There are a few ways where individuals can get their student loans discharged in bankruptcy, but typically people are stuck paying them. According to a recent study, 45 million Americans have student loans that amount to $1.6 trillion. It is important to remember that not all debt is created equal, with some struggling more than others to make their payments.
According to the Education Department, borrowers with the largest amounts are often those with graduate degrees who are now medical doctors, MBAs or lawyers. The income for these and other jobs can absorb the massive debt involved. The same can be said for those who earned a B.A. and owe about $30,000 or less after graduation.
Troubling trends for why students default
Here are a few scenarios that are the largest cause for concern:
- Insult to injury: About 1 million people default on their student loans each year with a total of 7 million borrowers overall. Those who default are those who struggle overall to pay their bills. It is not the only sign of struggle, but economists believe that student loan default is the worst sign because its lasting effect of not being discharged, plus the government can garnish tax returns, part of a paycheck or even Social Security.
- Debt without a degree: This happens most often (three times more likely) than those who finish their degree. The average of these defaults is less than $10,000. Another group with a disproportionately high chance of defaulting (four times more likely than their white counterparts) are African-American who get their bachelor’s degree.
- Low-income student: It is no surprise that another area with a higher than average number of defaults is students from low-income families. This is measured by students who received Pell Grants, but then they do not finish the degree.
- Those who went to a for-profit school: For-profit schools serve only 10% of the students who take loans, but they are often more expensive than community colleges and state schools. Because of the cost, 52% of students who start at for-profits default while only 26% at a community college or state schools do so. For-profits’ degrees also tend to be worth less to employers.
Getting help for debt
The good news is that lawmakers seem to be serious about handling this crisis. While that has yet come to pass, those struggling with student debt or debt from other sources are advised to speak with a knowledgeable bankruptcy law attorney. These legal professionals can help those buried in debt come up with a plan for getting back on their feet. They can also keep collectors from calling and represent clients during bankruptcy hearings as well.