U.S. student debt has more than tripled since 2004, and at over $1 trillion,
it is now substantially greater than both credit card adn auto debt balances.
There are great benefits to be gained from taking out a student loan to fund
a college education, including higher earnings and lower unemployment
rates for college grads. However, there are significant costs to having
student debts. The loans frequently carry high interest rates, delinquency
is common and costly and the federal government has the power to garnish
wages of individuals with delinquent federally guaranteed student loans.
The ability of U.S. households to make well-informed decisions regarding
higher education and student loan take-up for themselves depends on the
extent to which they accurately perceive the costs and benefit of such choices.
To what extent does the American public understand the implications of
student loan indebtedness?
If a borrower is unable to repay her federal student loans, what steps can the
government take to collect the debt?
a) Report that the student debt is past due to the credit bureaus.
b) Garnish wages until the debt, plus any interest and fees, is repaid
c) Retain tax refunds and Social Security payments until the debt, plus any
interest and fees is repaid.
The federal government can take any one of these three actions list above
against the borrower who fails to repay her student debt. Less than one
third of US households know that the government may possible take in
order to recover defaulted debt from student loan borrowers.
If a borrower files bankruptcy would the student debt be forgiven?
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
prevents all student loans (whether or not they are federally guaranteed)
from being discharged in bankruptcy unless the borrower can prove
"undue hardship" caused by the loan, a very high bar.
Sheila McKinney
