Student loan debt and bankruptcies
RICHMOND, VA (WWBT) – A 12 On Your Side Alert for anyone who thinks bankruptcy is the answer to mounting student debt. A typical student owes about $25,000 when they finish school. But that debt stays with you -- always.
Graduating college is the exciting part, repaying student loan debt, not so fun. Counselors at Clear Point Credit Counseling solutions say the ability to repay is not getting easier.
"Aside from the increased school cost that seems to go up each year, there is also the unemployment rate, about 7 to 8 percent of college graduates will continue to be unemployed," said Clear Point Credit Counselor, Patrick Owens.
The news doesn't get better. Student loan debt is keeping Bankruptcy Attorneys busy. A new report by the National Association of Consumer Bankruptcy Attorneys says there's a major increase in people with student loans looking for help; many of them are turning to bankruptcy.
"If they go through bankruptcy, they may find out those loans can't be discharged through the bankruptcy. And while their credit cards and medical bills and everything else can, student loans are going to be placed on hold and they will have to pick up with those payments right after they bankruptcy process," Owens said.
Owens says you may be able to get a deferment but no matter what happens in bankruptcy court, you eventually will have to pay up. Many times parents will step in to help. Credit counselors say this is not always the best thing to do. Remember, if your child doesn't pay, you are stuck with the debt.
"I have seen a lot of parents have to take out of their 401k savings or use reserves to pay down or pay off student loans just to help stop a default,"Owens added.
There are some options to avoid racking up student loan debt. Experts recommend looking into community colleges and two year institutions to decrease the amount you will have to borrow. Another tip, consider your career path.
"When you are choosing your major, make sure you know what the salary ranges will look like when you graduate. Considering how tough it is to be hired now, you don't want to be saddled with a lot of debt but end up with a job that has lower pay," Owens said.
And for all you college students that have extra money left over each semester after paying for classes, don't just blow it. Use the money to start paying off the loan. If you spend it, you'll have to pay it back in the end.
Here are some helpful links.
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