I’m the king of being baffled by things I don’t understand…like, say, the student loan crisis. I *think* I understand how we got here; what baffles me is where we go next.
Hell, I don’t know. A village in the Indian jungle, maybe?
Certainly that’s what a guy named Chad Haag did. In a 5/25/19 CNBC article he spoke frankly about why, after struggling to pay off the $20K in loans he amassed earning his master’s degree in comparative literature,1 he fled into what let’s call “student debt exile” in an Indian jungle village that’s as far beyond the reach of US debt collectors as, say, Cloud Cuckoo Land.
“I have a higher standard of living in a Third World country than I would in America, because of my student loans,” he said.
Setting aside the debate over whether India’s a third-world country, Haag’s decision baffled me because I couldn’t decide whether to admire him for emancipating himself from what I think of as indentured servitude in a corrupt system, or to condemn him for a liar and a thief and a deadbeat.
I mean…shit, Chad, you’re a grownup. You borrowed money from somebody else and gave your word you’d pay it back. Keep your word like any decent human being would.
But I mean…shit, Chad, you’re a grownup. You placed your faith in our educational system and it fucked you. Rise up and free yourself from your chains like any decent human being would.
So I don’t know. As I said, I’m baffled.
In my ongoing attempts to unscrew the inscrutable I ran across a subreddit dedicated to “strategic default” of student loans: /r/studentloandefaulters. As of this writing it has 8,100 subscribers. Here’s what’s on their minds. Take particular notice that these aren’t discussions of morality, but discussions of tactics. The morality of default is implied to be a given.
After spending an hour browsing the sub I found myself more torn than ever. Is it right to abdicate your student debt if it’s your only out from, quote, ruining your life?
As I’ve said many times, I’m a strong believer that the Wiccan Rede is the…oh God, what’s a good metaphor? The bedrock of FIRE? Anyway, the Rede says this: “An’ ye harm none, do what ye will.” Whenever I’m thinking about FIRE in the context of free will—which is pretty much all the time—that’s the principle I come back to.2 And an unspoken corollary to the Rede is: “Don’t desecrate your conscience.”
Trouble is, the ongoing formulation of one’s conscience leaves a hell of a lot of room for ambiguity. Sex trafficking is obviously evil, but what about resisting systemic exploitation in general? Remember that history is written by the winners.
Here’s some wisdom that surfaced recently in an /r/financialindepence discussion of the retirement ignorance of the average worker.
Subscriber denverpilot said:
The lack of retirement planning is just an extension of a much larger and deeply ingrained debt culture and an entitlement attitude.
That set another subscriber off. AnthonyMJohnson responded in part:
I’m not gonna lie, I absolutely hate this sentiment and think it is completely detached from reality.
It is 100% devoid of any mention of institutional structures that create this situation and makes it read like everything that is happening in the US is the result of individual decision making and personal moral failings[…]
He listed and discussed several such exploitative structures,3 and went on to say:
The fact of the matter is, in the US, you can do everything “right”, live in austerity and be full time employed (even several times over) and hell, contribute to your retirement accounts, and do everything we talk about in this subreddit [i.e., /r/financialindependence] and still end up totally and completely fucked and never able to experience retirement.
It’s easy for us to sit on pedestals here and make claims that pin every bit of outcome here on individual responsibility, but that is a gross oversimplification of reality, a convenient narrative that ignores the many millions of people who are not splurging on RVs and dining at fancy restaurants but instead can barely afford rising rent costs for their substandard apartment they commute 90 minutes from to their overly stressful job that they needed to put themselves $50k in student loan debt to obtain in the first place. [Emphasis mine.]
Damn, son. PREACH. I’ve been struggling to write a FIRE manifesto for lo these many years, and in 456 words and presumably just an hour or two, AnthonyMJohnson did it for me. I sent him a PM to thank him, and I’ll say it here again: strong work, my man. You didn’t specifically get into student debt exploitation as a corrupt institutional structure, but you didn’t have to.
