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Saturday, April 18, 2009

Law - "In Grim Job Market, Student Loans Are a Costly Burden "

The ILB has had a number of entries on student loans. Today the NY Times has this lengthy article by Tara Siegel Bernard. Some quotes:

Perhaps seduced by the idea of graduating from a well-respected university, many students tend to overlook the consequences of graduating with debts that are likely to far exceed their starting salaries. And as many borrowers have learned, student loans are among the most ironclad debts, on par with child support, alimony and overdue taxes. They stick with you no matter what.

Bankruptcy usually doesn’t provide relief, except in the most dire of circumstances. Even death isn’t a good enough excuse for discharging some private loan debts. And the government can wield a heavy hand to collect what it is due: If you fail to repay your federal loans, it can garnish up to 15 percent of your wages or take your tax refund or part of your Social Security benefits.

But if you are having trouble paying back what you owe because you’ve lost your job or have some other financial difficulty, you have options. Of course, it’s always best to take corrective action before you’re officially in default. For federal loans, it generally takes about nine months of missed payments. But you can go into default on a private loan as soon as one payment is missed, though the rules vary by lender. And collection charges are usually steep.

“The good news on the federal loan side is that there are a lot of options for borrowers, particularly those who are in shorter-term financial trouble now,” said Deanne Loonin, director of the National Consumer Law Center’s Student Loan Borrower Assistance Project. “The private loan side is where we don’t have or are unable to give a lot of general information because there just aren’t as many rights.”

You first need to figure out what types of loans you have: federal, private or a combination of both. * * *. Below are several options for both loan types. * * * [But there] are fewer options with private loans, and borrowers are generally at the mercy of their lender and the loan contract.

Posted by Marcia Oddi on April 18, 2009 01:28 PM
Posted to General Law Related