Nearly 20% of bankruptcies are filed by young men and women that are under the age of 29 years old! Many of these individuals were promised the world when they started attending college in their late teenage years. By attending higher education, they assume that they will find an amazing job with a high salary that will take care of their student loans in just a couple of years. The reality of the situation, however, is that many of them will not find a job in their field of interest, and they will have to return to the low-paying jobs that they had when they were working through college.
If these graduates are returning to their part-time jobs and they have loans of more than $20,000, they most likely won’t be able to pay for all of the bills that they have: rent, car payments, gas, food, and student loans? Forget about it. A $25,000 a year (at maximum) salary will not cover all of these expenses. This is when students become discouraged and feel that filing for bankruptcy is their only options.
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For those that file Chapter 13, some of their debts are wiped away (at the expense of their credit score of course), but not all of them disappear. In fact, if these individuals have student loans, not only do they not go away, but the individual is not allowed to pay down the balance of those student loans for three, sometimes five years while the interest continues to build on them.
So what’s the result? Those $20,000 student loans turn into $25,000 student loans or more. And then, what if you still can’t afford to pay the loans? Then you start getting penalized for not paying!
I knew one man that had exactly this situation. He had student loans that he still owed on, but simply didn’t have the money to pay them down. After 7 years, the balance of his loans increased from $20k to $40k. If he waited another 7 years, the balance of this debt would double once again. That means that instead of $40,000, he would then owe $80,000!! Another 7 years and it would total $160,000. His debt grew out of control and turned into a permanent straight-jacket. He was never able to get rid of his debts and walked around in constant sorrow.
Think Twice About Your Student Loans
I hope that this story makes you think twice about the student loans that you are piling up. And, if you know of students that are entering college, please advise them to keep their loans as low as possible. By keeping your loans low, your cash flow will stay high and you will be much less likely to find yourself in a bankruptcy situation.
Did you have student loan debt? Did you ever feel short on cash while trying to make the payments?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.