Eventually, unpaid defaulted student loans can have long-term consequences beyond just the loan directly. For example, the students' credit report will take a hit. Once the loan has been forwarded for collection the student’s wages can be garnished and their federal income tax refunds can be withheld. You also lose your eligibility for other types of federal loans including student loan consolidation.  Given the size of most student loans, it's usually impossible to repay a defaulted student loan in the single payment that loan collectors may request. There are mechanisms for repaying defaulted student loans and for both regaining your eligibility for more student loans and improving their credit score. (Student Financial Advisors, press release)

The political backlash against student loan defaults began in the Nineteen Eighties.  According to the New York Times:

[A congressional] plan call[ed] for new regulations that, starting in 1990, would deny aid to students in schools where previous borrowers had a default rate of 20 percent or more. If that policy were in effect today, the plan would affect nearly one-third of the 7,300 post-secondary institutions participating in the Guaranteed Student Loan program. Most of those affected would be proprietary vocational schools, community colleges, private black colleges and other institutions serving low-income students. (NYT, 12-2-87)

Today, those regulations are making educational institutions toe the line. One university shut its football program down because the high student loan default rate of its football players put the entire university in jeopardy of losing federal financial aid funds.  Once an institution’s student default rate reaches that magic 20%, the federal government kicks them out of the student loan program. In order to avoid that dire consequence, universities have slashed non-performing programs, which attract students who have a high risk of defaulting on their loans.

Job loss, medical bills, and unforeseen debt is driving hundreds of thousands into foreclosure, particularly in regions with high real estate prices, such as Florida, New York and California.   In order to get out from under debt, many families are losing hundreds of thousands of dollars in emergency real estate sales, such as this Florida couple:

Scott and her husband Joseph, 27, were served with a notice of default in September and put their house on Tea Rose Court up for sale in late October for $400,000. They bought the home in March 2006 for $515,000 and, because of a job change, now can't afford monthly payments. (Contra Costa Times, 11-26-07)

The inability to pay these massive loans is having an adverse affect on the mental health of hundreds of thousands of Americans, many of whom are carrying triple debt loads: student loans, credit card bills and mortgages. Massive loans, combined with the uncertain economy have put millions of homeowners and loan recipients at risk of a variety of stress-related illnesses.

According to a student loan blog, debtors are finding new and creative ways to outrun debt, and yes, suicide is among them.

StudentLoanJustice.Org has received thousands of stories from citizens whose lives have been shattered by their student loans. These stories are from decent citizens who have been forced to live "off the grid;" postpone marriage and children; leave the country and even commit suicide.

 The situation has created what one magazine is calling the Debt Industrial Complex. (DIB).

Debt is the new four-letter word. As the credit-fueled housing bubble comes ever closer to bursting, Democrats in Congress and on the stump are denouncing predatory lenders and their "Wild West" ways. The potential industry blowback extends far beyond NINJA (no income, no job, no assets) mortgages and "liar loans." A whole new debt-industrial complex -- high-interest payday loans, deceptive credit card practices, creditor-friendly bankruptcy laws, and an oversubsidized  (sic) student loan business -- is undermining Americans' economic security. (The American Prospect, 9-17-07)

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