Daily Gains Letter

Student Debt

Student debt is a form of debt taken by a person from a lending institution in order to attend a higher education. Similar to other types of debts, such as credit cards and auto loans, borrowers can default on the loan after a certain period of time if it has not been paid in full.

Many of these loans are offered to students at a lower interest rate. In general, students do not need to start paying back their student loans until the end of a grace period, which is usually four years after taking out the student loan.

What is troubling with the vast majority (90%) of student debt is that it is guaranteed by the federal government. If a student defaults on their debt, the government has to absorb the losses. If the default rate increases, this additional liability can have a significant impact on U.S. national debt.


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