The Impact of Student Loan Defaults

The student loan crisis has significantly worsened since 2019, with one borrower defaulting every 30 seconds and a million total defaults that year. Defaulting on loans leads to punitive consequences, such as capitalized interest, where unpaid interest is added to the principal, resulting in an increased balance. This issue is compounded by state-specific repercussions, like losing a driver’s license, and unique challenges in negotiating student loans compared to other types of debt. The inability to discharge student loans through bankruptcy further exacerbates the burden, leaving many borrowers in dire financial situations without effective ways to manage or resolve their debts.