Over the last four to five years, people have been using student loans as a form of income when they can't find a job. Why? It's extremely easy to get one. Some young people, and even some older adults, cannot find work. They then ambitiously turn to the idea of returning to school temporarily, and decide that they have to pull out loans to pay.
Before long, it occurs to them that returning to school requires more work than they anticipated, and so return to the job force. Then they're stuck with the same problems they had before PLUS the debt of the school loan. These loans are not dischargeable in a bankruptcy, and really the only way you can get rid of them is by paying them back over time. Forbearance and deferments only last a certain period of time, so inevitably the train wreck of student loan debt eventually hits us with the reality that we can't ignore them forever.
There are options that address these loans, though many Americans don't realize it. For example, I consulted with a lady who's got a doctorate. She owes $235,000 in student loans. She can't find a job that will pay enough that will allow her to handle the debt on that type of a student loan. Yes, the total loan balance IS higher than normal, but there was still hope for her.
We have worked with her to pay back the debt in a 60-month period in a Chapter 13 bankruptcy. This allows her to pay very little money back each month, $123 to $150. She's going to be in that bankruptcy for 60 months. Legally, her creditors cannot bother her while she is in the Chapter 13.
Our hope is that before the end of 60 months, Congress may act by changing the student loan laws. The fact is, there is more than $1 trillion in student loan debt out there. My best guess is that at least 40% or up to 50% of those loans are noncollectable. The government is going to have to act to repair the problem.
To understand how federal and private loans can affect you, click the link below. Many people don't fully understand the repercussions of getting loans until they default. So gain a better understanding of your situation, know what kind of loans you have and how to tackle repayment!
Regardless, some of you can't wait for Congress because those loans are after you right now. What we can do is manage your payments in the meantime. And sometimes, management is all we need to regain financial sanity.