Recourse Loan

See: Collateral.

If the lender has recourse against you if you don't pay her back, then they usually take whatever the asset was that you pledged when you borrowed the loan in the first place. Like, for most homes getting a mortgage, the buyer puts, say, 20% down and pledges their own home as that collateral. If they ever miss a few payments, the sheriff shows up and evicts the family, and the bank then auctions the home.

Not a pretty sight, but it happens every day in America. The recourse was known and accepted when the borrower signed the papers she promised to pay back the home with.

So, uh...what happens when student loans aren't paid back? What does the lender then get? A liver? A lung? A lecture on Kierkegaard? Yeah...not so much.