Student Debt


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.

  1. Education Loan

    Money borrowed to finance education or school related expenses. ...
  2. Federal Direct Loan Program

    A program that provides low-interest loans to postsecondary students ...
  3. Stafford Loan

    A type of federal, fixed-rate student loan that was available ...
  4. Free Application For Federal Student ...

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

    A loan that combines two or more federal education loans into ...
  6. Perkins Loan

    A loan program that provides low-interest student loans to undergraduate ...
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  1. Who is eligible for student loan forgiveness?

    Your eligibility for student loan forgiveness depends on the type of student loan in question. If you have a federal loan, ... Read Full Answer >>
  2. What’s the difference between the two federal student loan programs (FFEL and Direct)?

    The short answer is that one loan program still exists (Federal Direct Loans) and one was ended by the Health Care and Education ... Read Full Answer >>
  3. Can Sallie Mae loans be forgiven?

    Sallie Mae loans, similar to other private loans, cannot be forgiven. As of 2015, there is no option for private student ... Read Full Answer >>
  4. Can Sallie Mae loans be consolidated?

    Sallie Mae loans can be consolidated with other federal loans, but not with private loans. For federal loan consolidation, ... Read Full Answer >>
  5. How does Sallie Mae disburse funds?

    Sallie Mae is the number one provider of financial aid and student loans in the United States, servicing over 25 million ... Read Full Answer >>
  6. Do Sallie Mae loans go directly to your school?

    Sallie Mae is the biggest provider of financial aid and student loans in the United States. The company operates as a private ... Read Full Answer >>

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