Diplomas Come with Degree of Debt; Student Loans, Credit Bills Push Graduates to Bankruptcy

The Washington Times (Washington, DC), March 5, 2002 | Go to article overview
Save to active project

Diplomas Come with Degree of Debt; Student Loans, Credit Bills Push Graduates to Bankruptcy


Byline: Kristina Stefanova, THE WASHINGTON TIMES

Twentysomethings increasingly are filing for bankruptcy as they graduate from college to face tens of thousands of dollars in debt from high education costs and credit cards.

Bankruptcy filings reached a record high last year, totaling 1.5 million. Studies showed that the fastest-growing group of filers comprised those younger than 25, who accounted for nearly 100,000 filings.

The trend makes sense, bankruptcy lawyers say, considering that graduates on average owe $19,400 in student loans, as data from the General Accounting Office show.

Meanwhile, undergraduates are carrying credit-card balances of $2,748, up from $1,879 in 1998 and more than double the average from 1993, according to Nellie Mae, a major student-loan provider.

"You don't have to be an economic genius to figure out that if you're out of grad school with $100,000 at 7 [percent] or 8 percent interest and the only job you can find is paying $39,000, then you're going to be in bad shape," said John Garza, a bankruptcy lawyer with Garza, Regan & Associates in Rockville.

Five years ago, he saw one or two cases of student-loan-related bankruptcies a year. Now, he says, he sees one or two a month.

"Student loans have gotten so much larger than I've ever seen, and interest rates and the repayment rates are much more onerous than they used to be," Mr. Garza said.

Students do not have to begin payments on loans taken out through federal financial aid, which offer low interest rates, until a year after graduation and can be deferred if a student continues education. But loans made by private lenders, which have much higher interest rates, are repayable earlier and often through larger payments because of their shorter terms.

Filing for bankruptcy does not erase student loans - it only defers them.

The loans can be erased in rare cases when a bankruptcy filer can prove undue hardship. Although unusual, this is becoming easier, Mr. Garza said.

"The doors are starting to get cracked open because I think judges are starting to realize that there are situations where student loans have just gotten so huge that there's no hope or expectation that anyone could pay it back," he said.

Custis Nelloms didn't think he could pay back the nearly $50,000 he owed in student loans, so he filed for personal bankruptcy in December.

Mr. Nelloms, a Maryland resident who examines patent applications at the Patent and Trademark Office, racked up debt over 11 years while attending three colleges. He earned his master's degree in business administration in 1999 but was unable to find a high-paying job.

At 33, Mr. Nelloms is recently married. He was paying nearly $400 between two loans and defaulting on another two. So he filed for bankruptcy, losing a new car and avoiding payments on $1,400 of credit-card debt.

"Trust me, I did everything in my power to not have to" declare bankruptcy, he said. "But I had no choice."

His sentiment was echoed by Michael, 28, who filed for bankruptcy in August.

Michael, who didn't want his last name published, filed after realizing how much he would owe in three years when he expected to receive a doctorate in political science from a New York university.

"My dilemma ... was that I could either quit school with $60,000 in debt and look for a job, or continue on in school, finish my degree and be $160,000 in debt," the Maryland resident said.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

Diplomas Come with Degree of Debt; Student Loans, Credit Bills Push Graduates to Bankruptcy
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?