Student Debt vs. Mortgage Debt: What Makes Them So Different?

Unlike mortgages and most consumer loans, education debt can haunt you for life.         

By Tobie Stanger

Consumer Reports 

June 27, 2016

https://www.consumerreports.org/student-loan-debt-crisis/student-loans-vs-mortgages-what-makes-student-debt-different/

Excerpts: 

Americans owe more than $1.3 trillion in outstanding student loans. That's the second largest consumer debt, surpassed only by mortgages. A college education can cost as much as or more than a mortgage. But the stakes are higher if you run into trouble paying your student loans. 

Here's why student debt is harder to manage than a mortgage.

Congress sets federal loan rates each spring off the 10-year Treasury note. Private lenders have their own formulas. Student loan interest rates are typically higher than those of 30-year fixed-rate mortgages.

Can You Refinance to Take Advantage of Lower Rates?

                                                                                        Mortgages                                                                     Yes, through many banks and credit unions.

Student Loans
Yes, but be warned: Few private providers offer these services, and when you refinance federal loans, you forfeit key consumer protections.

Can You Discharge Your Loan in Bankruptcy?

Mortgages
Yes.

Student Loans
Not without proving “undue hardship” to a bankruptcy judge with challenges from the lender, a high bar.

Can the Loan Grow Bigger Over Time?

Mortgages
Not really, due to rules forbidding servicers from setting too-low payments, causing interest to add up.

Student Loans
Yes. That can happen with income-based repayment plans and in other circumstances. When unpaid interest is added to principal, debtors pay interest on interest.