“The final bill for one of my student loans was for one cent. The loan company created a bill for once cent and paid postage to send it in the mail. I wrote a check for one cent and paid the postage to send it back to them.”
- E Kross, age 56, Madison WI

When you’re 18 years old and someone offers you $100,000 for college it can be hard to turn it down. Afterall, you need that degree to advance your career and achieve your future goals. And when you’re sitting in that position, looking at taking out student loans to make college possible, it’s difficult to put an interest rate and repayment into perspective. More often than not, students take on the debt.

However, every penny you borrow is a penny (and more) you will eventually have to repay. Debt forgiveness is extremely rare and only applies to certain types of loans. Scroll on to learn about debt forgiveness and debt default, and to read a real story about how petty you can expect lenders can get with their cash.

What You Need To Know

  • Colleges are not legally allowed to discourage students from taking out the loans they are entitled to.
  • Student loan debt is rarely, if ever, forgiven. The loans you take out must be repaid.
  • The programs that support students in the repayment of student loans — such as income-based repayment and public service loan forgiveness — only apply to federal student loans.
  • Private student loans comprise about 20% of all student debt.
  • By 2023, nearly 40% of borrowers are expected to default on their student loans. In 15 states, professional licenses (such as those for nurses, social workers, counselors, and so on) can be revoked and your job lost if you default on your loans.
  • You’re more likely to be in default on your student loan if you reside in a predominately black or Hispanic neighborhood.
  • You’re also more likely to be in default on your student loan if you borrow less — 1 in 3 people who owe less than $5,000 are in default compared to 15% of borrowers who owe more than $35,000.
  • Large balance borrowers may not be in default, but they aren’t paying either. They are accumulating interest faster than they can repay.
  • The law treats unpaid student loans more similarly to unpaid back taxes than to unpaid credit card debt. Even filing for bankruptcy more often than not does not discharge your student loans.

What You Need To Do

  • Before your borrow, it’s crucial to evaluate the real long-term cost of your student loans.Remember, due to interest, your student loans will end up costing more than the original amount you take out.
  • Experts recommend you borrow no more (in total) than your expected first year salary after college. So if you think you’ll make $50,000 out of college, don’t borrow more than $50,000.
  • Your monthly payment should also be no more than 20% of your discretionary income.
  • This loan calculator is useful for calculating how much your loan will actually cost over time, as well as what salary you need to earn in order to avoid default.
  • If you’re already in student loan debt, consider refinancing in order to consolidate your debt and avoid getting behind or going into default.
  • Advocate for laws that require colleges and universities to share the risk in student loan debt, making them more likely to counsel new students about taking out debt and to support graduating students in finding lucrative careers.
  • Ask for more federal oversight of the nation’s largest debt collectors.
  • Be aware of how colleges represent (and misrepresent) job placement rates and statistics on their students in debt.


Go Deeper

The federal government historically has only tracked student loan default rates for the first three years after college. This figure misrepresents the number of students who are in default or severely delinquent on their loans later on after graduation. Because of this flaw in tracking, many colleges and universities aren’t being held accountable for the students they put in debt. They benefit from receiving loan dollars, while students struggle.


Check out this interactive article that breaks down the data and suggests how the government and schools can do better.