Ballooning Student Loan Debt Will Cause Future Pain

Experts now agree that student loan debt has exceeded credit card debt as Americans' largest personal debt. In fact, many experts now believe that the total outstanding student loan debt will exceed $1 trillion by the end of this year.

The media has failed to grasp the gravity of this news. The current economy has pushed a majority of recent graduates into jobs unrelated to their degrees and majors. There's a very good chance, many of these people will never attain a job in their chosen field or specialty and will never obtain the salary they anticipated they would.

But, repayment of the student loan does not depend on landing a job in your field or finding a job at all. THE LOAN MUST BE REPAID REGARDLESS.

Here's where the situation gets bad. When you struggle to pay a student loan, you have no way of getting out of the obligation as you do with credit cards. Once you enter into a student loan, whether it's from the government (i.e., Stafford Loans) or from a for-profit lender, you must repay that loan. Bankruptcy protects lenders of all types of student loans and you will only be able to get out of your obligations in bankruptcy if you can show that the loans are a true "hardship." Don't count on proving a hardship in bankruptcy court.

Basically, you should not rely on showing a hardship that can discharge your student loans in bankruptcy unless you can prove that you will never work again and never have the ability to repay the loans. This is rarely proved by a debtor.

The Moral of Student Loans is to Use Caution. They stay with you for life or repayment. Federal programs can sometimes make federal loans income contingent and reduce payment terms but you do not have programs to help you with private loans from for-profit lenders.

Read more articles about consumer debt by Ted Connolly, co-author of The Road Out of Debt

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