Are Private Student Loans Destroying Both Students And Parents?

More than half of all student loans issued are private student loans.  Despite their cost, lack of deferments for unemployment or disability and their nondischargeability in bankruptcy, private student loans are gaining popularity.  As the price of education rises, many students are depending on private student loans for not only their graduate education; but also their undergraduate education and more parents are co-signing these loans to make sure they kids can go to college.  But studies have shown that within the first 2 years of graduating, 11.5 percent of students default on their private student loans.  What happens then?  The private student loan creditor goes after the parent.  They go after their wages and their assets and there is virtually no escape through bankruptcy.   James Reach, a parent who co-signed his kids’ private student loans, is learning the hard way that debt on private student loans can grow exponentially and become financially destructive.

“One of my child’s original debts was $37,000. The last invoice we received was for $108,000,” he said.

That’s absolutely outrageous. And neither that child nor his parent can discharge these loans in bankruptcy at this time.  Well, not unless they can prove that repaying the loans will cause undue hardship.  And undue hardship has been very difficult to prove for most student loan debtors filing for bankruptcy. Parents considering co-signing a student loan for their child need to be very careful.  It is very risky to take on student loan debt on behalf of another person because if/when they are unable to pay that student loan, or if you are unable to repay that student loan, private lenders offer little mercy in terms of hardship deferments.

Speak to a bankruptcy lawyer today