Student Loan Debt – Bad News For Students And Co-Signers

Recent economic news is that student loan debt has surpassed credit card debt. The average debt load for a person coming out of college is over $28,000.00. No doubt there is a benefit to a post secondary school education.  If all goes well, the education received can lead to a better job and a higher level of income over the course of a lifetime. Parents and grandparents, who hope to help their child get ahead by cosigning the loans can find themselves in trouble. The wrong course of study, an unscrupulous trade school or unexpected life events such as disability, divorce or an economic downturn in the economy can frustrate these dreams.

Bankruptcy Cannot Help With Most Student Loan Debt

Student loan debt is the largest category of debt in the United States. It is non dischargeable in bankruptcy and will follow the borrower and their co-signing family members, for their entire lives. The Consumer Financial Protection Bureau has reminded the public that student loan borrowers, who had a parent or grandparent co-sign the loan, might find themselves being pressured to immediately repay the loan in full if the co-borrower dies or files for bankruptcy. This appears true even for those borrowers who have been making timely payments!

At the other extreme, if the student defaults, the co-borrower will find their retirement plans including continuing harassment by loan collectors. Co-signing a student loan is not simple formality. It is a very real financial obligation and long term commitment.

Obtaining a hardship discharge in bankruptcy , while not impossible, is very difficult to obtain except in the most extreme cases.