College Loans and Bankruptcy in Alabama
Ferguson & Ferguson
Attorneys at Law
April 11th, 2017
Do you know the difference between “good” debt and “bad” debt? Have you ever been told that you have to get a college degree to get a good job? Have you ever been told college graduates make more money? If you have answered yes to any of the above questions, you are not alone. Most people think a college education is a good thing. Have you ever been told that the college education you get may ruin you financially for the rest of your life? Probably not. Of all the debt you can incur in your lifetime, the worst debt of all is probably college loans, particularly if they don’t lead to a degree or gainful employment.
Why is College Debt so Bad?
College recruiters and the universities they work for need students to stay in business. Without students, there are no colleges. Colleges entice you to visit their campuses hoping you will be so impressed that you decide to enroll. Little do the colleges care about how you will pay for tuition and expenses, or what kind of financial shape you will be in when you fail to graduate, or graduate with a degree that qualifies you to work at a fast food restaurant. College debt can be worth it in many cases, especially if you find a decent paying job. But in almost every case, student loans are nondeductible and non-dischargeable in bankruptcy. Student loans can stay with you for decades and even into retirement.
Facts About Student Loans
Their are over 75 million millennials who have college loans. That does not include all of the parents who have mistakenly co-signed loans with their children. The majority of people struggling to pay back their college loans owe less than $16,400. Those loans are preventing them buying homes, cars and settling down. When they get behind on those student loans, their credit is ruined, and future loans are unattainable. When you default on your loans, you are saddled with fees, penalties and rapidly accumulating interest. Not surprisingly, lower-income borrowers and students of color were more likely to default on their loans.
How to Avoid College Debt
The best way to avoid college debt involves a careful planning strategy. Sometimes working a year or two before starting college is a good idea. Always apply for grants and scholarships. Millions of dollars in grants and scholarships go unclaimed each year. Consider starting out your college education at a local community college. They are less expensive, do not require housing and offer the same classes as larger universities. Consider working part time to help with the costs of college. Many local colleges have work study and co-op programs. Further, vocational training programs often are shorter and less expensive to attend. Lastly, do the math. Know how much college will cost, your loan payments will be, and how much you will need to make to survive.
Is going to college the right decision for you? Remember, student loans can rarely be discharged in a bankruptcy. Will your college debt be ultimately good or bad? If you are already having financial problems, we are here to help. If you have bankruptcy questions, call us now. Call 256-534-3435 or 256-350-7200.