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  • The Rising Burden of Student Loan Debt on School Students

    The student loan debt crisis has increased in recent years, and the burden on school students has reached unusual levels. An increasing number of individuals are feeling the weight of this financial obligation.

    To understand the root cause, there is a need to understand factors like federal and private loans, the role of the Department of Education, income-driven repayment options, and the cost of college. It is also important to find potential solutions to this pressing issue.

    Understanding Student Loan Debt

    Before going into details, let’s have an understanding of student loan debt. Student loan debt is the money that students borrow to finance their higher education expenses. 

    The expenses include the tuition fee, living costs, and the cost of books. These loans are generally categorized into two types, which are federal student loans and private student loans.

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    Federal Student Loans

    These are the loans that the U.S. Department of Education provides, and they offer advantages like income-driven repayment plans and fixed interest rates. These benefits are the reason why these loans are popular choices for many students.

    Private Student Loans

    Private financial institutions offer these student loans with varying interest rates and repayment plans. Private loans often need to give borrowers protection and flexible repayment options, which is a drawback, as federal loans provide this option. However, students also avail themselves of private loans to support their education-related expenses.

    Cost of College

    One of the main driving forces behind the escalating student debt crisis is the increasing cost of college education, which is still escalating. In the last few decades, the price of a four-year college degree has increased at a rate far surpassing inflation. This aspect has put higher education out of reach for many students.

    Federal Student Loans & Borrowers

    Federal student loans have long been touted to make higher education accessible. However, they also have various challenges. Federal student loan borrowers often need help with the complexity of loan programs and navigate the different repayment options available.

    Income-Driven Repayment Plans

    Income-driven repayment plans, like Pay As You Earn (PAYE) and Income-Based Repayment (IBR), have been introduced to relieve students who have borrowed these loans. These plans cap monthly loan payments at a percentage of the borrower’s income, which benefits the students. It makes the payment easier and more manageable.

    The Role of The Department of Education

    The U.S. Department of Education plays a significant role in overseeing federal student loans, from the start of the loan to the repayment stage. Understanding the Department’s functions and policies is important for all students who are taking loans.

    Student Loan Debt Resolution

    Private Student Loans

    Private student loans are an option for many but often come with less favorable repayment terms and higher interest rates than federal loans. Students borrowing private student loans may face various challenges in securing flexible repayment methods. It is better to research and discuss with experienced professionals before you apply for private student loans.

    The Impact on Students’ Lives

    The outcomes of the student debt crisis extend beyond the financial aspects. This crisis impacts students’ lives in various ways, such as financial stress, limited career choices, delayed milestones, and credit implications. Let’s discuss these aspects one by one in more detail.

    More Financial Stress

    When someone is on loan, it is evident that they are under financial stress. These debts affect borrowers’ mental health and overall well-being, affecting their studies, careers, and personal life.

    Limited Career Choices

    Graduates may feel compelled to take higher-paying jobs over careers that they actually like. This way, they comprise their passion and dreams in order to meet loan obligations. This might help them in the short term, but it has negative outcomes in the long run. 

    After paying off their debts from high-paying jobs, they feel unsatisfied because they never choose the careers they want to pursue.

    Delayed Milestones

    Many graduates on the path to paying off their student loans postpone significant life milestones, such as starting a family or buying a home, due to the financial burden.

    Credit Implications

    Defaulting on student debt loans can result in damaged credit scores, which also have negative consequences. This makes it challenging to secure future loans or mortgages.

    Addressing The Student Debt Crisis

    Effectively addressing the student debt crisis requires a consistent and focused effort from various stakeholders. Some potential solutions, like tuition reform, loan forgiveness programs, financial literacy education, etc, can actually make a difference and can solve this crisis.

    Loan Forgiveness Programs

    Explore targeted loan forgiveness programs that help students pursue careers in underserved areas, such as public service, healthcare, and education.

    Tuition Reform

    Encouraging colleges, universities, and other educational institutions to implement tuition reductions or freezes is also an effective solution. This step can make higher education more affordable.

    Increased Grant Funding

    Investing in grant programs and scholarships is an excellent solution to overcome the student loan crisis. The stakeholders, businesses, multinationals, NGOs, and government can invest in the educational system, easily reducing reliance on loans for financing education.

