Quotes from the article:
Save up for your wants. Spend less than you earn. Despise debt — any of it, including student loans — so that you borrow as little as possible.
Student loans are like no other loans. Lenders and debt collection companies can come after federal loan defaulters with a vengeance. Loan payments can be deducted from a borrower’s wages, income tax refunds can be snatched, or the account can be turned over for collection, which of course means more fees added to the loan. Federal benefit payments for defaulters, including Social Security benefits, can be taken. Borrowers can be sued for the entire amount of the loan, and there is no time limit for collection on federal student loans. They are liable for any collection or court costs; and they might not be able to renew a professional license. On top of this, it’s nearly impossible to erase the debt in bankruptcy.
The report also highlights another distressing fact about student loans. Twenty-three percent of borrowers kept default and delinquency at bay by postponing repayment of their student loans through deferment or forbearance.
A deferment allows borrowers to stop making loan payments if they meet certain criteria, such as an economic hardship. Lenders may also grant a forbearance that gives borrowers permission to stop making payments for a set period of time. But forbearance is generally a more expensive option than deferment because interest continues to accrue, even on federal subsidized loans.
Here’s the moral of this story, the authors of the study say. Their research confirms that far more students than generally recognized begin to pay off their loans but then have to resort to repayment options that increase their overall debt.
