Recently on our bankruptcy forum a user asked, “I am about to go to college. I read that up to 60% of students in the U.S. are now borrowing money to pay for college. If I do decide to take out a college loan what do I need to know before I do it?”
Asking questions about whether or not you need to borrow money for college is a great first step to ensuring you don’t make the same mistakes that so many students make. Unfortunately, experts estimate that college loan debt is likely to become the next crisis, most likely surpassing the housing crisis of 2008.
Although the market has not crashed yet, millions of college graduates have already found that their college loan debt is making it almost impossible to pay all of their bills and meet their other financial obligations.
- A college degree is no guarantee you will find a job.
With the easy access to loan money many students are not forced to make the tough decisions about a college degree. Namely, is the degree worth the money and do I really need a college degree to pursue the right employment?
Unfortunately, even many graduates pursing technical degrees such as petroleum engineering have seen the job market decline. Given the increased costs of college, all students should determine whether they may be able to find better employment by seeking a trade, such becoming a plumber or an electrician, and avoid the high costs of a traditional college.
- If you do go to college get a decree that is marketable.
Although many of us would like to spend four years studying the ancient literature of the Mayan culture, if you are paying $25,000 a year for a college degree you need to make sure you will be able to find a job when you graduate.
Focusing on what is now termed a “STEM” degree just might be the key. Science, Technology, Engineering, and Math could be the key to the best employment options post graduation.
- Student debt is generally not dischargeable in bankruptcy.
Many students get college loans and are under the mistaken notion that if they cannot repay them they will simply discharge them by filing Chapter 7 bankruptcy. While student loans can be discharged, under very specific conditions, they generally are not dischargeable.
In fact, to get college loans discharged you will have to file a motion and wait for a judge to make a ruling.
- Filing Chapter 13 bankruptcy generally will not help.
College students will also find that filing Chapter 13 bankruptcy will generally not affect their college debts. After completing a Chapter 13 bankruptcy plan the nondischargeable student loan debt remains and must be repaid. College loans will also continue to accrue interest during the bankruptcy plan repayment period.
While getting a college loan may be right for many students, it should not be done before considering the financial ramifications of the decision and whether or not the debt can be repaid according to the loan repayment terms.
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