Unlike other kinds of debt, student loans can be particularly hard to wriggle out of. Homeowners who can’t make their mortgage payments can hand over the keys to their house to their lender.
Credit-card and even gambling debts can be discharged in bankruptcy. But ditching a student loan is virtually impossible, especially once a collection agency gets involved. Although lenders may trim payments, getting fees or principals waived seldom happens.
Yet many former students are trying. There is an estimated $730 billion in outstanding federal and private student-loan debt, says mark Kantrowitz of FinAid.org, a website that tracks financial-aid issues – and only $292 billion or 40% of that debt is actively being repaid. The rest is in default, or in deferment, which means that payments and interest are halted, or in “forbearance,” which means payments are halted while interest accrues.
The Scholarship Committee