This Author Called For A Student Loan Boycott, And CNBC Was Not Having It

This Author Called For A Student Loan Boycott, And CNBC Was Not Having It

Lee Siegel, an author who defaulted on his student loan debts, appeared on CNBC’s morning talk show "Squawk Box" on Monday to defend his choice. It would have been hard for him to find a less sympathetic audience.

Facing the finance program's three co-hosts, Siegel presented an argument rooted in the world of business: Many of the country’s most famous multimillionaires, including Donald Trump and Ahmed Zayat, the owner of Triple Crown-winning horse American Pharaoh, have declared bankruptcy. So why, he asked, is it only an issue of morality when it comes to students?

The short answer from the hosts: It just is.

Siegel published an op-ed about his experience in Sunday's New York Times. He stopped short of calling for a student loan boycott in the piece, but told the "Squawk Box" hosts such a boycott would be a good way to protest an unfairly expensive education system.

"I do think that in an ideal situation, it would not be the worst thing in the world to have a national boycott like that," Siegel said.

Siegel also endorsed a proposal Democratic presidential candidate Sen. Bernie Sanders (I-Vt.) has introduced, which would finance tuition at state colleges and universities through a tax on financial transactions.

Siegel said his decision to default on his own loans was based on a conclusion that the U.S. student debt system is fundamentally unfair. He noted that student debtors have fewer options for reorganizing their debts compared to wealthier debtors.

"It is a fact that student loans are the only kind of debt that cannot be discharged through bankruptcy," Siegel said.

When Siegel pointed out that by contrast, Trump and others have famously declared bankruptcy, co-host Joe Kernen pushed back, claiming that Trump’s bankruptcy was different because it was corporate, rather than personal. Siegel maintained that the example still shows how wealthy individuals enjoy bankruptcy protections that students lack altogether.

In fact, Trump has filed for corporate bankruptcy four times, but never for personal bankruptcy.

John Pottow, a bankruptcy expert and law professor at the University of Michigan Law School, confirmed that Siegel's description of the bankruptcy status of student debt is essentially correct.

"It is fair to say that the debtor does not get the same type of bankruptcy for student debt that is afforded to other debtors," Pottow said. "It is true that 99 out of 100 debts are dischargeable in bankruptcy."

Pottow noted, though, that some tax debts are also not dischargeable.

Another host of the show, Andrew Ross Sorkin, conceded that college should be more affordable, but argued that people who default on their student loans are only hurting those who try to repay theirs.

“You don’t think it is completely unfair to all those people who actually pay their loan that you’re just saying, ‘Screw it?’” Sorkin asked.

Siegel argued that he did not dismiss his loan obligation from the get-go, but rather that his default was the result of choosing a career he was passionate about.

"I decided not to go into the Army or anything like that in order to pay off my loans," Siegel said. "I decided that I would become what I wanted to become and I went into default. And I suffered because of that. I do think that for me that was a better choice than having to go harness myself in a job or three jobs to pay off a loan that I found pointless and overbearing."

Addressing student loan debt and the high cost of a college education has become a top political priority among Democratic politicians and progressive activists. In addition to Sanders’ proposal, Sen. Elizabeth Warren (D-Mass.) has introduced legislation that would allow student debtors to refinance their loans at lower rates.

National progressive groups like the Progressive Change Campaign Committee want to make college "debt-free," meaning students wouldn't need to take out loans for any college-related expenses. Among Democratic presidential candidates, former Gov. Martin O’Malley (D-Md.) has endorsed debt-free college. Hillary Clinton spoke about making higher education "as debt-free as possible" while on the campaign trail in Iowa.

Total student loan debt reached $1.2 trillion in the last quarter of 2014, according to the Federal Reserve Bank of New York.

Before You Go

Introduces Financial Product Safety Commission

Elizabeth Warren

Popular in the Community