    Financial Literacy Education

    Promoting financial literacy education to help students make wise and informed decisions about their education financing and budgeting can also play a significant role. When the students are aware of this outcome of loans, they can strategize in advance how to manage tuition and loan repayment plans.

    Loan Refinancing Options

    Provide chances for borrowers to refinance their student loans at lower interest rates, similar to mortgage refinancing. This can also resolve the problem and help people to bring themselves out of the student loan crisis.

    Student Loan Debt Relief

    The Burden of Outstanding Student Loan Debt

    The outstanding student loan debt crisis has placed a burden on students, making student loan payments a source of stress for a number of borrowers. The scale of outstanding student loan debt in the United States shows the urgent need for solutions that alleviate the problem of monthly student loan payments and relieve the students affected by this crisis.

    Addressing the Student Loan Crisis

    The increasing student loan debt problem among school students is a serious issue with far-reaching outcomes. It affects not only students but also society as a whole, limiting opportunities and increasing economic inequality.

    Addressing this student loan crisis requires a consistent effort from the government, educational institutions, and financial institutions to execute reforms that make higher education more affordable and equitable for everyone.

    Addressing the Student Loan Crisis

    Contact The Pope Firm For Student Loan Debt Relief

    Contact The Pope Firm today if you are facing the challenges of a student loan crisis and feel that you are under financial stress. We are an experienced law firm that specializes in student loan debt cases.

    We serve in Kingsport, Johnson City, Bristol, and surrounding communities and also offer services of Debt Settlement, Business Bankruptcy Options, Stop Creditor Harassment, Payday Loan Debt Help, Stop Foreclosure, Wage Garnishment Help, and Medical Debt.

    Call us today for the best bankruptcy law services. Book an appointment or visit us today to get more information regarding the services that we offer.

    If you need assistance with personal or business bankruptcy and filing in Tennessee, reach out to The Pope Firm and Charles Pope, Attorney At Law.

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    Frequently Asked Questions

    Bankruptcy occurs when an individual, business, or other entity declares the inability to repay its debts. If you file for bankruptcy, that means that debt collectors must pause attempting to collect debts from you. Bankruptcy often allows you to erase most, if not all, of your debts.

    There are two types of debts, unsecured and secured. Some examples of unsecured debts are credit card bills, medical bills, or taxes. Secured debts can include car loans or mortgages, which use the purchased item as collateral. In many cases, filing for bankruptcy can keep this collateral protected and prevent foreclosure of your home or repossession of other assets.

    Bankruptcy is governed by federal legislation under the Bankruptcy Code, which falls under the greater United States Code. Both federal law and local law inform the bankruptcy procedure. Federal bankruptcy judges, appointed by the United States court of appeals, preside over court proceedings in these cases. In court, the judge and a court trustee, review your finances to determine whether or not to discharge the debts at hand.

    Each state has one or more bankruptcy courts. Tennessee has six bankruptcy courts throughout the state.

    Filing for bankruptcy can be a daunting process, and working with a firm with expertise in the field can provide you with necessary guidance.

    There are several types of bankruptcy. Most individuals, married couples, and small businesses choose to file under Chapter 7 or Chapter 13.

    What are the Differences Between Chapter 7 and Chapter 13?

    The primary difference between these two types is that Chapter 7 bankruptcy allows an entity to fully discharge its debts in a short period. A Chapter 13 bankruptcy involves reorganizing debts and creating a plan to repay those debts over an allotted time. After that time, Chapter 13 eliminates most of the remaining debts.

    Chapter 7 bankruptcy is typically filed by those with very limited income and unsecured debts, the most common of which is medical bills. Chapter 13 bankruptcy is most often filed by higher income bracket individuals and those with more assets, such as a car or a home. The motivation for filing Chapter 13 bankruptcy is often preventing assets from being repossessed or home foreclosure due to outstanding debts.

    What Other Types of Bankruptcy Are There?

    Two other types of bankruptcy are Chapter 11 and Chapter 12.

