Regular Contributor
Posts: 155
Registered: ‎04-04-2011

Does "No Payments Due Until After Graduation" Create Defaults?

I've come across a few news articles now about how the SL default rates are higher than they ever have been.  With that said, how many people here went through college based on the notion that all the SL debt you were accruing didn't need to be paid back until several years later?  I'm starting to wonder about how much the notion of not having any payments to make until six months after graduation is enough for some people to take on tens of thousands of dollars in SLs.  My question - if you had to start paying on the loans you took out for college right away, on a monthly basis, do you think this would have changed your decision of where you went to college?  If so, how?

Starting Scores (lender pull 3/27/10): 759 (EQ), 752 (TU), 749 (EX)
Current Scores (myFICO 4/4/11): 768 (EQ)
Goal Scores: 800

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Established Contributor
Posts: 951
Registered: ‎05-27-2009

Re: Does "No Payments Due Until After Graduation" Create Defaults?

IMO, of course it would change where people went to school. Most people don't have a job during college, or if they do it is only a part time job with minimal pay. Unless mommy/daddy were fronting the bill, people woudn't be able to afford it in school.


Student loans are a good thing - they give people the opportunity to further their education which directly correlates into better jobs when finished. Should you take on student loans that are in excess of what you could afford based on the job you receive after you graduate... of course not. But expecting students to make payments on the loan in school would just result in people taking out excess student loans to repay the loans for that year.


My only problem are the individuals who pay $80-100k for an associates degree through a for-profit school. The jobs that result from these schools will NEVER be able to cover the cost of the education, which is partially the schools fault, but falls more on the shoulders of the borrowers who aren't smart enough to look ahead.

Starting Score: 627 EQ, 621 TU - 11/15/08
Current Score: 778 EQ, 781 TU, 778 EXP 07/20/12 Lender Pull
Goal Score: 800 EQ & TU

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Regular Contributor
Posts: 187
Registered: ‎05-07-2010

Re: Does "No Payments Due Until After Graduation" Create Defaults?

I think the logic of no payments for 6 months makes sense.  A lot of students need time to get a full time job, maybe find a new place to live, and get settled a bit.  At least give them a bit of time to get their stuff in order before you hit them with a large monthly payment. 


Here is what I would do to lower defualt rates. 


Every semester/quarter a student wants to get federal loans, requrie them to go a website.  Have a few short questions they are required to answer. 


For example, if student A logs in, it would say "You currenlty have 35,000 in student loans you are requried to repay upon graduation.


"How much do you have in student loans?"


If you were to graduate right now, your monthly payment would be 403 a month"


How much would your montly payment be?



I think requiring something like this would be a bit more fair to students.  As the system is right now, a lot of students take the entrance counceling, then forget about it, then get some shock when they graduate.  If you were to require them to see their balance every semeseter/quareter and what their possible repayment would be, then they would have a tougher time claiming ignorance when they graduate.  I'm not saing that this info is tough to find for any student, but I think forcing them to view it might help them be more responsible. 

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