I attended an undergraduate program at The University of Wisconsin, paid for to a large extent by my parents. I worked part time during my Junior and Senior years in retail, just for spending money.
5 years later I attended graduate school and took out $7,500 in GSLs. I completed a master's degree in business in 3 semesters. When what would have been the 4th semester rolled around I was contacted by the bank which wanted me to come and pick up my disbursement for another increment of GSL debt. I had to argue with them for an extended time to get them to understand that I was not enrolled, that I was done, graduated. I think in those days (mid 1980’s) the programs were so loosely administered they would have disbursed the check anyway.
I attended law school as a part time student in the late 1980’s to mid 1990’s. I worked full time and attended classes part-time, during my lunch hour and in the evenings. It was a long slog, but I emerged from law school with a JD and no debt (my employers had generous tuition reimbursement programs which covered books and tuition, and even provided “academic leave time” which accrued during the semester and gave me a nice break to study before final exams.)
I paid off my GSL in the mid 1990’s.
I have taken bar exams for admission in several states, most recently in FL in 2010. I was in a crowd of about 3,200 test takers, waiting to be admitted to the examination facility. While in line waiting to get in, it was nearly impossible not to notice that a) at 53, I was 2x the median age of the crowd, and b) everyone in line, mostly fresh law graduates, were talking about their accumulated student loan debts. I was hearing lots of numbers just south of $100k, then a few in the $110K-$130K range. It was as if they were playing “”Can you top this?” with their loan balances.
Simply amazing, an amount of debt the equivalent of a mortgage on a modest home, except there is no home, no tangible thing that was purchased.
Now, the point of all these “Looming student loan debt bomb approaches!” stories is to soften up the public’s thinking on this subject and to allow the Obama administration to introduce the idea of bankruptcy code reforms which would allow student loans to be discharged. This is merely taking the irresponsibility of some of these students and foisting it on the taxpayers, who guarantee these loans. So, farmers in Kansas and factory workers in Vermont, and all sorts of folks who don't get the benefit of Junior’s M.F.A. from Yale, get to pay for it.
Student loans, at present, are not dischargeable under the Bankruptcy Code. In the rarest of situations, so rare that you could say it is practically impossible, one could theoretically qualify for a hardship discharge. But we are talking about perhaps 1 in every 10,000. So, student loan debt is forever. If you default, ultimately the Department of Education will sue and get a judgment which can then be used to garnish pay, lien on real property, and levy against personal property. So, the transition from being a “performing” loan to a “non-performing” loan is merely a change in nomenclature. It merely means that the DOE will go to court, get a judgment (which will include filing fees and attorney's fees) and then a different process will begin to collect that. So it does not go away, and nothing blows up, nothing goes off a cliff.
These conspicuous and increasingly frequent warnings about “ticking time bombs” are background plants from the Obama Administration. They are going to attempt to curry favor with young, heavily education-indebted voters by moving the costs of their, perhaps unwise over-investment in education, onto the backs of a broader population.
A little secret is that graduates of the "elite" colleges that have huge endowments don't graduate with huge piles of debt. In essence if mom and dad are successful and/or prudent they pay a "tax" in that they pay full price for tuition. Otherwise, the tuition is heavily subsidized and discounted. That BA & MFA from Yale shouldn't have a lot of debt when he or she goes to work. The big culprits here are the for-profit schools and the second and third tier of private colleges. I'd say "caveat emptor" with full disclosure (in large print) with earnings prospects of technical and non-technical major graduates and put a ceiling on the amount of the loans. Noting that the median household income in the US is $44,389, tuition is waaaaaaaay out of line. My kid's college had an official "College Arborist". Pretty campus, but -- wow!