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?
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Many Americans view it as an investment. In an in-demand field, earnings with a degree can be about a million dollars higher over a 40 year career than without a degree. If you have to take on $50k in debt and make $150k in total payments with interest for decades, you still come out ahead.
So that’s why it’s accepted and common. Whether all of that is wise is an individual decision. Whether it’s worth paying the additional cost of a “good school” is very murky.
If a borrower doesn’t pay it back, the loan goes into default and it negatively affects their credit score, making it harder to borrow in the future. The rest depends on exactly what kind of loans they were. For federal student aid, the government can take some harsh measures to collect, including taking it straight out of the borrower’s paycheck before they receive what’s left.
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