Hypothetical student graduates from college and owes $40K in

[raccoon]

loans. He searches high and low for a job but can only find one paying minimum wage.

Can he file for bankruptcy? I know the law was changed not long ago, but surely somebody in a case like this should be able to.

(As I've said, this is hypothetical, made up just now as I sit here typing. Although I'm sure there are cases like this in real life.)

[bluestateguy]

1. You can, but the loans will not go away

If his income was below his state's average he can still do a Chapter 7 and wipe out credit card debt, but the loans never go away.

[raccoon]

2. Oh, man.

Can you say "indentured servitude," boys and girls?

[mike_c]

5. that is exactly what it feels like....

I pay close to $1000 a month for student loan payments. I'd borrow the money again if I had to do it all over-- my life is much better than before I got my degrees-- but not having that payment would make a tremendous difference in my quality of life today.

[seabeyond]

16. or personal responsiblity n/t

[anarch]

18. no shit

[Marie26]

21. Exactly. nt

[bleedingheart]

37. well we could go back to not having student loans.

like back when my mother was a young high school graduate. She was very smart but her family was poor and it was before student aid and loans were available.

Her live would have been leagues better had she been able to get a loan and she would have been grateful for it.

Does it suck to pay back a loan? Yes...but at least a student loan provides the education that may give you a better life (there are no guarantees).

[datasuspect]

3. there are VERY VERY RARE instances

where student loan debt is forgiven. loss of a limb is one example.

however, if you meet certain criteria (which i have forgotten) you can in the smallest percentage of cases have them wiped in a BK.

[LiberalEsto]

8. So pay off the loans with credit cards...

and then file for bankruptcy?

[happyslug]

24. Good Idea but remember the following

1. Bankruptcy court can undo ANYTHING done in the three month prior to the Filing of Bankruptcy (Thus always wait three months before doing filing bankruptcy, if you pay off a relative the test is One year).

2. It is hard to get the number of Credit Card to pay off your Student loans right out of Collage, best advice is start to pay off the loans, get better and better credit till you have enough credit Cards to pay off your student loans and then and only then pay off ALL OF the Student loans with the Credit Cards.

3. Remember Congress can change the rules at any time, so be careful.

4. Credit Cards are easier to get if you own a home, AND if your equity in the home is less than $20,000 you can keep the home (If you keep up the payments) in bankruptcy. Furthermore any Judgment liens against the property can be "Avoided" i.e. dismissed in the Bankruptcy, if you keep up the mortgage payments and the equity in your home is less then $20,000. A judgment lien is a lien by operation of law whenever someone gets a Judgment against someone else, that Judgment is a lien on that Debtor's property (But such "Judaical liens" can be discharged in Bankruptcy if it interferes with your right to have the $20,000 equity exemption under the Bankruptcy Code).

5. Some of the above varies from state to state and you may want to discuss this with a lawyer in your home state before doing any of the above.

[mike_c]

33. my bankruptcy lawyer actually recommended this to me...

...several years ago (I filed as part of my divorce). I didn't do it.

[MiaCulpa]

51. There is a town here in MI that started a program to pay

for all kids college education, it's pro-rated on how many years you've lived in the town, I believe it's Hillsdale. Anyone else hear about it? If not, I can google later.

Another good way to finance school is to work for the college/university. Usually gets you a free ride.

The student loans do suck -- I'm down to the last 5k on mine -- but as someone already said, it's better than the alternative.

Good luck to you

[mike_c]

4. yes, and the student loans CAN be wiped out too, but only...

...under certain circumstances. First and foremost, he would have to convince the judge that he had made every reasonable attempt to pay the loans, and that it is (and will remain) impossible for him to do so. He must also show that the loan payments constitute an unreasonable financial burden. The standards for achieving this are evidently pretty tough. If he is capable of working at all, it's unlikely he would be able to make the case.

[soothsayer]

6. Run for congress and then default on them. Isn't that a great

tradition in this country?

[LiberalEsto]

7. My daughter IS that student

except she still has 8 credits to go, and works as a waitress, and lives at home. We're paying those loans for now, and it's hurting our finances seriously. I can't afford an eye exam for new glasses, or a spare tire and rim for the other daughter's car.

I don't know what she can do about it, except work toward electing a Democratic/Progressive political majority that puts the interests of working people over those of corporations.

We need to cut student loan interest rates down to 3 or 4% and make it possible to work off larger amounts of student loan debt through national service work such as teaching.

[EnviroBat]

15. In this administration, national service work = military service.

I wouldn't want to give these clowns any more bad ideas...

[bleedingheart]

38. why doesn't she have a waiver of payment on those loans?

she hasn't graduated and she isn't making enough money...and you shouldn't have to put yourself into hardship because of it.

