000 have since defaulted on those loans. Those numbers seem to suggest that something is sincerely wrong.

“One of the things that’s super frustrating is that the student-loan scheme is extremely complicated and convoluted and tricky to navigate, even for sophisticated and educated borrowers,” says Jarvis. “It is absolutely bizarre in its complication, and it gets more complicated every day.”

There likely is no single solution to the problems facing student loan borrowers. However, that doesn’t mean that borrowers should take Siegel’s advice and simply give up. There’s no reason to just accept a lifetime of bad credit and collection activity before you’ve at least tried to find a workable solution. Speak to your loan servicer. Speak to a student loan counselor. Speak to others who have successfully managed to integrate their student loan debt into their personal finances. You will very likely have a difficult road ahead of you, but at least it’s a road that eventually ends.