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How does the student loan system work? Isn't it that students pay back a percentage of their income? If that is the case, how can it become problematic?
by hollander 9y ago
How does the student loan system work? Isn't it that students pay back a percentage of their income? If that is the case, how can it become problematic?
- speby 9y agoNo, it's a regular loan and there is no collateral upon default. Additionally, they typically are not able to be thrown out in bankruptcy either. As a last resort, many student loans are federally guaranteed (so imagine if the borrower died, the government will guarantee the loan is repaid). In essence, this is one of the biggest (but not the only) reasons for ever-increasing costs at universities. They add more staff, more administrative people, more student perks, nicer dorms, and charge ever more money because they can. Students get the loans and in all but the most remotest of chance, that loan will always be repaid in due time. It's almost a no-risk loan for lending institutions making it practically like free money to be collected by universities/colleges.