Borrowers plan repayment boycott

David MoonBlog

A recent survey conducted by think tank asked student loan borrowers how they plan to deal with the almost four-year suspension of student loan payments that is set to expire next month. A whopping 62% of those surveyed said they are likely to boycott making loan payments.

I never knew that ignoring a contract was an option, at least not without consequences.

In about a two-week period in March 2020 we collectively discarded hundreds of years of established societal norms and tried to reconstruct a world that could withstand the unknowns of the emerging pandemic. Whether intentional or not, one recurring theme throughout much of that makeshift effort was an attempt to disconnect actions from their historically accepted (and for old people like me, assumed logical) outcomes. If you don’t make an automobile payment or pay your rent, you lose your car or housing. If you don’t meet your employer’s expectations, you lose your job.

A young friend of mine working at an insurance company told me that only 30% of her company’s workforce complies with the “requirement” to be in the office at least two days a week. When I asked what the ramifications are for not complying, she said there were none.  “What are they going to do, fire 70% of our employees?”

I don’t understand how some people don’t grasp the logical principle that you get more of the behavior that you reward. Any leader focused on simply reducing his short-term anxiety will reward actions that avoid turmoil. But like a parent who repeatedly gives a baby candy to get it to stop crying, focusing solely on anxiety reduction inadvertently encourages more of the behavior that causes the anxiety.

Football coaches punish players for ignoring seemingly inconsequential details in preseason practice drills to establish a consistent framework of expectations. Josh Heupel can’t tell his quarterback to run a certain play and have the player question if the coach is serious about the play call. For almost 4 years, a large cohort of Americans has been conditioned to question whether rules apply on a case-by-case basis. Employees have been conditioned that some employer directives aren’t real. They know that if enough people simply ignore a policy without consequence, they can’t fire 70% of the workforce.

What my young friend failed to realize is that her company would only need to terminate less than 5% of its workforce to inspire compliance with its workplace directive, but firing an employee is hard. In the short term, it creates more anxiety and additional work than it relieves.  And most people will go to great lengths to avoid discomfort and conflict.

It seems that 62% of student loan borrowers are counting on it.

David Moon is president of Moon Capital Management. A version of this piece originally appeared in the USA TODAY NETWORK.