Student Loan Crisis
Student Loans Too Much To Handle?
Outstanding student loans totaled $1 trillion this year, leaving many worried that student loan debt has a bigger impact on the economy than previously thought possible.
Some analysts are concerned that student loan debt loads impede economic growth and believe it is affecting our nation’s ability to rebound from recession. Debtors are less likely to purchase homes or take risks, which affects career choices, limits innovation and minimizes spending.
Bankruptcy attorneys are the ones sounding the alarm, worried that unregulated and overwhelming student loan debt is much like the unregulated mortgage debt that caused the housing bubble crisis: Too much debt and nowhere to turn.
Bankruptcy Attorneys Know Student Loan Issues
Since bankruptcy attorneys deal with people that are inundated with debt, they see the mounting crisis first hand, with an increasing number of people coming to them due to unmanageable student loan debt. They recognize that student loans can rarely be discharged in bankruptcy, and are worried that student loan debt is a sign of impending economic crisis.
Prior to 1976, student loans could be discharged in bankruptcy, but in 1976, Congress enacted the Education Amendments, making it impossible to cancel student loans within five years of bankruptcy. In 1998, the ability to discharge student loan debt was eliminated, except in cases of “undue hardship,” where you must file a petition and explain your circumstances.
Those “undue hardship” cases are fairly difficult to prove, unless you are physically incapable of working. Otherwise, debtors are expected to make due.
Bankruptcy attorneys are now calling upon lawmakers to allow debtors to file for bankruptcy on their student loans in order to eliminate their debt.
Some are calling for an overhaul in student loans, possibly a repayment plan that is tied to how much you make. The more you make, the more you pay; the less you make, the smaller your payments.
Others believe that students that graduated from college are in a better position to pay student loans than others, and therefore should not be assisted. (Of course, they probably don’t realize that student loan debt encompasses debt for all types of schools, including trade schools, and that it is still owed even if you are unable to graduate).
Student loan debt is now an issue that welcomes debate, and while the president has made mention of possible payment structures (starting with next year’s graduating class), we can’t be sure what the future will hold.
Prospective Students and Student Loans
At this point, prospective students should be aware of the fact that student loan debt can last, with repayment plans lasting for as long as 25 years. It is important that you are interested in what you intend to study and you are dedicated to working in that field or industry to repay the debt you borrowed.
Students should take advantage of all other potential tuition funding options first, so they can minimize the amount of student loans they rely on and maximize the amount of tuition funding that does not need to be repaid. Alternative funding should also be considered, such as part-time jobs and student-work programs.
Higher education is valued for providing students with the tools to get ahead and should not be discounted, but you still want to ensure that you will be using student loans to take advantage of these opportunities and gain from your experience.