Government education loan defaults: What takes place just after consumers default and why

Government education loan defaults: What takes place just after consumers default and why
Range will set you back one borrowers spend in default is higher, just as the preferred story states, or they may be minimal so you’re able to nonexistent. step 3 That’s because government entities provides erected an elaborate band of alternatives and you will rules to possess consumers for the standard. These rules are usually counterintuitive you need to include perverse incentives getting individuals in the way it manage its non-payments. Rougher charges try implemented into the borrowers whom quickly pay off their loans completely just after defaulting than just on the individuals who take part in an excellent a long time, bureaucratic “rehabilitation” process but create zero improvements into the paying off the bills. Continue Reading