Friday, June 12, 2015

Contrary to author Lee Siegel It is a Terrible Idea to Default on your Federal Student Loans

According to this article it sounds awful if you decide to default on your loans.
According to Jarvis, if you decide one day to stop paying your federal student loans, after 270 days the loan will default, at which point the government will start garnishing your wages, seizing tax refunds, and intercepting government benefits (like social security) without a court order. The government may also sue if they think it will give them access to your assets.
"They can and do — literally do — pursue debtors to their graves," Jarvis said.

Jarvis says defaulting on your student loans can also affect your credit and hurt your chances of qualifying for mortgages and loans down the road. She does note that the government cannot put you in jail for owing debt. 
In other words the Feds can blow up your financial profile if you default on this debt. What is especially galling is that they are charging above market interest rates on student loans and reaping billions in profit. For a masters degree the Feds charge 5.84% interest while the bank charges 4.12% for a 30 year fixed mortgage. Plus with the low interest rate policy it is very difficult to make 5.84% on your money in anything but stocks. You add this to the incredibly low yearly income gain and you have a recipe for student loans following people to their graves.

No comments: