As the second largest category of consumer debt nationwide, student loans are fairly common among Florida residents. Unfortunately, so is defaulting. Approximately one million borrowers default on their student loans every year. For those who think they may default on their own loans, Chapter 7 bankruptcy could provide much needed debt relief.
The student loan crisis is not getting better anytime soon. The average 2017 college graduate left school $40,000 in debt — $3,000 more than those who graduated in 2016. It might be due to rising education costs that experts have predicted that 40 percent of those with student loans will default on them by the year 2023.
Surprisingly, those who owe less are actually more likely to default on their loans than those who owe significantly more. Of those who owe less than $5,000, 32 percent will default at least one time within a four-year period. For borrowers with a balance of $35,000 or more, the default rate for the same length of time is only 15 percent.
Programs such as income-based repayment plans, deferment and forbearance can help those struggling with their bills. There are benefits and downsides to these types of plans, and borrowers should carefully consider the implications of continually accruing interest, which can ultimately add more to their balances in the long run. In some cases, interest will still need to be paid, even if the payments are otherwise temporarily halted.
Unfortunately, most student loans are not eligible for discharge through Chapter 7 bankruptcy. However, the process can still be incredibly helpful for those who are struggling to pay their bills. By discharging other debts and establishing a more secure financial foundation, consumers in Florida may be more capable of paying off remaining loans.