Post-college life is a shock to many new graduates. In addition to all of the standard life changes that leaving college brings, today’s college grads are saddled with a huge amount of debt which can lead to student loans bankruptcy.
A Difficult Start
The amount of student loans the average student requires to attain a bachelor’s degree can leave them $25,000 in the red. When you’re just starting out, this can hinder your prospects of getting a house, a car, or a business loan, which can severely limit future choices, such as delaying marriage and starting a family. Students in debt may find it hard to start new business, or to move out of their parent’s homes.
It’s Hard to Pay Back a Loan with No Job
Added to that, it’s becoming harder and harder for new grads to find jobs. In 2017, the Associated Press combed the figures from the U.S. Census Bureau and found that 53% percent of post-college 20-somethings are either unemployed, employed in low paying jobs that don’t require their degree, or are unable to support themselves with their current earnings.
Non-Payment: A Growing Problem
Many students are simply unable to pay their loans, and the rates for default (going more than 9 consecutive months without making any kind of payment) have been increasing. In the early 2000’s the default rate was around 4-5%, but starting in 2007, the rates began to rise, with some studies citing a 7% default rate, and others claiming as high as 15% in 2018. Defaulting is a serious thing. Once a person defaults on one loan, they are unable to take out another, and attempting to open other lines of credit is difficult if not impossible. A person who has defaulted may not be able to purchase a house, sign an apartment lease, buy a car, open a checking account, or get a credit card.
Small Mistakes with Big Consequences
Even just being late on your loan repayments can hold serious consequences. There are late fees which make the debt get even bigger, and it can result in a credit report black mark. In addition, once a payment is late, the phone calls start and reams of multicolored letters and will be sent by the creditor, which can be an embarrassing annoyance. While this is not as extreme as the consequences for default, it can still make life difficult.
A Growing Problem, with a Solution
The problem seems to be getting worse, not better, and the total sum of all student debt in the U.S. is expected to exceed 1 trillion dollars in 2019. So what is the solution? Some consider student loans bankruptcy and others think debt consolidation is the solution for them. These may be valid options in some cases, but there are many other possibilities, such as federal programs to reduce monthly payments, or forgive the debt entirely.
It may take some work, but it is possible to avoid student loans bankruptcy, default and late payments ruining your credit and your future.