Understand Student Loans Before Securing A Loan

In the effort to make themselves more marketable as future members of the American workforce, thousands of men and women enroll at colleges and universities every year. Indeed, the price of being competitive job hunters is a steep one, costing these young adults thousands in the process.

To finance their education, most of these attendees will be securing a student loan, along with Federal aid, scholarships earned, part-time jobs, help from parents, and other avenues of revenue. Everything may work out positively for these individuals as far as passing courses and ultimately earning a degree. However, when it comes time to leave college and repay one's student loans, the real world may hit the young debtor in full force.

A significant percentage of filings for bankruptcy in recent years have come from college-age men and women, and student loan bankruptcy is the prime culprit. To the chagrin of some insolvent parties who fit this description, this may mean a short-lived bout of independence before financial circumstances cause them to return home to live with their parents.

In consideration of the high occurrence of bankruptcy declarations among twenty- and thirty-somethings in today's America, the following are notes on the possible intersections of student loans and bankruptcy:

In looking at statistics and trends on the affordability of going to two- and four-year schools, it may not seem to some as if student loan bankruptcy should be as much of a concern in the United States as it is. A majority of four-year students attend a college or university for less than $10,000 per year. Still, it is not a small minority that pays more than this sum annually, and in any event, these prices being paid four times over do add up, not to mention the rising costs of education commensurate with higher prices of other "products" and services as time goes on.

Even more importantly, though, in the long term, student loan repayment plans, as is the case with any normal loan, will accrue interest to be paid on top of the principal. These can ultimately ratchet up the price of one's education to a large degree. Institutions of higher loans do nominally warn students upon exiting about the dangers of student loans and bankruptcy, but often very informally through an online quiz that essentially is an open-book test and one in which wrong answers can be amended by repeating the answer and quickly moving on. This is not to imply that all people who petition for student loan bankruptcy are misinformed about how their loan works. Nonetheless, this information is worth consideration for all student debtors.

Noting how hard times have befallen the American economy, student loans and bankruptcy collectively may be heavily associated with the nation's uncertain employment market. Graduates looking for their first "real" job or seeking to start their career straight out of college may find that things are not exactly going according to plan, as there is not an abundance of new jobs to be had. Moreover, even when young men and women have been working for some years and steadily repaying their loans, the need for companies across the country to downsize has forced Americans in the millions out of work and onto the unemployment line. Without the means to offset their debts from school, some young people may feel they have no recourse but to file student loan bankruptcy to manage their finances.

With all of this talk of student loans and bankruptcy, people who have yet to file under Title 11 but are contemplating this maneuver are advised to take caution. In personal bankruptcy cases, while most types of debts are capable of being discharged, some financial obligations must remain intact.

NEXT: All You Need to Know About Bankruptcy Credit