For members of the 2014 graduating class in Pennsylvania, now is the time to start looking for work. Many will face the reality of having to begin paying on their student loans in the fall as well. Those who have credit card debt along with college debt may feel overwhelmed. Bankruptcy, however, may help the person to regain a sense of control over what appears to be a dire financial situation.
About a third of college graduates who borrowed to go to college are behind with regard to their monthly payments. Some of these individuals are paying whatever they can each month, while others are simply avoiding making payments because they view their debt as impossible to overcome. The problem of simply ignoring student debt, however, is that interest continues to grow on the unpaid portion. In addition, debt that goes to collections ends up incurring extra costs that can reach as high as 25 percent.
Also, failing to make payments means that a person could end up being sued if his or her loan is held by a private student loan company. If it’s a government loan that is in default, the person can expect not to see his or her tax refund each year. In addition, wage garnishment may take place. In fact, the federal government might garnish 15 percent of one’s disposable income.
People with college debt along with credit card debt might feel imprisoned by their obligations. However, personal bankruptcy in Pennsylvania can help them to discharge their credit card debt and thus feel more stable financially. Although student loans will usually stick around following bankruptcy -- at least under current laws -- having all other debt eliminated will make it easier to pay down the college loans in the months or years to come.
Source: Fox Business, "What Happens If I Ignore My Student Loans?", , June 10, 2014