Going to a university can be very expensive. Tuition alone can cost several thousand dollars just for one semester, and this does not account for the cost of meals and housing. A traditional student is a young person, perhaps just out of high school. They do not have the money in savings thanks to a lifetime of work. This means either their parents must pay, or they will be forced to take out loans.
Student loan debt is a unique form of loan offered to college students. Other types of loans are applied to cars and houses, and special laws are applied to these loans and how they may be liquidated in the event of default. A student loan is different and is governed by different laws, designed to protect both the borrower and the lender.
There is no asset to liquidate and it is important to keep interest low for the student. The compromise is that student debt cannot be canceled in the event of a bankruptcy. A student just out of college typically only has college debt as an asset, and so bankruptcy is a tremendous risk for a private lender. The government subsidizes loans, which means that it pays interest for a set amount of time, but it will not pay off a defaulted loan.
The only way to escape student loan debt under existing law is to pay it off. It is possible to defer a loan for a year due to economic hardship, but interest continues to accumulate and the total bill grows. The law may change, and student loans may be canceled in the event of bankruptcy, but the student would still have to prove financial inability. Even after deferment, the lender will still follow the borrower and attempt to reclaim assets. If the student obtains a job, then they will demand a cut, even if it means through court order.
There is no easy way to escape college loan debt; even if the borrower dies, then the debt can fall to the spouse or another inheriting party. More than likely, all remaining assets will be examined upon the borrower's death by the state, and it will be liquidated in order to pay for taxes and unsettled accounts. The equity of the home and vehicle will be applied to the student loan, and only what is left over will be paid to relatives and beneficiaries.
All this should not scare the borrower. The most important thing is that the student not borrows and spends foolishly, and be sure to choose a career field that will likely pay well. It is also important to examine one's own performance. Someone who does not succeed academically might not succeed in their chosen career, and it is always better to reconsider sooner than later
Student loan debt is a unique form of loan offered to college students. Other types of loans are applied to cars and houses, and special laws are applied to these loans and how they may be liquidated in the event of default. A student loan is different and is governed by different laws, designed to protect both the borrower and the lender.
There is no asset to liquidate and it is important to keep interest low for the student. The compromise is that student debt cannot be canceled in the event of a bankruptcy. A student just out of college typically only has college debt as an asset, and so bankruptcy is a tremendous risk for a private lender. The government subsidizes loans, which means that it pays interest for a set amount of time, but it will not pay off a defaulted loan.
The only way to escape student loan debt under existing law is to pay it off. It is possible to defer a loan for a year due to economic hardship, but interest continues to accumulate and the total bill grows. The law may change, and student loans may be canceled in the event of bankruptcy, but the student would still have to prove financial inability. Even after deferment, the lender will still follow the borrower and attempt to reclaim assets. If the student obtains a job, then they will demand a cut, even if it means through court order.
There is no easy way to escape college loan debt; even if the borrower dies, then the debt can fall to the spouse or another inheriting party. More than likely, all remaining assets will be examined upon the borrower's death by the state, and it will be liquidated in order to pay for taxes and unsettled accounts. The equity of the home and vehicle will be applied to the student loan, and only what is left over will be paid to relatives and beneficiaries.
All this should not scare the borrower. The most important thing is that the student not borrows and spends foolishly, and be sure to choose a career field that will likely pay well. It is also important to examine one's own performance. Someone who does not succeed academically might not succeed in their chosen career, and it is always better to reconsider sooner than later
No comments:
Post a Comment