Personal Bankruptcy, Parent Loans, and the Student Debt Crisis

When we think about the student loan debt crisis and consider the ways in which personal bankruptcy may or may not be an option for discharging student loan debt, most of us think about the students who used those loans to attend a program at a college or university. However, as a recent article from 401kTV points out, parents of college students are also frequently left with student loan debt (from their children), and those parents also want to learn more about bankruptcy options for managing debt.
How do parents end up bearing the brunt of student loan debt in certain situations, and do they have the option of filing for consumer bankruptcy to discharge loan debt?
How Student Loan Debt Affects Families (and Not Just the Student)
The effects of student loan debt extend well beyond the individual who used those student loans to pay for school. Many parents find themselves in situations in which they have taken out student loans to help their kids pay for school. Why do parents take out student loans for their children? In other words, why are these costs being placed upon parents when their kids (the students) could be borrowing the money they need to pay for college? An article in U.S. News & World Report explains that college costs—including student loans—often fall to parents “after students hit the federal borrowing limit.” Indeed, as of 2017, approximately 14% of college students relied on parent loans to pay for school.
Most parents who take out student loans for their children borrow Parent PLUS loans, and the average borrowed is just over $10,000. However, there are a number of parents who borrow private student loans, which tend to be for larger amounts. In some cases, parents also use other options to help their children pay for college, such as taking out home equity loans or using money from their retirement accounts.
For some parents, taking out student loans to help their children pay for college can result in more debt than they can handle, and some seek bankruptcy protection. According to the article in 401kTV, student loan debt from children could be one of the reasons that we have seen a rise in bankruptcy rates among older adults.
More Older Americans Filing for Bankruptcy: Is Student Loan Debt Partially to Blame?
The article discusses recent research surrounding bankruptcy filings among older Americans, particularly for recent retirees. It suggests that the student loan debt crisis could be the reason that some of these recent retirees are filing for Chapter 7 bankruptcy—in an attempt to discharge student loan debt that they borrowed for their children. If this is the case, the article intimates, we could see a continually rising rate of bankruptcy among older adults as long as the student loan debt crisis continues.
Since 1991, the rate of bankruptcy among adults aged 65 and older has tripled. While there are numerous reasons that researchers have cited for the rising rate of bankruptcy in the Baby Boomer generation, it may be important to start thinking more closely about the role that parents’ student loan debt (borrowed for their kids) could be playing in decisions to file for bankruptcy.
Contact an Oak Park Bankruptcy Lawyer
Do you have questions about student loan debt and bankruptcy? Do you have concerns about filing for bankruptcy after retirement? An experienced Oak Park bankruptcy attorney can answer your questions. Contact the Emerson Law Firm for more information.
See Related Blog Posts:

Comments

Post a Comment

Popular posts from this blog

New Information on Debts That Bankruptcy Cannot Discharge

If you are thinking about filing for bankruptcy in the Oak Park area, it is important to know that certain kinds of debts cannot be discharged in a bankruptcy case. Under U.S. bankruptcy law, these are known as non-dischargeable debts, or exceptions to discharge. There are certain types of debts that have long been identified clearly as non-dischargeable debts, while there are misconceptions about other types of debts that may or may not be dischargeable. As an article in CNBC discusses, the U.S. Supreme Court recently issued a ruling in the case of Bartenwerfer v. Buckley , which clarifies that debts incurred due to another party’s fraud cannot be discharged in an individual’s bankruptcy case. Our Oak Park bankruptcy attorneys can explain the Court’s recent ruling and provide you with additional information on dischargeable and non-dischargeable debts. Supreme Court Says Debt Incurred Due to Another’s Fraud is Non-Dischargeable The recent Bartenwerfer case involved a debtor attempti
Read more

Learning About Different Types of Wills

Whether you are young or old, single or married, wealthy or with limited financial means, healthy or dealing with a medical condition, it is important to make a will. Many people have incorrectly heard that wills are only necessary for particular people, such as those with a substantial amount of assets or for older adults in poor health. Yet wills are critical for adults of all ages, and an experienced Oak Park estate planning lawyer can help you to make one. Before you begin working with a lawyer on a will, you might start conducting your own research into wills in Illinois and the requirements for a valid will. In so doing, you are likely to come across information about many different types of wills, and you are probably going to wonder whether you will need more than one kind of will. In short, there are different terms that can be used to describe the form or function of a will, as well as some distinct types of wills. Our Oak Park estate planning attorneys can explain in more
Read more

Younger Parents Need an Estate Plan

It is critical for younger parents to have an estate plan, even if they know they are healthy and do not anticipate that anything will happen in the near future. Much too often, younger parents assume that they can wait until they are older to consider estate planning or until there is a health-related reason to begin the estate planning process. Yet estate planning is critically important for parents who have minor children. While estate planning is important for adults of all ages, it can allow parents to make important decisions about who will care for their children in the event that they become unable to do so themselves. Our Oak Park estate planning lawyers can explain in more detail. Naming a Guardian for Your Minor Children in Your Will Most importantly for younger parents, making a will allows you to name a guardian who can care for your child in the event of your unexpected death. Nobody anticipates a deadly accident or a sudden situation in which there is a need for another
Read more