The Tragedy of Student Loans (Infographic)

The Tragedy of Student Loans

One Comment

  1. Poor and Broke says:

    Contrary to what people may be led to believe, the Treasury is making many millions of dollars off student loan defaulters.

    Once a borrower defaults on a federal student loan, they can garnish your wages and/or Social Security without going to court for as long as it takes to recover the balance or until the borrower gets the loan(s) out of default.

    Treasury can take 15% of your Social Security or net paycheck; the borrower does get to keep the first $750 monthly. (e.g. a borrower with a $900 Social Security check would see $135 taken out and would receive $765; a borrower with an $800 Social Security check would see only $50 taken out – not $120 – because he must be allowed to keep $750.)

    Could you live on $750 per month? Could you live on $750 per month if your rent is $500?

    They also take entire tax refunds.

    But there are hefty fees involved, which is where the Treasury is making all that money. Treasury skims off a cool fee of about 20% off the top, before any of the garnishment is applied to the loan balance – first interest, then principal.

    In many cases, subtracting the fee from the amount applied to the balance makes the amount applied to the balance insufficient to reduce the balance after the current month’s interest is added; that is, the balance increases.

    Also, the options currently available for people who can’t afford their payments did not always exist; I defaulted before today’s programs existed, and have to date paid more in fees (see above) than the amount I borrowed. And if you’re in default, those affordable repayment programs are not available to you. As a result, 10% of my $12,000 annual income is siphoned off by Treasury, leaving me with an amount to live on that is below the poverty line.

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