I agree with you that the loan rates should be lower than they are.

When I graduated I didn't have a job right away so I had my payments deferred for about 5 months.

[LiberalEsto]

41. They told me we couldn't get a loan deferral

because she wasn't taking actual classes at Edison College. We paid the enrollment fee there and had her existing credits evaluated. They found she needed just 8 more credits to qualify for their History BA. (University of Maryland kept tacking on distribution requirements that would have kept her in school at least another full year)

We requested a loan deferral form from Great Lakes, and it was sent to Edison College, but Edison said since she was not actually taking classes -- just getting ready to take 3 CLEP exams -- they couldn't certify to Great Lakes that she was a full time student.

Apparently the waiver you mentioned is something different. How does one go about applying for one?

[EnviroBat]

9. The Student Loan Officers will always find him.

Student loans are hell. You can never get away from them, no matter what your situation. You can file for forbearance, or deferment, but the interest will continue to accrue. Mine are currently at 7.125%! I decided to drop out of college and try to pay for school out of my own pocket because the loans were making me feel sick. But I still owe about $35,000.00. It never frickin ends! My advice to anyone is to avoid student loans at any cost whenever possible. when you're a young, starry-eyed student with big hopes and dreams, you're not thinking about the cloud of debt that will be hanging over you until you retire. Here's the other convenient thing, and many of you might not be aware of this; Paying your student loan does NOTHING to advance your credit rating/credit score. Zero, zilch, nadda. But miss a payment, and they slam your credit rating down the toilet! I recently discovered this little nugget when I applied for a home mortgage. Nice huh? I don't understand how Great Lakes, Sallie Mae, or whatever fly-by-night lender holding you loan can get away with this bullshit. The student loan system is completely screwed! I sincerely regret ever accepting student loan money, and I caution others against it.

[LiberalEsto]

42. And the moral of this story is...

that middle class kids aren't allowed to go to college any more. Sorry. Off to Wal-Mart or Mickey D's with you all.

[EvolveOrConvolve]

10. You can't bankrupt student loans

What I did is refinance my loans (about $50K worth of loans) at the lowest interest rate and payments possible. I pay about $160 a month, and probably will forever. After 25 years, the loans are automatically forgiven.

(BTW, only $40K in loans - you must be kidding. Many students end up with $100K+ in loans)

[EnviroBat]

12. Wha?

:wtf: "After 25 years the loans are automatically forgiven"??? If and only if the borrower suddenly burst into flames? I've never heard of that one... C'mon 2023!!!:headbang:

[happyslug]

14. Up till about 10 years ago you had the seven year rule

That was if you waited Seven years after graduating from school, you could discharge your Student loans, Congress changed that about 10 years ago removing the automatic right to discharge a student loan and permitting only discharge if payment would cause a hardship on the former student (Very hard to prove).

[EvolveOrConvolve]

19. Yep, it's true

I went to a school that employed a student loan specialist, and she was wonderful in giving me this sort of information. She knew ALL the ins-and-outs of the federal student loan process.

[bleedingheart]

39. oh...and your tax returns can be seized in order to pay your loans

I know a fellow who married a gal who didn't tell him about her loans she had taken years before for a beautician program that she did not graduate from...the big fat tax return he thought he was getting was used to pay down part of her loan...

[happyslug]

13. You can use your Credit Cards to Pay off your Student loans

A different technique is to use your Credit Cards to Pay off your Student loans and then wait three to six months and file bankruptcy on the credit Cards (The Bankruptcy code permits the court to undo any transaction, not for value, done in the previous three months to the filing of Bankruptcy, one year if is a relative paid off). Thus you transfer credit non-dischargeable Student Loans to dischargable Credit Card debt.

[EvolveOrConvolve]

17. Credit cards are becoming increasingly difficult to bankrupt

Especially with the "bankruptcy reform" bill passes by our lovely Republican congress last year.

[happyslug]

25. Only if your income is more than median income for your state

If your Income is BELOW median income for your state you can still discharge all of your Credit Card Debt. If your income is Above Median Income they are ways around the new changes (For example buy a new car increase one's non-dischargable debts which makes it easier for someone above Median Income to meet one of the other exceptions to discharge under the Bankruptcy Reform Act).

[EvolveOrConvolve]

44. I didn't know that

What if the median income for the state is extremely low? Still seems unfair for the credit card companies to throw credit at any human as long as they're breathing, then expect not to have to pay for their irresponsible practices. On the other hand, someone who has gone out and run up their credit cards buying big screen TV's and boats shouldn't be able to file for bankruptcy. Luckily, a majority of bankruptcies are the result of medical problems or job loss.

