There are three basic categories of student loans that are outstanding:
1. Students that have graduated
2. Students that are in school and will probably graduate
3. Students that are out-of-school, have not graduated and probably will never graduate
I just want to concentrate on #3, the students that have outstanding college loans and have not and will not graduate, although all three situations are in crisis, the latter one is especially troublesome.
First off, there is a misimpression that all students or nearly all students in high school should go on to get a higher education in order to best secure themselves a good paying job and future relevancy. That policy is pure rubbish and does a great disserve to those students and to society at large. Admission to college should primarily be based on students that are qualified to go to college and the most straightforward way to determine that is via standardized test scores, and grade point averages. If a student has not excelled in either area, he is not qualified to go to college and should not be admitted until such time that he has demonstrated that his aptitude and proficiency has increased by improving his score to an acceptable level on a standardized test. This policy is for the benefit or both the student and the college itself.
Unfortunately, that isn't the case for college admissions in America in which the qualifications to gain admittance to many schools are quite soft. For instance, U.S. News & Report found that thirty-nine colleges accepted students at an acceptance rate of 99% or above for the Fall 2012 applications, out of the colleges that they surveyed. You might ask, what's wrong with a high percentage of students being accepted, after all, doesn't everyone deserve the opportunity of a higher education and the benefits thereof. I disagree with that spurious thinking but for sake of argument let's say that I agree. The problem then becomes two-fold when this happens:
1. They fail to graduate
2. They have massive student loans to repay
I have a good friend whose son has a student debt of $43,000 and in all probability will never get a graduate degree. Fortunately, he is working, but since he is no longer in school, and six months have passed since he last was in school, he must make mandatory payments against his student loan, this despite having never graduated and in all probability never benefiting from attending college. Nobody in their right mind would have loaned him $43,000, but somehow he was able to incur this debt. How?
Part of his student debt comes from federally backed subsidized Stafford loans, part from unsubsidized Stafford loans, and finally part from federally backed Perkins loans. The key word here is federal. Essentially that means that you and I, the taxpayers are responsible for any defaults produced from these student loans and with the Consumer Financial Protection Bureau estimating a total of 1.2 trillion dollars in student loan debt as of 2013 we have ourselves a serious crisis.
Specifically, the question then becomes as to how long anybody with high student debts and no graduation degree will go before simply calling it a day and not paying their loan, or short-paying their loan, or negotiating forgiveness of their loan, or filing a class-action lawsuit, or all of the above and then some.
$43,000 is a lot of money and if you feel victimized, as you probably justifiably should, the payback of all that money will simply never occur.