    Chapter 11 primarily applies to larger companies and corporations, but sometimes it is the right choice for small businesses as well. Chapter 12 applies to those who are considered family farmers.

    Various considerations get factored into who should file bankruptcy. Filing bankruptcy may be the right choice for you if you are overwhelmed by debt. Regardless of what type of bankruptcy you file, as soon as the process begins, you are granted an automatic stay. A stay is an injunction that prevents creditors from collecting any debts for an allotted time. An automatic stay halts the process of, for example, foreclosing on a home or repossessing a vehicle.

    A Chapter 7 bankruptcy will discharge most of your debts. Filing Chapter 7 is appropriate for those who make less than the median household income in Tennessee and whose assets would not be at risk. In this situation, your non-exempt property is sold to pay off creditors.

    Chapter 13 bankruptcy allows you to create a plan to repay your debts. If you have non-exempt property used as collateral in secured loans, you can restructure your finances to pay off any relevant debts over the next three to five years. Chapter 11 functions in a similar way, but is exclusively for businesses.

    Filing for bankruptcy can provide a fresh start for those bogged down with debt, either by restructuring finances or discharging debts entirely.

    How bankruptcy affects business depends upon the type of bankruptcy filed.

    Chapter 11

    Businesses classified as corporations, partnerships, or LLCs can file Chapter 11 bankruptcy. Chapter 11 allows for debt restructuring, while the business stays open. As in Chapter 7 and Chapter 13, an automatic stay activates as soon as your bankruptcy period begins. In an automatic stay, creditors cannot try to collect money or other assets from you.

    During this period, you work with your lawyer to restructure your debts and develop a plan to get your business back on track. This plan must be approved by some of your creditors and a bankruptcy court to go forward. You will be able to repay your debts over several years.

    Chapter 7

    Filing Chapter 7 bankruptcy discharges all of your business’s debts by liquidating your assets. The entire process can be completed quickly, often in several months. Chapter 7 allows for the discharge of most debts, excluding government taxes and fines.

    Chapter 13

    Only individuals can file for Chapter 13 bankruptcy. Thus, although businesses cannot file, you can file Chapter 13 as the sole proprietor of your business.

    When you decide to begin the bankruptcy process, the first step is to find a lawyer who is an expert in filing bankruptcy in Tennessee. Hiring a bankruptcy lawyer can indeed be expensive, but it is worth the cost. This professional can guide you through what type of bankruptcy is best for your situation and what to expect throughout the process.

    • Collect your documents: It is important to have everything from your paystubs to your credit report available before starting.
    • Take the means test. This test will determine if you are eligible for Chapter 7 bankruptcy and help guide you in making a repayment plan for Chapter 13 bankruptcy.
    • Meet with a credit counselor. In the state of Tennessee, most individuals must meet with a credit counselor from an approved provider before filing for bankruptcy.
    • Fill out bankruptcy forms. If working with a lawyer, you can expect they will use online programs to help you file your paperwork.
    • Pay your filing fee. It costs $335 to file for bankruptcy in Tennessee. Waiver of the fee is possible in some cases, but it is uncommon. However, it is possible to pay the fee in several installments instead of the entire balance upfront.

    Declaring bankruptcy wipes out many debts, but not all.

    What Debts are Usually Covered by Bankruptcy?

    Bankruptcy can clear most unsecured debts, including:

    • Credit card bills
    • Medical bills
    • Overdue utility payments

    Bankruptcy can also clear many secured debts, but it depends on whether you file for Chapter 7 or Chapter 13 bankruptcy. For Chapter 7, you will have to give up any non-exempt items you put up for collateral. For Chapter 13, they will become part of your repayment plan.

    What Debts Are Not Covered by Bankruptcy?

    • Child support
    • Alimony obligations
    • Those related to personal injury or death in a drunk driving case
    • Any debts not listed on your bankruptcy papers

    No type of bankruptcy covers these debts. If you file for Chapter 7, they remain outstanding. Under Chapter 13, you pay these debts along with your other debts.

    What Debts May Be Covered?

    Bankruptcy rarely covers student loan debt. However, it may be in some cases with proof of undue hardship.

    Tax debt is also rarely covered, but bankruptcy may cover certain old unpaid taxes.