College Life and Bankruptcy

September 27th, 2010 by Reed Allmand

It’s an unfortunate reality; but many college students have a disproportionate amount of debt compared with those who are not in college. Even with the recent Credit Card Act, students are still taking on unprecedented amounts of credit card debt, student loan debt and some are even taking the leap to purchase a home.  Here are few tips on surviving financially during your college years:

1. Limit the amount of student loans you take out.  Student loans are relatively easy to get and very hard to pay back. Even if you file bankruptcy after you graduate, it will be nearly impossible to discharge your student loans.
2. Limit your credit card usage during college.  Credit card debt is very serious problem during college because many students find it too easy to get credit cards but don’t understand the ramifications of taking on large amounts of debt.  So what happens is that by the time a student reaches their senior year, they can have on average about $20,000 in credit card debt with no job prospects that would allow them to pay it off, especially in this job market.
3. Don’t use your student loans as a down payment on your house purchase.  Using student loans as home down payment is a little trick that’s becoming more common as students look for ways to maximize the benefits of financial aid.  Remember, your student loans were designed to pay for your education and not as a means to securing a home loan.  In addition, purchasing a home while in college may be unwise unless you have a real job that offers a significant salary, benefits and stability.
4. Finally, if you find yourself overwhelmed by debts that you have accrued during your college years, don’t be afraid or ashamed to file for bankruptcy.  While bankruptcy won’t likely discharge your student loans, it can discharge other unsecured debts and allow you to get a fresh financial start.