The Wall St. Journal with a look at rising student loan defaults. One physician who borrowed $250,000 for medical school now owes $550,000 - thanks to penalties and interest:
To be sure, Dr. Bisutti's case is extreme, and lenders say student-loan terms are clear and that they try to work with borrowers who get in trouble.
But as tuitions rise, many people are borrowing heavily to pay their bills. Some no doubt view it as "good debt," because an education can lead to a higher salary. But in practice, student loans are one of the most toxic debts, requiring extreme consumer caution and, as Dr. Bisutti learned, responsibility.
Unlike other kinds of debt, student loans can be particularly hard to wriggle out of. Homeowners who can't make their mortgage payments can hand over the keys to their house to their lender. Credit-card and even gambling debts can be discharged in bankruptcy. But ditching a student loan is virtually impossible, especially once a collection agency gets involved. Although lenders may trim payments, getting fees or principals waived seldom happens.
Yet many former students are trying. There is an estimated $730 billion in outstanding federal and private student-loan debt, says Mark Kantrowitz of FinAid.org, a Web site that tracks financial-aid issues—and only 40% of that debt is actively being repaid. The rest is in default, or in deferment, which means that payments and interest are halted, or in "forbearance," which means payments are halted while interest accrues.
The real kicker with this doctor? "The entire balance of her federal loans will be paid off in 351 months. Dr. Bisutti will be 70 years old."
Bad system. One good way to counteract profit-centered health care in this country would be for the U.S. government to underwrite medical school instead of having student take out these onerous loans. The creditors say most medical students repay their loans on time, but I wonder: How many of them are practicing assembly-line medicine to make those payments?
