> As someone who was still in college myself only a few years ago, the idea of the financial burden imposed on me for the rest of my life simply for doing the thing that society practically strong-armed me into doing seems, to me, ridiculous; for that reason I am hesitant to call any form of Student Debt collection "ethical" simply because the laws which govern it are atrocious.
What happens when you don't pay your Student Loans for years and years? Since it's a "guaranteed loan", it can't actually (continue to) impact your credit rating, can it? So could you effectively decide to just "let it ride" until you die of old age, never having paid a cent of it?
If so, I think this is basically the idea behind of guaranteeing the loan in the first place: to give the people who can't pay their debt the ability to just ignore it forever.
"Guaranteed" means the government -- ultimately -- guarantees the banks that they'll get their money. But what that really means is that the borrower of a student loan lacks almost all of the consumer protections that any other borrow has. The government will garnish any wages, social security or disability checks, or anything else they can get their hands on. And that goes on until the debt is paid or you die.
People have done this. If you search around Google you can find details. Your credit is ruined for 7+ years but in default the loan stops accruing interest. The government will pay the loan off but then the government will garnish wages and tax refunds at a specific percentage until the principal is repaid.
I may be wrong, but my understanding is that (at least for the student loans I have), the owner of the debt is allowed to garnish my wages (and I have heard even social security payouts) after some amount of time in default. So I think your plan would only work for people who are willing to be unemployed indefinitely.
Sounds like a scary criteria to an entrepreneur ("you can never work!") but it might ultimately make sense for those who go to university, but end up marrying someone with a good job and becoming a lifetime dependent of them (in est, the classical homemaker.)
There are probably a few other less-common situations as well, where a person has no money of their own but access to plenty of the money of others, e.g. the "trust-fund baby."
What happens when you don't pay your Student Loans for years and years? Since it's a "guaranteed loan", it can't actually (continue to) impact your credit rating, can it? So could you effectively decide to just "let it ride" until you die of old age, never having paid a cent of it?
If so, I think this is basically the idea behind of guaranteeing the loan in the first place: to give the people who can't pay their debt the ability to just ignore it forever.