Don’t lend money to a friend, an ancient proverb advises, because you will lose both your friend and your money.
My cousin Rudy taught me that lesson. A couple of years ago, Rudy called me from the Travis County Jail in Austin, TX, asking me to go his bail.
I can’t remember why the Texans locked him up. I think he rolled a homeless man on Congress Avenue or took a leak on the State Capitol grounds. Maybe both. Rudy was a little vague about the charges.
“You gotta get me out of here,” Rudy pleaded. “The jailer is threatening to shave my face and my head. I need a good lawyer.”
“How much do you need?” I asked, thinking he would ask for a few hundred dollars.
“I need ten grand,” Rudy replied. Ten grand!
But who can say no to a relative in need? I wired the money. “Just pay me back when you can,” I told him.
Did Rudy ever pay back the loan? What do you think?
The federal student loan program is sort of like the money I loaned cousin Rudy. More than 40 million people owe Uncle Sam $1.7 trillion, and most of them aren’t paying it back.
In fact, I suspect a few million student-loan debtors have concluded that their loans are really gifts–like the money I wired Rudy.
And the government is encouraging that point of view. The Department of Education has put nine million borrowers into long-term, income-based repayment plans (IBRs). People in those plans make token payments for up to 25 years, but they will never pay off the principal on their loans.
There are millions more who have gotten economic-hardship forbearances, and they ain’t paying nothin.’