I took out some student loans when I went to law school. Well, that's not exactly true; I took out an excruciatingly large amount of student loans. In fact, my student loan debt is more than my house debt. I had to in order to support my family of three, which ballooned to four, then five.
I'm not complaining, nor do I try and justify my actions. I'm not discouraged, I just think, "well, there's another 20 years of debt." No, my situation doesn't discourage me, it's the situations of other students, especially those entering college, that bothers me.
Student loans are too easy to get, and too difficult to get relief from. The bankruptcy laws don't allow a discharge of student loan debt, except in the most dire of circumstances, and after jumping through numerous fiery hoops.
There's this Wall Street Journal article (the link is to the Yahoo! Finance page) that discusses some of the more grim realities of student loan debt.
The theme of the article seems to showcase an underlying misconception about student loans: they're not going to come and bite me in the butt at a later date.
Moreover, the plights of these individuals highlights just how ignorant we are when it comes to student loans. Most, if not all, of the individuals never read the fine print. One of the borrowers even gets dinged with a penalty of over $50,000.00, when her student loan got sold to a collection agency. Although, arguably that borrower's situation is unique, many borrowers wind up with the same student loan complications. Heck, I'm not even sure how much interest got added to the sum of my loans while I remained in "economic hardship" following graduation from law school. Naively, I think, "hmm, oh well, just a 'cost' of education."
Sadly, too many people, especially first-time borrowers and younger students, become apathetic about the actual costs of student loans. Too many borrowers fail to read the fine print or other obligations that go along with signing student loan paperwork.
If you're thinking about student loans, you need to think very hard about the consequences:
First, student loans, for all intents and purposes, are not dischargeable in bankruptcy.
Second, in most career choices, you will not qualify for "loan forgiveness" on upaid student loan debt.
Third, most lenders are ruthless in collecting their student loans.
Fourth, interest never sleeps. The article mentions that one of the borrowers counseled their relative "[that the borrower] would probably have this debt for the rest of [her] life." Sadly, interest, especially unpaid and compounded, continues to keep individuals from fulfilling their loan commitments. Note: I doubt that any of the provisions of the healthcare plan (set to start in 2014) will help relieve this current crisis.
Finally, here are some bright spots:
First, because lenders are ruthless, they'll commit Fair Debt Collection Practices Act (FDCPA) violations. The article shares the story about Dr. Bisutti whose "neighbors know [my dad's] daughter the doctor defaulted on her loans." If a creditor tells any unauthorized individual the status of your debt, they have possibly committed a violation of the FDCPA. Note thought that the Act does not apply if the creditor is collection their own debt. Another sneaky way for the big-time creditors to take away some of your rights.
Second, staying current is easy (to some extent) if you'll faithfully manage your obligations. One of the reasons a lot of people explain they're in trouble is because of other, unnecessary debts, such as credit cards and high-interest car loans. Get out of debt now if you want to manage your future. You cannot pay your high-interest loans and your student loans. Ideally, the only loans you should have are your home and student loans.
Third, carefully read your paperwork and discuss it with parents or an attorney. Keeping out of trouble is also about making the right choices with the right information. Lenders must disclose all terms of the loan prior to your signature. This will give you the opportunity to read the note obligations, discuss the terms, and sign with the greatest amount of knowledge.
If you'd like to discuss your student loans, please give us a call. We can work on developing strategies for managing your loans and debts, and if necessary, work with your creditors on developing reasonable terms.