Student Debt

AAA

DEFINITION of 'Student Debt'

Money owed on a loan taken out to pay for educational expenses. Rapidly rising college tuition costs have made student debt the only option to pay for college for many students. In the United States, most federal student debt is serviced by Sallie Mae, a publicly traded company.

INVESTOPEDIA EXPLAINS 'Student Debt'

The upside of student debt is that by borrowing money to obtain a degree, it may be possible to earn significantly more or to pursue a more personally fulfilling career, making the debt financially or emotionally worthwhile. The downside of student debt is that some students incur debt but don’t actually graduate, and some students take on more debt than they can comfortably pay back given their career choice. Another downside of student debt is that most people incur it at a young age, before they may fully understand the implications of their decision. In addition, student debt differs from other types of debt in that it typically cannot be discharged in bankruptcy except in cases of undue hardship.

Working while in school, obtaining scholarships and going to a public, in-state university can minimize the need for students to take on debt to finance their education. Graduates who work in public service professions for a specified number of years and who make a minimum number of debt payments may be eligible to have some or all of their student debt forgiven if the debt is in the form of a direct student loan from the federal government. Graduates with federal student loan debt who qualify for special repayment plans, such as income-based repayment, may also have the balance of their student debt forgiven after making payments for 20 to 25 years, depending on the program.

RELATED TERMS
  1. Free Application For Federal Student ...

    The form that must be completed in order to qualify for any type ...
  2. Direct Consolidation Loan

    A loan that combines two or more federal education loans into ...
  3. Stafford Loan

    Federal, fixed-rate student loans available to college and university ...
  4. Perkins Loan

    A loan program that provides low-interest student loans to undergraduate ...
  5. Federal Direct Student Loan Program ...

    A program that provides low-interest loans to postsecondary students ...
  6. Education Loan

    Money borrowed to finance education or school related expenses. ...
RELATED FAQS
  1. What are the long-term effects of delinquent accounts?

    Delinquency occurs when borrowers fail to make payments on their loans. All loan borrowers should do their best to avoid ... Read Full Answer >>
  2. What are the differences between delinquency and default?

    Delinquency and default are loan terms that describe failure to make a required payment. A loan in delinquency occurs the ... Read Full Answer >>
  3. When capitalizing interest, will interest accrue while you are in a deferment?

    When capitalizing interest, interest accrues while a person is in a deferment of his loan. In the event of a deferment, the ... Read Full Answer >>
  4. Why is more interest paid over the life of a loan when it is capitalized?

    More interest is paid over the life of a loan when that interest is capitalized because the capitalized interest is added ... Read Full Answer >>
  5. What is the difference between compounding interest and simple interest?

    Interest is the cost of borrowing money, where the borrower pays a fee to the owner for using the owner's money. The interest ... Read Full Answer >>
  6. How does accrued interest work on student loans?

    Using private and federal student loans to finance a college education is a common funding strategy, but students are often ... Read Full Answer >>
Related Articles
  1. Credit & Loans

    An Introduction To Perkins Loans

    Check out the eligibility and repayment options, and how you can get this loan forgiven.
  2. Credit & Loans

    An Introduction To Student Loans And The FAFSA

    Learn how to fill out the FAFSA form so that it is easier for you to fund your education.
  3. Personal Finance

    Seniors: Before You Co-sign That Student Loan

    If that loan isn't paid back, you could be on the line for the whole amount, plus penalties. Ask the 115,000 retirees whose Social Security checks have already been garnished.
  4. Credit & Loans

    Debt Forgiveness: How to Get Out of Paying Your Student Loans

    Though many individuals eagerly await the possibility of student loan forgiveness, strict stipulations and changing laws may leave some debt-burdened grads with huge un-paid tabs and reduced ...
  5. Credit & Loans

    College Loans: Private Vs. Federal

    Not all student loans are the same. Know what you're getting into before signing on the dotted line.
  6. Credit & Loans

    Fund Your Schooling With PLUS Loans

    Find out what they and are whether you're eligible to apply for these no-maximum loans.
  7. Credit & Loans

    An Introduction To Stafford Loans

    Stafford loans provide student funding that a majority of people can easily access. Find out if you qualify.
  8. Retirement

    Student Loan Debt: Is Consolidation The Answer?

    Consolidating your student loans offers convenience, but there are drawbacks.
  9. Credit & Loans

    Student Loan Deferment: Live To Pay Another Day

    Extending your principal repayment date can increase your chances of fighting off default.
  10. Budgeting

    Student Debt: Is Bankruptcy The Answer?

    Student loans can be a huge financial burden, but bankruptcy won't necessarily save you from paying.

You May Also Like

Hot Definitions
  1. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  2. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  3. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  4. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  5. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  6. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!