There's Nothing You Can Do About Your Student Loans
Just in case you needed any more proof that we're not likely to see a sudden U-turn from the government over the ability to clear student loans in bankruptcy, Bloomberg has another story on the subject for us today—this time detailing the lengths that Uncle Sam will go to in order to ensure that your loan will not be dischargeable in bankruptcy.
The piece focuses on the case of on Tangerie Shells, a social worker with an elderly mother disabled husband, and three children to support. Having already filed for bankruptcy, Shells is attempting to have her $137,000 in loans forgiven "because paying them, she said, would make it impossible to provide for five family members."
Like the case of Robert Murphy I highlighted recently (also written by Bloomberg's Natalie Kitroeff, who is carving a unique niche with her reporting in this area), this is a case that seems open and shut on first glance, but that quickly becomes more complicated the deeper you delve.
Unlike Murphy's case, which hinges to a large extent that he borrowed the money towards the end of his career to pay for his children's education—an act that some have interpreted as a deliberate attempt to circumvent the system—Shells' case is really about the detail. Like, all the way down to her daily spending habits, and whether they constitute a "normal" amount of spending.
Witness: Department of Education attorneys raised objections to Shells' $700-per-month food budget, noting that some of it was spent on meals outside the home. And her $567 monthly car payment was also viewed as excessive—her protestations about needing a larger vehicle to meet the needs of her extensive family notwithstanding.
This, then, is the state of the student loan market today—a place where loan obligations are extremely hard to get rid of, and where scrutiny of even the smallest details of your life will be necessary if you are to achieve such a thing.
Unfortunately, there's not a huge amount of advice out there for people who are already struggling with their payments—other than to try to find a way to make a few. If nothing else, doing so will establish that you've made a good faith effort to pay them—a factor that is weighed as part of the process when deciding if you qualify for a write-off.
For those who are at the beginning of their college careers, however, it's important to know that the decisions you're making right now could have an effect that will last for the rest of your life. That shouldn't be a reason to back out of getting a higher education—it's still the best thing you can do for your lifetime earnings potential—but it does mean that you should think carefully about the sticker price of the institution you're considering, and whether it's truly worth it.