Private student loans may now be subject to bankruptcy filings

Private student loans are an option that numerous students use to help pay for their education. Operated outside the federal student loan system, these private student loans are very easy to get but could be difficult to pay back. If new legislation in Congress passes, private student loans will no longer be exempted from bankruptcy. How education is valued is the ultimate problem that needs to be solved, though.

Article Source: Private student loans may now be subject to bankruptcy filings By Personal Money Store

borrow money|borrow money} with private student loans|Private student loans are one way that up to one-third of students pay for their education}. When figuring out how to pay for college, many students end up turning to loans. {The first “line of loans” are the federally supported and now federally administered loans|The first type of loan that most people take out are Federally administered loans are the first "line of defense" in applying for loans. The limited amount of money on these loans typically doesn’t cover the true cost of education. To make up that difference, half or more of parents or students take out some kind of private loan. These private student loans are basically loans with no credit check – and students are taking them out at higher rates than ever before. Usually, these loans don't consider if the student could pay them back – and the interest rates to them are very high.

Why private student loans cause problems

For-profit colleges tend to be the largest recipient of private student loans. Unlike a casino loan, payday loans, credit card bill or even some mortgages, private student loans can’t be settled during bankruptcy proceedings. The only way to settle these loans, other than paying them in full, is proving “undue hardship,” which could be very difficult to fulfill the legal requirements of.

How to put a price on education

More education means better pay, or at least that is what those that take out private student loans usually tell themselves. The one true fact is that the more well-educated someone is, the higher their average salary. The math of this problem, though, is much tougher when you take into account the increasing cost of education. The cost of school is increasing at four times the rate of income, on average.

Citations

Newsrecord.org

NYTimes.com

BLS.gov