Much has been said on the pages of this blog about student loan debt. Test your knowledge of the subject with the short quiz below. And be sure to check back for a discussion of the results.
#6 - Who determines the amount a student can borrow?
In most instances the lender of funds would make this call. At least that is what would make sense to me. But according to the quiz, the school decides the maximum amount a student can borrow in the case of student loans. That's convenient for the school because it can charge whatever it wants (as long as other schools do too, which they do) and authorize the amount loaned.
I suppose this would make sense if the school was at risk if the student eventually defaults. But I think the school gets the cash up front and the lender, the federal government I believe, takes the hit in the case of default.
#6 - Who determines the amount a student can borrow?
ReplyDeleteIn most instances the lender of funds would make this call. At least that is what would make sense to me. But according to the quiz, the school decides the maximum amount a student can borrow in the case of student loans. That's convenient for the school because it can charge whatever it wants (as long as other schools do too, which they do) and authorize the amount loaned.
I suppose this would make sense if the school was at risk if the student eventually defaults. But I think the school gets the cash up front and the lender, the federal government I believe, takes the hit in the case of default.
Is that how it all works?