In addition, private lenders might be more aggressive in pursuing payments from borrowers because the borrower has fewer options for repayment.
As the number of college students with credit cards increases, so does their level of credit card debt. At least some of these students are using these credit cards to pay educational expenses, but these charges (estimated at roughly an average $1,000 a year for students who use credit cards for educational costs) are not being included in most student loan estimations. If they were, then $25,000 for a four-year education would be closer to the mark. This debt, of course, comes with higher interest rates and a lack of subsidies.
The question of whether student debt levels are excessive has been on the public policy agenda for three decades. Between 1976 and 1980, the volume of federally guaranteed student loans more than tripled, and serious talk of “overburdening a generation” arose in the public media.
Another factor that hides the real level of student loan debt is credit card use
However, just how overburdened that generation became is difficult to ascertain. Unlike my college friend, members of that generation are not always open about their student loan problems or the long-term effects-both positive and negative-of a university education funded through loans.
A 2000 National Post Secondary Student Aid study found that an estimated 39% of student borrowers are graduating with “unmanageable debt,” which is defined as debt in excess of 8% of borrowers’ gross monthly income. In addition, 55% of African-American student borrowers and 58% of Hispanic student borrowers graduated with similar unmanageable debt burdens. While these populations have historically made less than whites, their college educations cost the same.
In 1988, Nellie Mae, a company similar to Sallie Mae, issued a report on its first qualitative survey of student borrowers in repayment. The study concluded that about one-third of the borrowers felt significantly burdened by their loans. However, an overwhelming majority of them also believed that student loans significantly increased their access to and choice among postsecondary institutions.
Second, unlike other non-collateralized loans, which credit card companies and banks must write off after nonpayment for seven years, student loan companies can come after unpaid accounts as long as the debtor lives
Now if my friend, who was lucky enough to graduate, defaults on his student loan, what can the creditor get out of him? There is no real direct connection between the thousands of dollars borrowed for education and a debtor’s car or house, but federal and state law give student loan organizations as Louisville bank payday loan much legal support as possible to secure repayment.
In 2003, there were 5.6 million Americans in student loan defaults, roughly 5% of all Americans between the ages of 20 and 49. And those in default find themselves caught in the strange legal status of student loans.
First, it is nearly impossible to discharge a student loan debt in bankruptcy. This means that even if the bankrupt debtor’s creditors agree to a repayment plan or to a part of his liquidated assets, these agreements almost never include the student loan creditor. Sometimes people declare bankruptcy just so they can continue to repay their student loans at the expense of the rest of their debts.
Student loans are almost never sold off to collection agencies designed to squeeze as much as possible before that seven year window runs out, because the clock never stops running.
Put more bluntly: in most states, two crimes have a statute of limitations of more than seven years. One is not paying student loans, the other is murder.