As young as I can remember, the mantra to stay in school, go to college, it will lead to more prosperity, a better life, a better job, rang out like a blow horn in your ears. So, being young and impressionable, and wanting to better your life and your financial position in it, you listen. I can remember my older siblings telling me not to worry about Student Loan Debt, you will make more than enough to pay the student loans back and then some. It will all be worth it in the end- they say. I personally graduated from college in 1991 with $6,000.00 in debt. Law school tacked another $44,000.00 in debt. At the time I graduated from law school, in 1996, I had $50,000.00 in student loan debt and I seriously wondered what I have I done? How will I ever pay this amount back? How long is this going to take me to pay it back and at what cost? I obsessed about how I will ever pay this back in my life time without suffering a lot!
tuition costs on the rise
It is now 2016, and we regularly meet with clients who have $200,000.00 or more in student loan debt! The rise in tuition rates for most schools across the country have shot through the stratosphere. I sometimes wonder if the rise in Tuition Cost Of Colleges And Universities has more to do with- “how much can you borrow” than it does with the actual cost of schooling itself. I know, that is very cynical thinking right? Have you ever wondered why the cost of tuition is rising when we are trending toward on line schools? My son attends a full time on line public education program through Blue Sky in Minnesota. He loves it. He wakes up each morning, and instead of going to a brick and mortar building to school, he goes to our in house office, and hops online. This is not home schooling, this is a public online k-12 education curriculum. So, wouldn’t you think the cost of education would be going down with less of a need for brick and mortar building to house thousands of people and classrooms? My opinion is these classrooms will soon be empty, useless shells.
no jobs for the educated
At any rate, back to the story. At the Kain & Scott Bankruptcy Law Firm, we see debtor after debtor with the same story; I received this degree, I can’t find a job, and the jobs I can find pay me much less than I am worth, and by the way, I have overwhelming student loan debt I can’t repay. Our clients ask us constantly, is there anything in the Bankruptcy Code that could help us resolve our overwhelming student loan debt problem? We often hear about how they have heard there are ways to get rid of student loan debt. Unfortunately, a few lawyers, and other companies tease student loan debtors by advertising in deceptive ways that make a debtor think there is hope- when there often times is not.
students stuck with unmanageable debt
Under the current Bankruptcy Code is there any way to discharge a student loan? Yes- there is. But, before you get your hopes up, read on. Section 523(a)(8) of the bankruptcy code excepts student loans from being discharged in bankruptcy unless it causes the debtor and the debtor’s dependents “undue hardship”. What is undue hardship you ask? Good question. There are numerous court opinions across the country that differ on what undue hardship means.
I tell my clients often, if we do nothing, student loans are not dischargeable in bankruptcy. If you want to ask the U.S. Bankruptcy Court for an order stating the student loans are discharged as a result of undue hardship under 523(a)(8), you must first bring a lawsuit against the student loan companies in federal court asking the court to issue the order you desire. What? I have to sue the student loan companies? Yes? Do I have to hire a lawyer to sue them? No, but you are a fool if you don’t. Why? Because the student loan companies are not likely going to let you walk away from the student loans without a fight- right?
So, you either have to hire a lawyer, at substantial cost to you, and hope like heck you win, or see if you can find a lawyer to help you pro bono. There are lawyers who will take these student loan cases on a pro bono basis, but they are few and selective in the cases they take.
Left hopless and suffering
This is where most of our clients abandon any hope of ever discharging their student loans in either a Chapter 7 Bankruptcy or Chapter 13 Bankruptcy case. The economic fall out from all of these student loan debtors being saddled with overwhelming, life long student loan debt, can not be understated. Students and college graduates drowning in student loan debts, tend to delay getting married, don’t buy houses, and don’t spend a lot of money, because, well, they don’t have it. Needless to say, our economy suffers as a result.
So, what are our student loan debtors to do? Many have enormous student loan debt, under paying jobs, and literally no hope of ever paying back all of the student loan debt they have incurred, to get jobs, that many colleges implied were going to be waiting for the graduates. That brings up another can of worms that we don’t have time to deal with here- the colleges that solicit and make implied promises to these students to entice them to attend the colleges to begin with.
