Thursday, January 31, 2013

Student Loans: Greater Than 15% While Americans Live Paycheck-To-Paycheck

I recently did a quick search on the internet to see how close Americans are, in general, to needing to file bankruptcy, and whether or not there have been any changes to the default in student loans. This, a least in part, is a reflection on our economy.

If you are contemplating bankruptcy, read the articles below. Hopefully you will not feel as if you are the only one in such a predicament. Even though I have not verified the facts listed within the articles, I find them interesting.

You need to know this. Welcome to America, where half the nation lives right on the razor’s edge. A stunning new report out of the Corporation for Enterprise Development, finds that 44% of Americans are just one financial shock away from complete ruin. Nearly half the nation doesn’t have enough savings to keep them out of poverty for more than 3 months, should they suffer a job loss, an accident, a sickness, or other financial setback. Another recent study out of the Consumer Federation of American, found that 40% of all American households live paycheck-to-paycheck, with virtually no savings. This is what’s become of the once valued American middle class after thirty years of trickle-down Reaganomics. And it’s the main reason why our economy continues to falter – our nation's working people and consumers don’t have enough money to spend. Let’s roll back the Reagan tax cuts – put in place a new wealth tax on everyone making over a billion dollars and redistribute some of that wealth down to working people, who will actually spend it.
The situation for college students in America continues to deteriorate. A new report published by FICO Labs, finds that the student-loan delinquency rate rose 22% from 2005 to 2007 – with more than 15% of all students being forced into default on their loans. The rapidly increasing price of college tuition, the cutbacks in government assistance for students, and the non-existent job market, are all conspiring together to saddle our next generation of leaders with enormous piles of debt. As the report notes, “in 2005, the average U.S. student loan debt was $17,233. By 2012, it had ballooned to more than $27,253 – an increase of 58 percent in seven years." How are our American workers supposed to compete with the rest of the world, and take risks, when they’re so deep in the hole by the time they graduate? We need to be sending our young people to college for free, like many advanced European nations already do.

Source:; On the News With Thom Hartmann: New Reports Finds 44 Percent of Americans One Financial Shock Away From Ruin, and More, January 31, 2013.

The bankruptcy code states, in general, student loans can not be discharged.  This means you will continue to owe the debt even after going through bankruptcy.  However, the bankruptcy code also provides for the discharge of a student loan if it is an "undue hardship".  The interpretation of what an undue hardship is varies greatly from court to court around the country.  If you owe a student loan and are contemplating filing bankruptcy, you should seek the advise of a competent bankruptcy attorney in your area.  You may also want to contact an attorney member of the National Association of Consumer Bankruptcy Attorneys (NACBA) to find out where their efforts stand with congress in getting student loans discharged through bankruptcy.