Defaults On The Rise

Once again, I bring up the loans that are in default. It is getting worse, much worse. I just received a note earlier this week from a borrower. It was a comment as a matter of fact. They were insisting that borrowers rise up and refuse to pay the predatory lenders. Occupy pushed this agenda as well. And I was under the impression that there would be a debtors' revolt, but I was wrong. Even though more and more people are falling off the grid, thanks to their crippling debt, they have not risen up collectively to revolt. Rest assured, I am not casting judgment on distressed borrowers. However, my forecasting was incorrect. There are many reasons why borrowers have not risen up. First, there are historical circumstances that are peculiar to the U.S. that make it difficult to resist collectively. Then you add to the fact that these borrowers are not revolting in terms of their labor, but a system, a cruel system, that has turned them into a new indentured class. How does an indentured class effectively revolt? This is the tricky question that so many of us can't seem to answer properly. Second, if you default on your federal loans, Uncle Sam punishes you in severe ways. The pain lasts for a lifetime. They garnish your wages. They garnish your social security checks. They garnish your disability checks. They squeeze everything out of you. This is one of the reasons why there are more student loan debt refugees. In fact, I have been receiving more emails from people who have left the country. Interestingly, some of them have told me that lenders, such as Sallie Mae, have actually tracked them down. They have received phone calls overseas. One man told me that he is not too concerned, but did admit that it the call will probably cause restless sleep.

Sadly, there are ways in which we could solve this problem. Can we expect the problem to be changed? Is that asking for too much?