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Student loans, credit card debt leads to bankruptcy for some

The cost of obtaining a college education is sizable, and seems to only increase every year. Some analysts believe that the reason behind the high cost of higher education may be the 'easy money' mindset brought on by the availability of student loans. For many in California, student loan debt, combined with credit card debt, is creating an unsustainable financial scenario which could lead to the need to seek bankruptcy protection in years to come.

This trend is not likely to improve as student loan rates are expected to jump to 6.8 percent, where they sat before Congress moved to cut student loan interest rates back in 2007. This will leave current and future college students with a much larger debt service than those who completed their studies in recent years. However, many who were able to take advantage of the lower rates are still having difficulty repaying their loans.

Unfortunately, bankruptcy does not offer debt relief in relation to student loans. What bankruptcy can offer is an opportunity to discharge a large portion of unsecured debt. Doing so can leave consumers with lower monthly debt service, which can make meeting one's remaining financial obligations easier.

Achieving a college education is a worthy endeavor. However, for California students who have to rely on student loans to fund their education, high levels of debt can accrue before a degree is earned, leaving them facing serious debt issues just as they enter the workforce. In addition, many relied heavily on credit cards to fund their expenses while in college, leading to additional debt. Often, staring salaries are insufficient to cover the cost of living plus loan repayment obligations. For some, personal bankruptcy can offer a fresh start and the ability to move forward free from credit card debt.

Source:, "Student Loan Interest Doubles, What Can College Kids Do About Debt?" March 29, 2013

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