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Student Loan Bankruptcy: A Topic that Will Not Go Away

By JLP | May 1, 2012

From a recent WSJ article:

Tracy Paulsen, a 34-year-old lawyer from Wenham, Mass., said she recently moved in with her aunt, has put off marriage talk with her long-term boyfriend and depleted her individual retirement account—all so she can get a handle on more than $200,000 in student loans outstanding, most of which paid for law school. “It’s a noose around my neck that I see no way out of,” she said.

Wow.

I feel for this woman. I can’t imagine having that kind of debt hanging over my head.

I don’t have an easy solution in mind. Maybe freeze the debt so that it incurs no more interest. Stretch the payments out, possibly.

The article doesn’t mention how much the original debt was That Miss Paulsen had accumulated. But, even if it were $100,000′ her monthly payment would be $277 for thirty years with NO INTEREST. That’s a pretty hefty obligation.

The bottom line is that college students need to do some due diligence before they take out these massive loans.

Topics: College Funding, Student Loans | 10 Comments »


10 Responses to “Student Loan Bankruptcy: A Topic that Will Not Go Away”

  1. Matt Says:
    May 1st, 2012 at 10:51 am

    So if you’re 18, just out of High School, and want to go to Law School you shouldn’t go if your parents didn’t save?

  2. JLP Says:
    May 1st, 2012 at 11:34 am

    Matt,

    Where did I say that?

    What I am saying is that I think students need to do some due diligence BEFORE they sign their lives away. I don’t think I’m being unreasonable. Do you?

  3. Stacey Says:
    May 1st, 2012 at 12:03 pm

    My husband worked full-time, traveled for his job and attended law school at night. I managed the babies and was a very lonely woman for over 5 years. But law school can be done if you can open your eyes to something other than a 3-year timeframe.

  4. Jack Says:
    May 1st, 2012 at 1:35 pm

    Matt,

    I submit that Law School is a POST-graduate degree. One must have a Bachelor’s degree first.

    On the basis of one’s Bachelor’s degree, get a job and save the money yourself, or work full-time while going to law school part-time.

  5. Rick Francis Says:
    May 1st, 2012 at 5:37 pm

    Ultimately she needs to make good use of that law degree and get a job that will allow her to pay off her loan. That may be difficult with the current economy but it doesn’t seem like it is really impossible.
    It may well take 10 years, but it isn’t unique to Tracy. Anyone that gets a law or medical degree will have to work a long time to pay off their loans. If they don’t get a higher salary from their degree they are in trouble.

    -Rick Francis

  6. BG Says:
    May 1st, 2012 at 6:25 pm

    That debt is no joke. Sounds like she is taking the right steps to deal with it, though.

  7. TMS Says:
    May 1st, 2012 at 8:51 pm

    That law school debt IS a joke. A JD degree takes three years. $200K for what she admits was mostly for her JD degree?

    Looks to like me she lived high on the hog counting on a fat salary immediately upon graduation.

    My first wife was in law school before we got married. Been there and done that. No way any reasonable person would rack up that kind of debt. Work as a bar waitress for fat tips on the weekend. Go to a Big 10 school on in state tuition. Graduate with minimal debt and stop whining online about how you owe $200K. Complete insanity.

  8. BG Says:
    May 2nd, 2012 at 6:52 am

    TMS) good catch. I just found the WSJ article, and it claims she has yet to make a payment on the debt….that IS a joke.

  9. JLP Says:
    May 2nd, 2012 at 7:27 am

    BG,

    I’ll post a link to the article in a little while. I posted from my iPad yesterday and posting links from an iPad is a pain.

  10. Jack Says:
    May 2nd, 2012 at 8:25 am

    It should also be remembered that that money was borrowed from someone else. It is not magic money that come from nowhere and will go nowhere when repaid. Flesh-and-blood people put their money in the bank with the expectation that it is safe and will earn some small amount of interest. Student loan interest rates are low because they cannot be forgiven in bankruptcy. If that were not the case, how many students would take the money, get their degrees, and declare bankruptcy (like the “strategic defaults” we see in the housing market)?

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