School Loans Leave Both Kinds of Seniors in Debt

The seniors graduating from colleges across the country this year have something in common with other seniors, besides a college degree. They, too, are in debt to educational loans.

Student loans, which have over taken credit cards and car loans as the largest pool of debt in the U.S., are a growing burden not just for recent graduate of colleges and universities, but often to their parents and grandparents.

A college education, which has been sold for decades as the gateway to the middle class, is rapidly being transformed as the gateway to indentured servitude of loan servicing entities.

Student loans cannot usually be discharged in a bankruptcy as can most other debts. The only discharge available is one of "extreme hardship," where you have to argue that you will never earn more than you currently are earning and will never progress beyond entry-level employment.

For parents or grandparents who cosigned student loans for children who had the misfortune of graduating during the worst recession since the great depression, the future is anything but bright.

Students strapped with massive debts and having limited, low-paying job opportunities are left in a precarious situation, and if they default, the lender will look to their parents to repay the loan.

A recent Federal Reserve Bank of New York report finds that of that $870 billion of debt, 27 percent of the borrowers have past due balances. They also calculated that 21 percent or $182 billion is delinquent.

Equally troubling is their determination that almost half, or 47 percent, were in either deferral or forbearance, and not yet making any payments. This means we do not really know how well the borrowers will be able to repay this debt.

Also worrisome for the long-term health of the economy is the prospect that $580 billion of the student loan debt is owed by those younger than forty, especially when the recovery has been light on jobs, and the creation of well-paying, white collar jobs is practically nonexistent.

If you find yourself with a large school loan debt and other types of debt, you may want to speak with an experienced bankruptcy attorney, who can review your situation. While you generally cannot discharge school loan debt, a Chapter 13 may provide a way to restructure your other debts to help you make ends meet.