Bankruptcy: Still No Relief for Student Loans

The economy is still on a downfall after analysts wrongly predicted a rise in the market. Aside from affecting the stock and housing markets, the bleak economy is of course, affecting employment. This could be one of the worst situations new graduates are being faced with. Unemployment rates are now standing at a 14.5%. And to top it all off, not only will graduates be worrying about not getting a salary, but they will also be faced with a mountain of debt – student debt.

For those graduates who are trapped in the murky student loan situation, CBS News reports that filing bankruptcy won’t help any. In 2008, more than 500,000 students defaulted on their student loan payments. And unlike the past years, bankruptcy won’t even be an option for them.

It is a very real situation that graduates come out of college with as much as $100,000 in debt. This makes them feel as if they’re on a home mortgage, without even owning a house.

One graduate regrets taking on student loans without reading the fine print. She had taken two loans, a private one, and a government funded one with about the same loan amount. The government student loan had flexible terms, however the private loan came with non-negotiable and expensive repayment terms. Her government loan only costs her $160 per month now, but her private loan costs as much as $800 per month. With the growing demands of daily life plus a complicated pregnancy, she found her student debts too much to handle. She was advised to file for bankruptcy, only to find out that under the law, student loans cannot be discharged, unlike mortgages, credit debt, and even gambling debt.

This development should make students even more wary and vigilant when it comes to taking out student loans. As much as possible, it’s best to apply for a government student loan such as Stafford loans, since the terms are more negotiable and forgiving.

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