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The Problem With Student Loans

Student Loans In The News

Headlines related to student loans are appearing on news stories more often in recent weeks, at least partially due to the upcoming presidential election. Offering a free college education for everyone or spending trillions of dollars to pay off existing loans may not be addressing the root of the student loan debt problem. Here are some additional facts: Many students that have the most trouble paying back their loans have quite school before finishing a degree. Compared to many other types of debt, student loans are more likely to be placed in deferment. This process extends the payoff date and increases the payoff amount. Income levels have not risen significantly, yet universities and four year private colleges continue to increase tuition costs and associated fees. Higher education offers degree programs that look good on paper but do not support a career wage that can repay student loans. Students who have credits from a trade school or community college may find it difficult to transfer credits to a university. This means classes may have to be purchased and retaken with each move. As classes are taken and re-taken, the overall cost of education increases. When parents and students sign the loan agreements, they may not be fully aware of what they’re getting in to. All of these examples represent scenarios that contribute towards the growing concern over student loans and educational debt.

Debt Forgiveness Programs

Debt forgiveness programs can be helpful to eliminate or significantly reduce debts associated with student loans. The Federal Government offers debt forgiveness options for careers in public service; veterinarian, lawyer, doctor, nurse, etc. If you’re a teacher, there are even more loan forgiveness programs to be aware of. Another situation that may entitle one to the forgiveness of student loans involves disability. Basically, if you can’t work due to a disability, then you may also be eligible for what is called a “permanent disability discharge” of student loan debt. If your loans were from a bank or other private lender your access to debt forgiveness programs may be more limited than those offered by the Federal Government. Furthermore, a recent graduate who is not able to generate a healthy income or a student that didn’t graduate may have fewer options available.

Defer Student Loans

After graduation, or after one stops going to school, it is a challenge to produce enough income to keep up with the debt load. Nevertheless,young people have been buying homes and cars that are above their means as well. Whether student loans are federal or private, deferment or refinancing plans are a temporary, short-term solution. Interest rates will continue to accumulate more debt as the length of the loan extends. Unless there is a real effort to payoff debt before accumulating more debt, the cycle continues. Even with a significant improvement making loan payments, a personal may find that these loans take ten, fifteen, or twenty years to pay back. Deferring the student long is basically just “postponing” the inevitable. Alos, if at any point during this time payments are not maintained, then the student loan goes into default status. At this point, the financial problem is likely to impact parents or other co-signers to the loan as well.

Student Loan Default Can Lead To:

  • Decline of Credit Scores
  • Wage Garnishments
  • Tax Refunds Withheld
  • Federal Benefits Withheld

 

Discharge Student Debt

Debt from student loans is a major stress and weight on our economy. Other than maintaining payments or debt forgiveness programs, there is one more option to consider; filing bankruptcy. The debt carried by a student loan is treated differently than other unsecured debts.  In some cases, it may be possible to discharge student loan debt through bankruptcy. Filing Chapter 13 bankruptcy can “restructure all debt” to allow for consolidation. When in a desperate financial situation, bankruptcy should be investigated and

Bankruptcy Can Indirectly Eliminate Student Loans

Student debt is becoming one of the top reasons younger generations decide to file bankruptcy. If student loan debt is your only debt problem, then bankruptcy is not your solution. However, if there are other serious debt problems in addition to educational loans, it is possible that bankruptcy could help by eliminating the other debts. Doing this will “free-up” funds which may be adequate to address the student loans indirectly with a payoff to the lenders. Bankruptcy to eliminate student loans for consumers who have serious debt is a bit tricky, but it can be done in certain situations. The bankruptcy process as it stands today can’t eliminate student loans directly. If you’re interested in what bankruptcy can do, the next step is to get sound legal advice from a Bankruptcy Attorney. Debt Advisors offers a free initial case evaluation to gauge your situation. Remember, bankruptcy is the “solution” to overwhelming debt, not the “problem.”  If you have an opportunity for some free legal advice, why not take it? Start Right Here.

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