When taking on student loan debt the last thing on a students mind is how they would be able to pay back the money they borrowed. The National Consumer Law Center has pinpointed several factors that can lead to a student loan default.
Who defaults on student loans and why
According to the report, the major reason for default is the student has not completed their field of study and has stopped attending school. The survey revealed that the students that were in default, only 47% had finished and graduate. his showed that 53% of the student in loan default never finished their degrees.
Students that attended for profit colleges have the highest two-year default rates. Of students that defaulted, 65 % of the were from public colleges.
A lack of knowledge concerning loans and defaulting.
In general, the center found that many individuals who defaulted on their loans did not fully understand the state of their finances. About 24% of individuals said they did not know they were in default when they sought legal assistance, while 65% said they did not remember being contacted before they defaulted.
Additionally, the survey found that about 47% of students believed they should not have to repay their student loan debt, usually because of problems they had with their schools. About 90% of these individuals attended a for-profit institution. For this reason, the center believes colleges should be held accountable for poor student outcomes, while degree seekers should be given better, clearer information before applying for loans.