I’m not American so the concept of a college loan is very alien to me. In my country we either pay for college tuition up front, apply for financial aid if our grades are high enough and your family is needy enough, or you don’t go at all. And In some public universities, tuition is either wholly or partially government subsidized.
I’ve heard of Americans complaining how they’ve got thousands of dollars in college debt and in some cases they take your whole adult life to pay off. So why are college loans even a thing in the US and what happens when you’re not able to pay it off?
In: 9
College in America is really expensive. The average in-state tuition for a state college is more than $25,000 a year. Minimum wage is $7.25 an hour, so the fact is that you just can’t afford college working a minimum wage job. If you go to graduate school it can be even more expensive, the average doctor in the USA graduates from medical school with something like $250,000 in debt.
The way the loans are structured if you make minimum payments for long enough then the rest of the loan can be forgiven, but that term can be as much as 25 years in some cases. In addition around 2012 or so they jacked up the interest rates on student loans. So a number of people saw the interest rates, after they had taken out the loan, literally double.
There are a number of ways to defer or get temporary relief from paying, such as if you lose your job or have some other hardships, but you cannot get rid of the loans in bankruptcy. If you can’t pay they will trash your credit score, garnish your wages, and, eventually, can even suspend any professional licenses you have. In the USA most landlords run a credit check when renting an apartment, so if your credit score is low not only can you not get a mortgage or a loan, you can’t even rent a decent apartment. Thankfully stuff “only” stays on your credit report for 7 years, so if you get back on track it’s not going to literally follow you around forever.
Honestly this is pretty much par for the course in America: you just walk around with this knowledge in the back of your head that if you get laid off or sick or one of a dozen other things that you’re just going to be financially ruined for the rest of your life. If you’re rich, we’re talking multi- millionaire rich, America is a great place to live. If you’re not you just kinda hope nothing goes wrong.
Latest Answers