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Hefty student loan debt may lead to other financial woes

| Jul 18, 2011 | Debt Management |

For many people in New Jersey, student loans can make up a large part of their financial problems. Students, especially those at for-profit schools, are often unable to secure enough government aid to cover the high tuition. They are forced to rely on private loans to fill the gap. However, these private loans have a much higher rate of interest, placing a huge burden on borrowers.

Private student loans have been the fastest growing and most profitable part of the student loan industry in the last decade, often to fund tuition payments at schools that are run to turn a profit. A huge proportion of federal student loans are allocated to for-profit colleges; $26.5 billion was paid out to these schools in 2010. Students that attend these colleges accumulate a huge amount of not only student loans but also other forms of debt.

Unfortunately, according to the Education Trust, the credentials obtained from these colleges are not opening up doors to well-paying careers. More than 50 percent of people who attend for-profit colleges default on their student loans and may even be forced into filing bankruptcy on their remaining debt.

Concern over the use of public funds to keep for-profit schools in business has been growing; so much so that the government proposed new rules that would stop federal funding from going to programs where the graduates have a higher than normal debt-to-income ratio.

Unfortunately, the majority of the new measures were blocked by the efforts of lobbying groups on behalf of the colleges, and there will be no change in funding levels until 2015 at the earliest.

Many New Jersey residents attended college, and many of them will have had to have taken out federal or private loans to finance their education. Individuals faced with the overwhelming challenge of making ends meet after graduation may find speaking to a legal professional who has knowledge of the bankruptcy laws, helpful in preventing them from defaulting on student loans in addition learning how to regain financial security after bankruptcy through debt management.

Source: NJ Dot Com, “Opinion: For-profit colleges drain public resources- run students into debt,” Linda Stamato, 03 July 2011