My latest GenDebt column is about Sallie Mae's lending practices. It seems that a lot of people end up owing 2, 3, or 4 times more than they originally borrowed, outlandish amounts that they could never pay off in a million years.
This is a danger that haunts borrowers of all types, but I believe the problem is worse for student loan borrowers, for these reasons:
1) Unlike credit card debtors, students have no choice but to borrow their way through school. It's the acceptable, responsible thing to do.
2) Besides the fees and inflated interest rates that happen if you're a "bad" borrower (making late payments), you can also get in trouble for being a "good" borrower. If you take advantage of deferments so as not to become delinquent, you'll get walloped with even more charges in the end.
3) Because student loans are not dischargeable in bankruptcy, the banks have no incentive to settle. Often, if your credit card debt is "charged-off" (ie, sold to a collection agency) that agency will accept less than the face value, because they acquired your debt for less than face value. With student loans, the banks can turn your debt over to the Department of Education, which can seize your tax returns, your wages, social security, etc etc etc.