Student Loan Debt Hits $1 Trillion
The student loan burden is now at a record $1 trillion. That number is staggering. Many factors contribute to this growing number. The cost of college continues to rise at a rate higher than the rate at which salaries are rising. It is also outpacing the growth rate of teacher salaries. It now costs more to get a college degree, but the potential salaries for recent graduates do not support the bills that result from the degree.
The private student loan sector is also exacerbating the problem. Many private loans come with variable interest rates. These loans entice students with low initial rates, but these loans also have the potential to shoot up 5 points over the lifetime of the loan. Depending on the type of the loan, students may or may not be eligible for deferments, forbearance periods or income based relief. Absent those options, graduates are left to try and negotiate lower monthly payments, battle creditors or simply stop paying because they are unable and know they do not have any assets for the creditors to seize.
Students Speak Out
As many consumers know and all attorneys know, student loans are virtually impossible to discharge in bankruptcy, so those loans are not going anywhere. This creates the situation where millions of college graduates are left paying down loans in small increments over longer and longer periods of time. It is not uncommon to find graduates 10 and 15 years removed from graduation still trying to pay off student loan bills.
The Consumer Financial Protection Bureau is the bureau charged with monitoring the student loan sector. The Bureau asked consumers to start posting student loan stories on its message board in order to highlight just how bad the situation is and to hopefully jump-start student loan reform.
One individual posted his story of how he went back to school to enter the graphic design market. However, what the school advertised and what the school actually offered in the way of classes greatly differed. He ended up having to take extra classes which drained his loans. He was unable to finish his degree, but is still facing over $100,000 in debt. A loan more tailored to his needs and his specific degree might have helped to better allocate the funds from the loan so he would be able to complete his degree. One poster told his story of how his original loan of $80,000 grew to $135,000 in just a couple of years. He now makes interest only monthly payments of $700. His lender will not allow him to consolidate or defer payments.
One person outlined a familiar story to many students and graduates. His original loan from Bank of America was transferred to another company. That company passed it to their subsidiary that began aggressively pursuing payments while he was still a student. He spent the remainder of his time as a full time student balancing studying and dealing with a constant barrage of phone calls, emails and letters from the student loan companies.
A parent told his story of how he helped finance his daughter’s college education. He makes small payments throughout her college career and has the option of getting off the note once his daughter graduates. He must pay a large fee if he goes this route or continue to be on the note and face large monthly payments. The father does not want to leave his daughter to pay the full monthly amounts after graduation, but he fears that he will not be able to pay them on his own.
Many of the other stories have familiar aspects to them. Students speak of running out of funds prior to graduation. Graduates describe the added stress of having their wages garnished by student loan companies. The skyrocketing interest rates were a common theme as were graduates’ failed attempts at deferments or consolidation.
While student loans cannot be discharged in bankruptcy except in cases of undue hardship, it is always helpful to receive the advice of those trained on these issues to determine if bankruptcy might be a smart step to deal with mounting debt. In this area, please take a moment to reach out to the Dallas bankruptcy lawyers at our firm to see how we can help.