Almost every bankruptcy client I’ve met with that has student loans has been deferring payments for years before they come into my office. What is the problem with deferring student loan payments? The answer to this question is two powerful words – compound interest.
When you defer your student loan payments, this interest is just compounding on top of you for another day.
As a Georgia bankruptcy attorney, I’ve met with many clients who will ask, “How is it that I only borrowed $10,000.00 and now I owe $20,000.00.” Once again, compound interest.
In addition to compound interest, consumers need to understand the fact that student loans cannot be discharged in bankruptcy. Since there is no way out of student loan debt, I call it slave debt. You are a slave to it until you have it paid off.
Student loan debt is the most dangerous form debt for any person.
If you have a car debt that you can’t afford, you can give the car back to the creditor and file for bankruptcy.
If you have a house that you can no longer afford, you can give the house back to the creditor and file for bankruptcy.
In contrast, when you have student loans that you cannot afford, you are out of luck thanks to the fact that Congress made student loan debts nondischargeable in the mid 90s (this was about the same that college educational started rising rapidly).
How long should you defer payments? The longer you defer payments, the more money you will and the chains of slavery that grip you become stronger and heavier.
The answer is that you should try to pay college loan obligations off as fast as you can. Rent, food, and electricity are top priorities. After the basic necessities are paid, student loan debt needs to be next on this list.
Credit cards and medical debt should be last on this list. If it turns out that you need to file bankruptcy, unsecured debt like credit cards and medical bills can be eliminated.
Many people with student loan debt should consider filing bankruptcy to eliminate the burden of other debts so that they can begin to tackle the nondischareable debt.
One way or another, you must free yourself from the chains of student loans at some point.