Bankruptcy filings may now contain private student loans

A private student loan is, for many low-income students, a way to pay for college. These loans are not supported by the federal government, however they are generally extraordinarily easy to get, however they could be difficult to pay back. If new legislation in Congress passes, private student loans will no longer be exempted from bankruptcy. As a final solution, though, we as a society might have to re-adjust how education is valued.

Source for this article: Private student loans may now be subject to bankruptcy filings By Personal Money Store

borrow money|borrow money} with private student loans|Private student loans are one way that up to one-third of students pay for their education}. A large majority of student choose to take out some type of loan to help pay for college. {The first “line of loans” are the federally supported and now federally administered loans|The first type of loan that most people take out are federally administered loans. The limit on these loans, however, often falls far below the cost of education. Almost half of parents or students take out some kind of loan to make up that difference. These private student loans are essentially loans with no credit check – and students are taking them out at higher rates than ever before. These loans often have variable interest rates and are offered with very little, if any, consideration of the st! udent’s ability to repay the loan.

Why private student loans cause troubles

Many private student loans are taken out by students attending for-profit colleges or ultra-expensive “top tier” private colleges. Unlike a casino loan, payday loans no faxing, credit card bill or even some mortgages, private student loans cannot be settled during bankruptcy proceedings. Paying down these loans is the only way to settle them, even if one files for bankruptcy.

Judging the value of an education

The justification for many families and students that take out private student loans is that an education will always pay for itself. It is true that with a lot more education, average salaries go up and unemployment and underemployment go down. The increasing cost of education makes this math much harder, though. The cost of school is increasing at four times the rate of income, on average.

Citations

Newsrecord.org

NYTimes.com

BLS.gov