Allowing Bankruptcy Filing Won't Stop The Student Loan Conundrum


For a couple of months now, the Occupy Wall Street movement has gotten a lot of media attention. While no one really knows what they want as there is a mixed bag of groups that are protesting, one common complaint heard is the cost of a college education. Most people who go to college get student loans to pay for their education that many times doesn't pan out. There are those kids who get a liberal arts degree and have no job skills whatsoever and can't figure out why they can't get a good paying job. Hearing these stories, it's hard to have sympathy for these individuals. Over the last couple years with the increased numbers of people filing for bankruptcy, there are many people that are saddled with huge student loans. In today's economy, there just aren't any jobs, especially for kids getting out of college. Currently, there is more than $1 trillion in student loans debt that is guaranteed by the government. This is quite a big chunk of change. It's no surprise with $1 trillion outstanding that they would allow a student loan debtor to file for bankruptcy and wipe these debts out.

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You can ask any bankruptcy attorney and the common answer to discharging student loans is it's next to impossible. With the student loan debt tripping the $1 trillion mark many are wondering if a student loan bubble is being created. What's interesting is, Americans now owe more money on student loans than on credit cards according to the Federal Reserve Bank of New York and the US Department of Education. If young adults getting out of school have no way to get a job and pay these loans back, where is the money going to come from? If Congress changed the bankruptcy code to allow the discharge of student loans in a Chapter 7 bankruptcy, there would be a stampede to the door to file for bankruptcy.

What's interesting is, many of these people with all of this debt, really don't believe they owe it. Especially the ones that have not benefited from the education they owe money on. There is the other side of the coin of the individuals that became doctors and lawyers. Many of these have become very successful and the last place they want to spend their money is paying back those pesky school loans. There have been many government agencies created to track down these deadbeat students.

Over the past 20 years, kids have been sold a bill of goods. They have been told all the way through school that if they want to get a job and not deliver pizzas their whole life, they will have to have a good education. Today, many of these graduates head out into the job market to only find out that there are only entry-level positions available to them. With this kind of income and being saddled with student loans, they will never get out of hotel mom and dad. Education is important, but these days society has put too much of an emphasis on going to top-drawer schools. Many entrepreneurs and wealthy businessmen don't even have a college degree. Their success is attributed to the school of hard knocks with a lot of hard work.

Even if Congress made filing bankruptcy on student loans a possibility, nothing would change and the debt will still never be paid. The amount of debt with the student loan industry will continue to rise as lenders have very little risk because the powers that are given to them to collect from Congress with the main one being that debt can't be discharged in a bankruptcy filing.


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