Why Do People Have Issues With Student Loan Debt?
A big reason is that they have much higher loan balances without the eventual income to pay them. In the last several years, a number of “for profit” schools got into the business of providing different types of trade education. They encouraged students to get student loans to pay for the education. They were overly optimistic in terms of graduation rates and incomes once they graduated. The kids couldn’t repay the loans when they graduated, but the school didn’t care. They already had the money! To make it worse, the government had to pay these loans because of its guarantee so you and I eventually ended up paying for this questionable education! The situation got so bad that the current administration has tried to crack down on these schools and many have closed and gone out of business.
Also, the cost of more traditional types of higher education has increased dramatically. People have paid those higher costs with student loans. One way even “non-profit” schools attract students is with nicer amenities. The cost of providing those nice amenities is not insignificant.
This situation is very difficult, especially for the middle class, in terms of paying for all of these additional features at school. They want their kids to get a good education and have some fun, but they don’t have the ability to pay for it and don’t qualify for scholarships based upon financial need. Unfortunately, they many time get stuck taking out expensive student loans
How Can Someone Get Out of Issues Related to Student Loan Debt?
The easy answer is, never get into the problem in the first place, but once the cow is out of the barn, there is a different set of facts to look at! If someone is not doing well, a hardship discharge could be explored in the context of a bankruptcy, although there are issues with that since the 3-pronged test is difficult, and it requires filing a lawsuit, which means hiring an attorney.
The second choice might be to get rid of or other debts, sometimes in a bankruptcy, to put yourself in a position to pay the student loan debt. A third might be to address the package of administrative remedies available and see what can be done to partially discharge or write down student loan debt based upon providing services or taking certain types of jobs.
What Happens If You Are Constantly Late or are In Default in Student Loan Payments?
In California, for example, some borrowers can have their wages garnished at 15 percent without a judgment even being entered against them. If a lender sues and gets a judgment, they can take up to 25 percent. If a person can’t live on 15, or 25 percent, less, they are looking at leaving the country, working in jobs without a salary, or being self-employed. These are only dodges, as the debt will still be outstanding, they just may not be able to find you. The point is that these student loan issues will starts to affect a person’s lifestyle choices.
Here’s an example; I was listening to a call-in financial advice radio show, and a guy called in and said he had $100,000 in debt he incurred going to law school, but now he’s graduated and wants to work in the public defender’s office. The host told him working in the public defender’s office was very admirable, but they don’t pay well and he wouldn’t be able to pay his student loans. He should work for a big firm on Wall Street or in a big metropolis where he would receive a higher salary and pay down the loans because he’d forfeited his right to be a public defender when he took on the debt. His decision as to the type of job he could take was made many years ago when he incurred the student loans and he didn’t even realize it!
People must be cognizant of what it takes to get through school and the available job market, so they can put together a long-term plan for paying off that debt. It’s very easy for me to say that after our students have already accumulated $1.2 trillion in debt, but we must encourage people to have these conversations and do this analysis.
For more information on Reasons For Student Loan Issues, a initial consultation is your next best step. Get the information and legal answers you’re seeking by calling (818) 992-1940 today.
