According to this article on the college bubble, “25 percent of all government loans default, 30 percent of community college loans default, 40 percent of two-year college loans default, and for-profit schools have a 43 percent default rate.” These are government-guaranteed loans. When the student defaults, the government pays the lender plus interest and hires collection agencies go after the students for the loan plus a 25 percent default fee. Students are not free of these loans until they are somehow paid off; student debt is non-dischargeable in bankruptcy. Universities get paid regardless of whether students default or fail to graduate. According to the article, “Student debt now exceeds credit card debt, at $829 billion versus $826 billion. From 2004 to 2005 alone, student debt increased by 30 percent. And a majority of undergraduates owe $20,000 in student loans, up 108 percent in a decade, while 45 percent of college graduates from the class of 2009 earned less than $15,000 in 2010.”