And so after a lot of reading and soul-searching and dialogue with friends, I end up having a great deal of sympathy for student loan abdicators like Chad Haag. And I’ll tell you why by sniping at Navient.
Navient’s an easy target. The company services 25% of student loans in the US: $300 billion in loans spread across twelve million debtors.4 An average of $25K a head. And as a natural extension of its business activity the company makes a metric fuck-ton of money slicing these loans into tranches and bundling the tranches into loan-backed securities and selling those securities to investors.
Sound familiar? I instinctively abhor this practice because it was at the gangrenous stinking God-cursed heart of the housing crisis and the subsequent Great Recession. The practice has been historically proven to lead to a whole gut-cart’s worth of rot, including:
-Ratings agency fraud.
-Over-extension of credit.
-Perverse legislation designed to prop up the entire structure.
-Increased exploitation of those who graduate concurrent to the economic fallout.
But an important distinction this time around is: the consumer debt that led to the housing bubble was dischargeable in bankruptcy court. The consumer debt leading to the student loan crisis isn’t, or at least not without great difficulty.5 What does that mean, exactly?
It means telling Millennials, “We’re entitled to everything you’re due us, but you’re entitled to nothing we’re due you.”6 That’s the essence of, among other things, “Privatize the gains and socialize the losses,” which as I’m sure you know is a particularly noxious flavor of bullshit.
Look at the problem like this: the future earning ability of student debt consumers acts as a sort of natural backstop to the means by which they’re being exploited in the first place. Which further goes to show how skewed towards the corporation and away from the individual the system is. After all, if it’s so difficult for YOU to discharge your student loans in bankruptcy, why should it be easier for your lender?
That’s a violation of the first principal of fairness.
The only thought I’m left with is this: when the system fucks you, fuck the system right back. That’s to my way of thinking the essence of FIRE—we call it “fuck you money,” after all. And even though I’m a strong advocate of taking responsibility for your decisions and actions, I’m still extremely sympathetic to strategic defaulters like Chad Hagg. I don’t suggest you yourself go into student loan exile, but I invite you to consider that with the exception of a Perkins loan, defaulting on private debt can roll off your credit report in seven years or less…
…whereas you’ll likely be paying off your student loans for far longer than that. Tough one, eh?
- I’m not EVEN gonna get into whether the size of that loan is egregious relative to the average; or whether paying six years of your life and God knows how much $ in total for a commercially worthless master’s degree is wise. Note, though, that I use the adjective “commercially.” Knowledge, after all, is power.
- Which is why the early retirement police can kiss my sunburned ass.
- -The enormous industrial shift from pension plans to individual retirement accounts (which have only been in vogue since the 70s), which shifted the cognitive burden of retirement planning completely to millions of people overnight who had never received any education whatsoever on retirement accounts. Do you think this was done with the best interests of employees in mind?
-The stagnating wages that have been propped up by credit because, believe it or not, more people than you think are using that to get by, not for boats or RVs but for food and rent and yes, cars that they need to literally get to work to survive. This is also why most people don’t contribute to 401Ks. They need the money to survive now.
-The murder and disempowerment of collective bargaining efforts (unions) and the serious reduction in negotiating power of regular workers, which affects every part of the employment agreement – income, health care, retirement options.
-The combination of massive population growth plus large jump in life expectancy plus broad health epidemics (obesity, drug addiction) plus lack of a comprehensive universal healthcare system, altogether resulting in increased collective costs and just flat out many more people who can’t save for retirement.
-The gutting of regulatory bodies created to protect employees and consumers.
-The continued campaign of misinformation perpetuated by particular political parties intended to disenfranchise the people and prevent them from even beginning to turn the very slow wheels of structural change that could begin to address any of this.
- See: https://www.forbes.com/sites/zackfriedman/2018/12/13/navient-student-loans-audit/#7af4ca1bb520
- See this explanation of the Brunner Test.
- Other generations are affected, of course, but I say Millennials because I think they’re at the moment mainly afflicted by this situation.