I wasn’t planning to blog today, but this popped up in my Facebook feed.
If the article is taken at face value, a man was arrested at his home last week for a $1500 federal student loan he received in 1987. The article goes on to say that the US Marshals have 1500-2000 warrants for people who haven’t repaid their loans.
A second article popped up while I was reading the first here. It doesn’t make the situation much better – the Deputy Chief insists that the whole situation could have been avoided if the man had paid his $1500 outstanding student loan from 1987 and cooperated with the first two marshals on the scene. Leaving aside the former (the man insists that the marshals didn’t identify themselves), it does raise a very important question. How exactly is he meant to pay?
In fact, the sheer absurdity of the situation has me raising eyebrows. I am no expert, but a couple of commenters on the net asserted that the cost of the whole affair (so far) is just under $30’000, far in excess of the $1500 he owes. Am I missing something? Or is someone stupid enough to believe that the cost of arresting someone (and imprisoning them) is lesser than writing off the debt? The only explanation that makes sense, as far as I can tell, is that this is intended as a warning shot to every other debtor in the country. Pay up or go to jail.
So I did a net search and discovered this article, which asserted that the story was a little more complex than suggested. The man hadn’t shown up in court, etc, etc. (And he was ordered to pay back costs, though nothing like the extreme figure I mentioned above.) The article concludes by advising students to work out ways of repaying their loans before matters get out of hand.
But this runs into a very simple problem. A newly-graduated student, as I discussed before (here and here) is unlikely to be in a position to pay. I have no idea what the rules are in the US, but in Britain you have to earn above a certain threshold to pay back your debts. I certainly couldn’t pay them back myself when I had a regular job. A newly-graduated student trapped in Starbucks, selling lattes, or serving burgers at McDonalds is not going to be able to repay her loans. Sue her? She probably doesn’t have anything worth the cost of suing her. Put her in jail? Putting her in jail is going to cost the taxpayer a great deal of money, for what? Even if you set up a work camp and put debtors to work (doing what?) I doubt it will repay the loans, let alone the cost of setting up the camp and putting debtors in it.
So what can reasonably be done about this ever-expanding bubble?
Well, for a start, you could stop expanding it by shovelling more and more money into the bottomless pit. Fees have been rising, at least in part, because students can borrow money from lenders to pay the universities. The universities don’t care because they get their money first, but everyone else should be worried. Students may discover that their exam results aren’t worth the paper they’re printed on, while lenders may discover that they can’t get their investment back before it’s too late.
Really, if you’re in a hole, the first thing to do is stop digging. But it might be too late for that.