YOU CAN'T ESCAPE!
Feb 15 '00
So you've gone to school and racked up a considerable amount of student loan debt. Now your wondering,
"These payments are pretty steep, maybe I should just stop paying them back and default. I mean after all, as a "Good Americans" we've all borrowed up to our eyeballs in an effort to achieve some sort of consumer perfection. Why shouldn't I just declare bankruptcy like everyone else and be free of this burdensome student loan debt?"
DON'T EVEN THINK ABOUT IT (for the following reasons):
1. Bankruptcy protection will eliminate your requirement to pay back many consumer loans and debts. However just like income taxes, student loan obligations DO NOT go away under bankruptcy protection. You'll still be on the hook. Even if you just default (stop paying) it will hammer your credit history. I wouldn't advise trying to get a car or home loan after defaulting on your student loans. Could be painful.
2. It's wrong! Honest taxpayers are the ones who get stuck with the bill for student loan defaults. You have already received the benefit of reduced interest rates because you're borrowing from the Federal Government, don't make them (really us taxpayers) eat the cost of the entire loan too!
3. This one's probably the most important. TAX DEDUCTIBILITY! If you're married and have a combined adjusted gross income of less than $75,000 (or single and AGI < $60,000), you can deduct the interest paid on your student loan payments up to $1,500 in 1999 ($2,000 in 2000). Very nice!
Student Loans have some of the highest default rates of any type of debt. However, just because everyone else does it, doesn't mean you should too! Set spending limits for yourself once you finish school and budget money for you student loans as a part of the total cost of living. It may take a while, but once you finish paying them off, you'll have a great deal of satisfaction (deservedly so) not to mention a solid credit rating!
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