Now that several banks have come to a mortgage settlement, what’s the next big financial crisis? If the predictions made by the National Association of Consumer Bankruptcy Attorneys (NACBA) come true it will be student debt. The association released on Tuesday a study about student debt based upon a nationwide survey of 860 bankruptcy attorneys.
Currently, student loan debt is hovering around $1 trillion. In contrast, national credit card debt is approximately $798 billion[1] and some credit card debt is actually tuition related with approximately 25% of cardholders used their credit card to pay for tuition, according to the American Council on Education.
Many of the attorneys stated in the NACBA report that the situation "…feels too much like what they saw before the foreclosure crisis crashed onto the national scene."
The report urges changes to bankruptcy laws so that individuals with student debt can receive the same relief as others facing bankruptcy. Currently very few student loan debtors have any chance of discharging what they owe through bankruptcy because they are unable to prove “undue hardship”.
While US bankruptcy laws do not favor student debt, there are still ways to get some relief from student loans.
- Deferment/Forbearance: You can temporary defer payment of your student loans due to economic hardship, unemployment, being in school and unemployment. While only temporary, interest doesn't accrue on subsidized loans. If you don't qualify for deferment you may be able to get a forbearance which is when lenders let you pause your payments or reduce them for a period of time. Unfotunately interest will continue to accrue. If you have already defaulted on your loans neither option is available to you.
- Repayment plans: There are a few repayment plans available that may be able to reduce your payments. See this website for more details. http://www.direct.ed.gov/inrepayment.html
- Discharges: Some teachers or public servants are eligible for cancelations. If you have become disabled after the loan was made or the student has died the loan may be discharged. See the website for more details http://www.direct.ed.gov/cancellation.html
- Consolidation: There are some ways that you can consolidate your student loans. See http://www.direct.ed.gov/cancellation.html for details.
- Selling future payments: If you have an illiquid asset such as a structured settlement annuity or single premium immediate annuity, you may be able to sell all or some of your future payments for a cash lump sum payment. This will allow you to pay off the loan without accruing interest.
1. http://www.usatoday.com/money/perfi/college/story/2012-02-08/student-debt-looming-economic-bomb/53010440/1
Brrrr. It is a cold day here in Sunny Philadelphia. Check out these "hot" stories in the world of money and personal finance.
- IRS changes may trim your tax bill - Cost-of-living adjustments push tax-bracket limits and exemptions up lower your tax bill.
- Workers score big paydays in North Dakota - 6 figure jobs without experience or an education as long as you can handle harsh winters.
- Enjoy luxuries while on a budget - Now you too can live like the rich and famous without going broke.
- Last minute Halloween Costumes - Great DIY last minute Halloween Costumes.
- Saving money using student discounts - Helping students to save big on everything from computers to necessities.
The kids are back in school, the weekend is almost here and the economy is still struggling. Here's some tips to hopefully improve your financial future.
- Being Ivanka Trump - She beautiful, rich and has some helpful advice you can use to improve your financial outlook even if you don't have a super rich dad.
- Financial Basics - What every college student should know before they head off to college.
- Ditch the credit cards - Walmart brings layaway back for the holiday season.
- Ways to Save - By choosing less conventional approaches, these students were able to avoid massive college debt.
- Investing - A practical guide on how to get started.