[happyslug]

45. Median Income by State (From Bankruptcy Court Site):

http://www.usdoj.gov/ust/eo/bapcpa/bci_data/median_income_table.htm

Lowest Median Income for a State (Single): MISSISSIPPI: $29,247 For a couple $36,940
Lowest Median Income for a state (Couple): West Virginia: $33,704 For a couple 36,376
Lowest Median Income for a Territory/Commonwealth: PUERTO RICO $18,107

Highest Median Income state for a Couple (DISTRICT OF COLUMBIA): $39,649 For a Couple $64,274
Highest Median Income for a State, Single (CONNECTICUT): $54,311 For a Couple $63,455

[bluestateguy]

27. Automatically forgiven after 25 years?

Can you explain that provision some more? I'm not saying I don't believe you, but I never heard this one before.

[liberalgenes]

29. Automatically forgiven after 25 years?

I think the poster is referring to the Income Contingent Repayment Plan offered by DirectLoans. In this plan, you make payments, based on your income, for 25 years, at which point the loan is discharged regardless of the principal balance. However, the amount of the discharged loan is considered income for that year, and the borrower is liable for the income taxes on that amount.

As a personal aside, if you're ever thinking of taking advantage of this program, do not consolidate your loans with anyone else. I consolidated with SallieMae, which does not offer such a program (they offer an "income sensitive" program, which isn't very sensitive at all), and now they are not allowing me to switch back to DirectLoans. It's an evil, evil business -- these student loans.

[bluestateguy]

30. I'm with Direct

I have found that they will work with you if you meet deadlines and take initiative. I'm on a 10 year payment plan, which will be tight, but I like knowing that I can stretch that out if I have to.

[EvolveOrConvolve]

43. My loans are directly through Sallie Mae

I had about $8K in loans through an outside loan company, but they charged terribly high interest, and had me on a 10 year plan (I'd have ended up paying about $20K for the $8K in loans). I paid them off with a home equity line that was at 3%, then dumped all my extra cash into them until they were paid off).

I don't know who Direct is, but there are a lot of companies who have bought up student loan debt, and can now rape and pillage for the next 10 or 15 years.

[woo me with science]

49. That's true for now, but it is one more VERY IMPORTANT REASON

to get Dems into office. The debt forgiveness is a provision that Republicans will not hesitate to eliminate if they are left in office. They seem to have no problem with 75-year-olds in soup lines.

[EvolveOrConvolve]

50. Agreed

The greedy bastards don't care about anyone who isn't in the top tax bracket.

[happyslug]

11. Also remember the 25% cap AND that child support is SUPERIOR

The Federal Government has waived the 25% cap on attachment of wages for child Support BUT NOT FOR STUDENT LOANS, basically if you go into default on your student loans the Feds can only take 25% of your income (And by law, your employer can NOT terminate you, or otherwise discriminate against you, for the attachment).

Furthermore Most states have passed laws making Child Support payments superior to Student loans so that if you have Child Support payments and Student loan payments, both done by attachment, the Child support gets paid first and if over the 25% limit you get to pay NONE of your Student loan.

Thus by careful planing you can avoid paying your student loan (For example "live" in a room off the mother of your child's house, giving two different addresses, have her file for child support and thus have first claim on your wages). Now the rules for Child Support and attachment of wages for OTHER Debts vary from state to state, but careful planning you may be able to avoid paying your child support.

[Marie26]

20. Yeah, but student loans aren't dischargeable in BR.

Bummer.

[RedStateShame]

22. I'm on that boat right now

My wages are garnished, and there is no chance in hell I will ever pay them off, or own anything worth more than my monthly rent payment. Each day I work in my cube farm, I wish I hadn't wasted my time going to college and pursued a more honest endeavor, like weapons running or drug dealing. If only I could have been able to dunk a basketball, I might have gotten a free ride.

[aikoaiko]

23. I advise students (esp young, single) to work and stretch out college

rather than go into college loan debt. No one, I repeat, no one, cares how long it takes you to go through college (within 10 years or so), but grades and knowledge matter. And not having to pay a nut after you graduate is freedom.

Students really have to be careful and smart about this.

This hypothetical student might have to work two jobs for a while if min wage is what only available. When students make a promise to pay back loans, sometimes it takes effort to keep those promises.

[Solo_in_MD]

28. I am living away from my family so I can make enough money so my

children will not have to carry that burden. Our parents (wife and me) got all of their kids thru college free and clear and we are doing our best to pass that on to the next generation.

[aikoaiko]

31. I think that is a excellent gift to your children.

And it will help them get ahead. For many prospective students, however, their parents are unable or unwilling to make the sacrifice that you are.

