The sole purpose of applying for student loans is to provide the means for a student to attend college, so that he or she can later reach the goal of continuing his or her education and graduating with the appropriate degree. This is true no matter who applies for the loan, whether it is the student or the parents. Ideally, the student and his or her parents will decide to go with a loan company which offers the possibility of monthly payments, that way, they are not in any way compromising their own finances, and will be less likely to run the risk of being able to pay for all their household expenses.
Sometimes, however, in spite of the best intentions, various financial problems can occur right out the blue and loan repayment becomes difficult. In times like this, it is hard to know what to do – if money comes up extremely tight, should a family cover all their expenses and let the loan payment be late or go into default, or should they eschew their household necessities and focus solely on loan repayments?
Lending companies all work pretty much the same way and companies which specialize in student loans are no different: not only do they expect the monthly principle payment, but they expect all inherent interest charges as well. As such, if a borrower stops paying for any reason, the lending company will exercise any means necessary to ensure that the borrower continues making payments on the loan or loans.
The insistence of private lending companies who specialize in student loans to continue receiving payments no matter what kind of financial situation the borrowers may be going through is one of the main reasons college bound students and their families hesitate to take out a private student loan. It also plays a large part in the ineligibility of so many students when it comes to scholarships, and it is also why so few students are able to pay their own way when it comes to college expenses. It is terribly easy for the recipients of private student loans who later find themselves in dire financial straits to have to withdraw from school.
Unfortunate circumstances such as these do not have to result in a student’s withdrawal from school, however. For parents and students alike who are having trouble paying off private student loans and still maintaining all of their necessary household expenses, bankruptcy is a viable option. It is not a decision to be taken lightly though, and it is always recommended that borrowers try to work something out with the lenders themselves.
Should bankruptcy become a necessity, it is extremely important to consider all the consequences. If they prove to be worth it then the borrower first needs to present compelling evidence and a logical argument, proving that if he or she continues paying the loan, it will result in the inability of the household’s providers to take care of the family and the household itself.
Simply put, either the student or his or her family must prove without a doubt that paying on the loan is detrimental to the family and its financial situation. This means that repaying the loan has to interfere with the student’s or family’s ability to pay for necessity, such as groceries, household bills, doctor’s appointments, et cetera. Once this has been suitably proven, a court will decide whether the student and/or family will be able to declare bankruptcy, especially as it applies to the student loan.
Gary Marjani is author of several articles pertaining to student financial aid such as FAFSA, Stafford Loan, Pell Grant, etc.
