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Why Student Debtors Go Unrescued

Stashed in: Young Americans, Awesome, Personal Finance, Student Loans

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Get your customers very young, through an institution with a lot more trust than you, don't inform them of the law, and push them into default. Is that a good model for a financial institution?

It's really not a good model.

At least now some students can refinance their debt to more reasonable payment schemes. 

But yeah, the whole system is questionable. 

I don't know if I fully agree with the premise of the article. When you first take out a student loan, you are required to take a workshop where they explain student loans and repayment options in depth. And then when you finish school, you are also given a loan exit interview where they explain all repayment options. And then they send you a number of letters outlining various options. It seems a bit odd for the article to blame the companies offering the loans when the process seems easy enough to read and understand, especially if you've just finished earning a degree. I guess the main complaint may be that this isn't automatic?

That said, the cost of a university degree, and the use of very large loans to finance it, is way out of line with the potential income earned by most people after they finish, but that's another point and not really the emphasis of the article. Why has the full price of education so greatly outpaced the inflation rate over the past 40-50 years? I think it's because the money is there for the taking, so schools have grown their scope to become about far more than just learning. This is good for the schools, but not great for the average student's long term finances.

You make several good points, and yes one complaint is it's not automated.

The bigger complaint is that it's hard to know what being in that debt is going to be like.

The cost of education outpaced inflation so many more people need loans to go to school.

Despite the workshop, most people don't fully realize the consequences of such a big loan.

As you said, good for the schools but not good for the average student's finances.

The single biggest factor that's driven tuition inflation has been the greater availability of loan dollars, too.  See:   So the loan system seems problematic on both the front and back ends of student debt.

At least now student loans are refinance-able. 

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