Student Loans Suck: Can I Just Default?

For most college grads (and even some dropouts), student loans are a major source of stress. Let’s face it, most people made the decision to take out student loans when they were young and stupid. When getting drunk and making out with some random face at a party was more important than sound financial planning. So, now they’re out of college, struggling to find an entry-level job, wondering how they are going to pay for rent, and car insurance, and Netflix.

Add student loans to the mix? F*** that. Can I just default?

Short answer: no.

Long answer: no, and you should feel ashamed for asking in the first place.

The reason why you can’t default is broadly separated into two categories. Good reasons why, and bad reasons why. Let’s go over bad reasons first:

You can’t default on your student loans because it’s unethical

  • You took out student loans on good faith. You borrowed that money and spent it on a promise that you’ll pay it back, regardless of whatever hardships you come across. That money had to come from somewhere, and you’ll get plenty of people telling you that you owe it to society, taxpayers, etc, to pay it back. This is a bad reason because, well… ethics take a second place when you have a hundred thousand dollars hanging over your head like the Sword of Damocles.

You owe it to your cosigners.

  • If you default on your loans, your cosigners will have to take the blunt of the repayment. Do you really want to lay it on your mom’s tiny, old shoulders to pay back the $100k you used to fund your fine art tuition? This is a bad reason because well… actually this is a pretty good reason but no law is going to force you to be a good person. You’re just an a** if you stick someone else with your loans.

Now good reasons:

If you don’t pay, your debtors will come after you

  • This is especially true with public loans. Those will never, save for an act of God, go away. If you don’t make the minimum payment on your student loans, your salary will be garnished, and unless you can spend the rest of your life without an income, that means bad times.

You can’t discharge your student loans in bankruptcy

  • Once again, only an act of God will allow you to discharge your student loans in bankruptcy. Not that it doesn’t happen, but the odds of it happening are so rare that you might as well not attempt it unless you are permanently disabled or something similar.

Leaving the country isn’t the best solution

  • So you’re going to run away from your problems? Well, even if you are prepared to leave your family, friends, and everything you know behind for some exotic locale, remind yourself that you can never come back. Your student loans won’t go away, your credit will be tanked, and your financial status is essentially moot. Hey, if you want to go into self-imposed exile, then this is about the best option you have.

So what can you do?

Pay back your loans

  • Obviously

Look into income based repayment plans

  • Revised Pay As You Earn Repayment Plan (REPAYE Plan)
  • Pay As You Earn Repayment Plan (PAYE Plan)
  • Income-Based Repayment Plan (IBR Plan)
  • Income-Contingent Repayment Plan (ICR Plan)

Look into Public Service Loan Forgiveness (PSLF)

  • Currently this is really only a solution for those going into public service (government positions, teaching, etc)

Refinance your loans if possible

  • Can you refinance or consolidate your loans? If you can, you may find yourself saving a lot of money

Work with your private loan creditors

  • You can negotiate with creditors, to an extent

Still want to default?

  • Speak to a lawyer. Your case may be one of the few that stand against the inevitable lawsuit brought on by your creditors.