Still, I like to see HS grads work a hard job before going to college. It help motivate them to do well. :-).

After working in pool construction during the summers in AZ, I was very motivated to get my degree. :-)

[bluestateguy]

26. One more point

You get a 6 month grace period after graduation. Then you can get an economic hardship deferment for 12 months. You can do this for a total of 36 months during your repayment period.

I came dangerously close to being the student that you describe.

[SheilaT]

32. If anyone asks me for advice,

I'd say DO NOT BORROW MONEY FOR COLLEGE. Student loans are a trap, and even if the graduate gets a good job, paying off $40,000, $80,000 or more is a huge amount of money. We're talking loans that are essentially in the neighborhood of mortgage payments. Which means, a lot of new graduates, even the ones who get good jobs, have a greatly diminished financially ability to buy a home. Perhaps that's one unrecognized reason for the slowing of home sales.

We have excellent community colleges in this country. Most of them are a good place to get started. We also have very good public colleges and universities, and even though they cost more than they should because of a decline in state financing of those institutions, many of them are still highly affordable. And, as another poster said, take longer to go through if you have to work, rather than taking out a loan. I repeat, it's a trap.

[mike_c]

36. it's a trap, but not one that all of us can avoid....

I have ten years of higher ed-- college through Ph.D.-- and I came from a poor working class background. No family help, and I didn't start college full time until I was in my thirties, with a family of my own to support. The strain of doing that contributed to the demise of my marriage. I came out of it $75K in debt-- less, actually, but I was in default for several years immediately after finishing-- so I basically spent 10 years living on about $15K-$16K annually (jobs or stipend, plus loans). I was already on the trailing edge of employability when I completed my post-doc stint-- in my forties with a shiny new degree. It was borrow the money or give up the dream.

[SheilaT]

54. And was it worth it?

Are you making significantly more money than you would have with just the Master's? Or are you simply in a field where you must have the PhD or there's no job?

I realize that there's a wide range of jobs available with and without certain degrees. And you've nailed it: Borrow the money or give up the dream. Why should the dream be given up? It's the basic problem of a money-based economy like ours, in which making money is the ultimate value and worth of a person.

I have an acquaintance who's currently working on his PhD in philosophy. Currently he teaches, and gets by, and I'm not sure how much longer he has to go, or what he hopes to do once he has the degree. Teach at the university level, I suppose. He loves philosophy, and I love it the rare times I see him, because I can have wonderful conversations with him.

So what I'm saying is I understand, I think, and I do believe dreams are worth pursuing, but sometimes a little harsh reality-checking is in order.

[Eurobabe]

34. Sorry but I think paying loans with CC and then bankrupting

is just fucking wrong.

I make my almost $400 a month payment every month on a whopping $53K loan. I hate it, but I would never use my CC and then skip. That's bogus.

[EstimatedProphet]

35. You just described my situation

It's not a lot of fun.

[WindRavenX]

48. me too

:(

[Jed Dilligan]

40. I'm banking on inflation

Sallie Mae: you owe us 30,000 dollars

Jed Dilligan: got change for a 50?

[Nikia]

46. As others have said

Fianancial hardship deferrment and income contigent plan are possibilities. At one time, I could have taken advantage of the income contingent plan but I thought that I'd be better off not doing that. Six years after graduation, my loans are half paid off and I feel alright about that. If it weren't for Federal loans, I probably would be off in Iraq because I would have gone ROTC or to the National Guard to pay for college.

[Xenotime]

47. You just described *'s new American Dream.

If he would have worked more to help people and the economy, this would not have been the case.

[Horse with no Name]

52. Those loans will be an albatross around his neck until he either

pays them or dies.

[RumpusCat]

53. Talk to the lending institution

I had a rough time paying on my loans right after I graduated b/c it was difficult for me to find a job for a while. This was recently, too--just a few summers ago. I can not stress how important it is to talk to the lendor in that kind of situation--they can't wipe the debt out but they can and will work with hypothetical student. My lendor (Edfinancial) let me defer payments from month-to-month for awhile and, most importantly, since they knew I was trying and not simply not paying they didn't put me down as a deadbeat or ding my credit rating.

Hypothetical student is young, yes? His/her situation isn't unusual and the lending institution isn't going to scold or break out the debtor's prison shackles. If hypothetical student is also suffering from credit card debt, medical bills, other debts or s/he has dependents that s/he's having trouble supporting then the situation gets more complicated, but if it's just student loans then it's not time to panic yet. DEFINTELY hypothetical student shouldn't try and charge the debt to a CC (as if some jobless student is going to be able to get a 40k line of credit!) and no one is going to take a 20-something trying to declare bankruptcy over students loans seriously.