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.

BREAKING DOWN '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. PLUS Loan

    A low-cost student loan offered to parents of students currently ...
  2. Perkins Loan

    A loan program that provides low-interest student loans to undergraduate ...
  3. Student Visa

    A special endorsement that is added to a passport that governments ...
  4. Free Application For Federal Student ...

    The form that must be completed in order to qualify for any type ...
  5. Student Loan Interest Deduction

    Student Loan Interest Deduction is a tax deduction for interest ...
  6. Education Loan

    Money borrowed to finance education or school related expenses. ...
Related Articles
  1. Personal Finance

    What New Student Loan Repayment Options Mean

    American college graduates are facing an increasing amount of student loan debt. There are new rules for repaying that debt. Here's what you need to know.
  2. Personal Finance

    Student Loan Debt: The Baby Elephant in the Room

    Rising student debt, default rates and an increasing demand for college grads add to economic woes.
  3. Personal Finance

    Shocking Spike in Federal Student Loan Defaults

    The cost of college keeps going up and graduates are finding it tough to land good jobs.
  4. Personal Finance

    How Student Debt Imperils Retirement Savings

    Student loan debt is out of control. Here is how it can impact saving for retirement.
  5. Personal Finance

    All About Student Loans

    Student loans bridge the gap between college savings, scholarships and earnings from part-time work.
  6. Personal Finance

    A Beginner's Guide to Getting Student Loans

    Follow these 5 steps and you'll be well on your way to knowing which loans to go after – and which college really offers you the best deal.
  7. Personal Finance

    College Cost Reduction Act Helps Students Meet Payments

    This legislation can help families pay college costs and reduce student debt.
  8. Personal Finance

    Why You Should Be Wary About Most Student Debt Advice

    Falling victim to bad student debt advice can drain your wallet. Take a look at the most common ploys you want to steer clear of.
  9. Managing Wealth

    How Paying for Higher Education Has Become Riskier

    Think student loan balances are a big issue? Here are several more things that are conspiring to make paying for a higher education harder and riskier.
  10. Financial Advisor

    Deal with Your College Debt Using These Steps

    The worst thing to do with college debt is to ignore it. The best way to start tackling it is with a clear roadmap to financial freedom.
RELATED FAQS
  1. Why are private student loans generally more expensive than federal loans?

    Make the right decision between a federal student loan and a private student loan when looking for financial aid for your ... Read Answer >>
Trading Center