People Helping People Is Not a Free Ride
I’ve observed with much concern that many of my friends on social media agree with a June 6 New York Times opinion piece by Lee Siegel, “Why I Defaulted on my Student Loans.” I’m sure most of you have read this one already, but for those who haven't, here's the Cliff's Notes version.
Siegel describes, with much disdain, how a balding, 50-something banker approved a private student loan co-signed by his mommy so he could attend a private (read: expensive) liberal arts college of his choosing.
He took out a second private student loan his sophomore year, but during that year daddy declared bankruptcy. His parents divorced and mommy could no longer afford the tuition gap the loans didn't cover.
So poor Siegel had to transfer to a state college and eventually dropped out of school.
Siegel thinks the world owes him a living. He wrote that had he made a financially strategic decision and selected a major and potential career that allowed him to afford to repay his student loans, it would have resulted in self-disgust and life-long unhappiness, which would have destroyed his precious young life.
Those adolescent words aren't mine; they came directly from his keyboard.
He also opined that his decision to default on his student loans was both morally and legally reprehensible.
He further provided what he felt was sensible advice for others considering strategic default.
Obtain as many credit cards as you can and live with or marry someone with good credit were two of these gems.
I have another word for his advice: Fraud.
One would assume Siegel is a millennial who lacks life experience. He is not. He's 57 years old.
And he's not alone. Many of my friends, most of who are middle aged, liked this post on Facebook and agreed with him. It's not fair that college is expensive. It's not fair that some people are born with rich parents, while most come from modest means. Everyone should be provided with an education and the career of his or her choosing.
In what alternate universe does this world exist? Here in America, we’re lucky that anyone of modest means has – with hard work and dedication – an opportunity to achieve personal success. Some countries do provide free educations. Those countries also have very high tax rates.
I can't imagine Siegel would support that either on his modest writer's salary.
Many countries provide no way at all to move up the socioeconomic ladder. In some countries, it's even written into law.
I wanted to attend a small, liberal arts college, too. I entered the school's scholarship competition and won the second place prize: One-half of tuition paid. The remaining bill was still more than my parents could afford. So, I sucked it up and attended a small state college, eventually transferring to a larger state school.
I did not, as Siegel wrote, drop out of my lowly state college because I thought I deserved better. For a guy who claims to have come from modest means, he sure has champagne tastes.
Instead, I worked full time and even had to take out student loans of my own.
Well-paying journalism jobs were scarce in 1993, so I took a sales job instead, selling customized textbooks. I eventually found my way to credit union marketing. My story is not unique.
Was my precious young life wasted? Absolutely not. Along the way, I learned valuable time management skills and developed dogged persistence.
And guess what? Thanks to those skills, I achieved my original goal of becoming a professional journalist.
Was it the path that I envisioned as a wide-eyed, idealistic 17-year-old? No. But it turned out to be the right path.
What does this mean for credit unions? The prognosis isn't good. Increasingly, Americans don't see loan agreements as binding. They see educational loans as an investment, and investments can be abandoned if they don't pay off. This same line of thinking convinced many it was okay to strategically default on their mortgages.
Like student loans, mortgages were marketed as an investment, not a loan. The takeaway is that credit unions should be cautious with that marketing strategy, and should be extra cautious when underwriting those loans.
Credit unions help people; they don't give them a handout.