The Ups and Downs of Student Loan Debt

student loan debt, student loan discharge, discharge student loans in bankruptcyThe topic of student loans has really come to the surface and received some attention over the past ten or so years.  There are usually two student loan topics that arise; the rising cost of student loans and the non-discharge ability of student loans in bankruptcy. However, to give credit, there are some positive points for Federal Student Loans to mention as well.

Breaking-Down Federal Student Loans

It’s a great thing, that in America, so many people have access to Federal Loans.  Most Federal Student Loans offer low fixed interest rates, deferment, repayment plans based on income and some forgiveness options for teachers and public service employees; this is pretty appealing to most students.  In addition, the chance of being approved for a Federal Student Loan, such as a Stafford Loan, is almost a sure thing.  Your credit history is not a factor what-so-ever, your credit is not checked, as it would be with a private lender. The ease of receiving a Federal Student Loan makes the dream of going to college very real for many.

Overwhelming Student Loan Debt

According to the Federal Reserve in June of 2010, Federal and private student loan debt surpassed credit card debt.  In short, this means that Americans have more student loan debt than credit card debt.  And, it’s not just college graduates that are experiencing this problem. Loan debt from classes adds up equally for all participants.  Regardless if you can’t find a job related to your degree, or if you never reach graduation, you are still left with the loans to repay. The opportunity to go to college is an honorable one, but it is something that really needs to be taken seriously because it involves borrowing a lot of money.  (The average annual tuition for a public four-year college is approx. $10,000 – $20,000.)  We need a combined effort on the part of student counselors, lenders, colleges, our legal system, and more to prevent this problem from continuing.

Student Loans and Bankruptcy Laws

Prior to 1976, student loans were dischargeable in bankruptcy.  However, there was a big concern back then that too many loans went into default.  As a result, Congress passed laws to protect Federal Student Loans, basically, laws that would protect these government investments.  Private student loans weren’t impacted until 2005 when the BAPCPA, Bankruptcy Abuse Prevention and Consumer Protection Act was passed.  Protection for WI Residents. This is the current law that makes discharging student loan debt nearly impossible. There are people today, including politicians and presidents that feel our government is profiting entirely too much from Federal Student Loans, including the defaulted ones. Until there is some consensus on this issue, it may not resolve for a very long time.

What to do about Overwhelming Loan Debt

If you have questions about what to do about your student loan debt, or any other kind of consumer debt that you may have, it doesn’t hurt to ask a local bankruptcy attorney just to be sure.  If your student loans can’t be consolidated or discharged in bankruptcy, we can steer you in the right direction to possibly get them consolidated, or forgiven.  In many circumstances, we are able to identify other areas of your economic situation that can address to significantly impact your financial future in a positive way.  You just don’t know, until you ask; we encourage your questions and respect your inquiry.  Your first consultation is free. Start Right Now.