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Deadbeat Morality

The next time a young adult asks me why he or she needs a prenuptial agreement, I am going to suggest Googling Lee Siegel.

Siegel is a writer who garnered attention recently with an opinion column in The New York Times in which he proudly - some would say brazenly - defended his choice to knowingly default on his student loans. According to his bio from the HarperCollins Speakers Bureau, Siegel is the author of four books and holds three degrees (a bachelor’s degree, a Master of Arts and a Master of Philosophy) from Columbia University. He told CNN that he owes $150,000 in student loan debt, though he was not so specific in his column. Siegel not only defended his own choice to walk away from his obligations, but encouraged others to do the same.

As Ron Lieber, who writes for The New York Times feature “Your Money,” pointed out, Siegel’s suggestion is not only ethically dubious, but could leave many debtors in precarious or painful situations. Defaulting on your student loan debt can make it difficult or impossible to secure credit cards, auto loans or mortgages. And wrecking your credit score can also make it hard to rent an apartment or secure a job. Alternative financial services, which Siegel mentions, may fill some gaps, but they are both expensive and risky compared to their traditional alternatives.

And this is not to mention that the Department of Education can garnish your wages and that the credit of any co-signers, typically parents, will also be trashed.

Though Siegel has received a great deal of criticism, he has so far expressed bewilderment at his critics’ anger and disapproval. “I knew it was controversial, but I never expected the hostility and the anger,” he said in his CNN interview. He also clarified to Yahoo! News that he took out loans for living expenses while his tuition at Columbia was defrayed by scholarships, saying of critics who pointed to his multiple degrees from an Ivy League school as undermining any attempt to represent his case as typical, “I’m not sure what [the] point is.” Whether or not his shock is disingenuous, it demonstrates something about Siegel that sets him apart from most of the rest of us.

Perhaps I live in a bubble. I do business almost entirely with people who unfailingly behave honestly and enter into transactions in good faith. This is why I am not prepared to say that the world is full of people like Lee Siegel. But I recognize - we all have to recognize - that Lee Siegels are out there, feeling entitled to consume our resources, waste our time and disrupt our peace of mind without giving anything of great value in return. They are a special sort of leech, the kind that convinces itself that its parasitism in fact makes the world a better place, and that the host upon which it feeds ought to be appreciative in consequence.

A Lee Siegel does not acknowledge that there are real human beings - retirees and wage-earners, taxpayers and even classmates who sat next to him at the institutions where he has, in effect, awarded himself a full-ride scholarship - who bear the costs of his unpaid indebtedness. He blames his banker, or his college, or his universe, for what he perceives as the injustice that someone who prefers to make a living doing something that pays less is expected to satisfy his voluntarily assumed debts just as completely as is someone who chooses to make a living doing something that pays better. The only party he holds blameless is himself. He knows that the rest of us blame him, however, and he meets that moral judgment with contempt.

There are just so many charming aspects of a Lee Siegel.

Oh, and about those prenups. The thing about Lee Siegels is that not many of them label themselves for easy identification. Most travel under other identities. They never enter a bank or a business meeting or a relationship and announce, “I only honor my commitments when I feel like it.”

In fact, one of the suggestions Siegel offers for a potential defaulter is to marry someone with good credit, “preferably someone who shares your desperate nihilism.” Lieber reports that Siegel’s wife bought the home where the couple lives, so he seems to be speaking from experience.

But it is hard to imagine a wide dating pool of partners eager to sign on for a deliberately sabotaged financial future. In an era when credit scores have become a topic even early in a couple’s dating life and unequal debt loads have strained romantic relationships to the breaking point, it is all too easy to picture a defaulter conveniently forgetting to mention his or her “nihilism” to a partner until much later.

While we can debate the wisdom of letting 17-year-olds put themselves deeply in debt, or of parents who won’t say no to their children’s dream schools, the fact remains that most people who take on a debt will try to repay it, even if it’s hard. Yet a romantic partner who would be sympathetic to a default that resulted from the outright inability to pay, due to job loss or other unforeseen misfortune, might rightfully have other questions for a voluntary defaulter. Those questions are not only ones of judgment, but of ethics.

As Kevin Williamson observed at the National Review in reaction to Siegel’s column, “To default on a loan because you do not wish to pay it back is theft, in this case theft from all of us, since the federal government is on the hook for the loans in question.” If someone is frank with a potential spouse about choosing not to repay a loan, he or she is providing important information about not only a financial situation, but a moral outlook.

So you need to protect yourself against the risk that you will tie your finances to those of a Lee Siegel. In most business transactions, we use contracts for that purpose. In a marriage, people use a prenup.

Let me hasten to add - in fact, let me emphasize - that there are many other good reasons to enter into a prenup. The fact that you ask your intended spouse for one does not in any way mean you consider that person to be a Lee Siegel traveling incognito. In fact, if you did harbor such suspicions, it is hard to imagine you wouldn’t reconsider marrying that person in the first place. A prenup acknowledges the reality that marriages sometimes fail despite the best efforts of two sincere and responsible people. Such an agreement can avoid a lot of legal uncertainty and costly litigation down the road while ensuring a fair result for both parties.

That it can also protect a person, at least in some cases, from the consequences of marrying a Lee Siegel is a bonus. But it’s a valuable bonus that ought not to be overlooked. Because although the world, thankfully, is not full of Lee Siegels, there are still a lot of them out there.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us,” and Chapter 4, “The Family Business.” Larry was also among the authors of the firm’s book The High Achiever’s Guide To Wealth.

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