Why Are Bankruptcy Options for Student Loans Important?

In our blog post earlier this week, we mentioned that the White House has tasked administration officials with looking into bankruptcy options for private student loans. Student loans are a financial burden for most graduates, but the weight of debt is far heavier for graduates with professional degrees.

By observing the student loan payments of graduates in specific professional fields, it sheds light on why allowing bankruptcy for student loans would be a very important and positive change for graduates.

Bankruptcy Would Allow Some Graduates to Start Over

Law school debt is the perfect example of how student loans can permanently cripple the finances of graduates. Several years ago, the New York Times covered the story of a 27-year-old law school graduate with $250,000 in student loans. Instead of making big bucks at a major law firm, the young man had graduated into a very poor job market for graduates in his field, forcing him to take a job as a legal temp for $10 an hour.

Depending on the interest rates for each loan and whether it is private or federal debt, monthly payments could exceed $1,000 a month. This would mean the 27-year-old man making $10 an hour as a legal temp would be stuck with payments that likely exceed half of his monthly pay!

According to the American Bar Association, law school graduates end up with an average of $84,000 to $122,158 of debt, depending on whether they attend private or public schools.

This young man’s story is not unique, nor is it limited to law school graduates. Follow our blog as we cover more stories like this one on student loan and bankruptcy changes. For regular updates on The Sader Law Firm, follow us on Facebook and Twitter.

The Sader Law Firm – Kansas City and Missouri Attorneys