College loans are one of the most common loans to default. This occurs for several reasons. First, a young student isn’t wise in the ways of borrowing. They usually understand the art of spending but rarely understand the pain and sacrifice for the obligation they create when they borrowed their tuition.

Second, time tends to dull the memory to the fact that even though their first semesters are now history, their borrowings have now accumulated interest and their payment will be forthcoming as surely as were mid-term exams. When the time comes to repay, their school obligation often competes directly with spending obligations needed to start living their new life as a self-supporting adult. Thus the “here and now” can be a powerful counter-payment force to avoid making college loan repayment a priority. Professional counselors most often hear from defaulting student borrowers, “I can’t afford to make my new car payment and still pay my college loans”.

Third, a student can only hope that the investment made in their education will eventually lead to a successful job and the ability to repay their debt. It is unlikely the graduating student will not be eventually employed in their field of study, but the issue of repayment depends directly on when the student will become self-sufficient and what income will be required for their support and repayment of debt. This is the great unknown and the primary reason for most defaults.

How well a student anticipates their metamorphosis into financial self-sufficiency, while still considering their accumulated obligation of student debt, will determine their degree for potential default. This planning process is best undertaken with an experienced financial aid counselor or parent.

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This work is licensed by Ed DeShields under a Creative Commons Attribution License (CC-BY 2.0), and is an Open Educational Resource.

Last edited by Ed DeShields on Jun 9, 2006 8:17 pm -0500.