We are all taught to believe that an education will lead us to the paycheck we need and desire. Our parents and teachers teach us that an education is crucial – and in many respects, it can be. During these tough economic times, countless people are finding themselves jobless and are deciding to go back to school.
While education is wonderful, the loans that are required for most of us to obtain it may leave the whole experience tainted. In a recent New York Times article, for-profit trade schools were singled out as being very expensive, with up to 80% or more students taking student loans to pay tuition, many of which carry over a 10% rate (The New Poor: In Hard Times, Lured Into Trade School and Debt, Peter S. Goodman March 13, 2010)
While promises of high wages and up to 90% job placement are often made, the truth is that many cannot afford to pay their loans back upon graduation. This is not only true for trade schools, but also for professional educations such as law and business school and many others. When the economy stumbles and people lose jobs or cannot find jobs out of school, they tend to look for more education. This would make sense, but for the inescapable student loan and the fact that often the jobs for which they become eligible still do not pay enough to keep them above poverty level, even if a greater income is obtained (which is not always the case).
Bankruptcy: Another thing to keep in mind is that, while most credit cards, medical bills, mortgages, car loans, and even some taxes are dischargeable in bankruptcy, student loans are almost never discharged! I have seen clients come in with $20,000, $50,000, up to more than $300,000 in student loans that they cannot pay back and cannot get rid of in bankruptcy. There are very few circumstances under which a debtor becomes eligible for student loan dischargeability; and even if you might be, costly litigation within a bankruptcy is required and there are no guarantees as to a positive outcome.
The moral here is not to wholly avoid student loans, but I do urge anyone thinking a quick but expensive education will be a perfect remedy, to look beyond the advertisements and to really weigh the financial likelihood of being able to pay back loans that may add up to the equivalent of a mortgage payment for many years to come.
by: Greta LaMountain, Esq.