Which one?

Its not realistic. The horrible part is for personal debt you can file chapter 11 but for student debt can someone file bankrutpcy?

Great question. I believe the IRS has procedures in place for people who are insolvent, but I don’t know exactly how this would be handled.

There is also the possibility that the tax treatment of forgiven student loans will be changed by the time people are eligible. It will be over a decade before this issue goes from theoretical to real.

That 400,000 dollar loan …in 25 years…will balloon upwards of 750,000 or more

now THAT is discharged as taxable income at the highest tax bracket of 39% (ballpark).

Now THAT is a huge tax bill to save for!!!

The problem with student loan debt vs business debt is capitalized interest, so with business debt as you pay the principle balance you’re only building a small amount of interest. With Student Loan debt at the end of every year all the “unpaid” interest is capitalized and added to your principle balance. So if you’ve ever taken a forbearance or deferment your principle balance is growing every year based on capitalized interest. Thats a fact they almost NEVER tell students when they’re taking out student loans. Additionally, gone are the days of Attorneys all making 6 figures plus. I know plenty of attorneys (myself included) that put their nose to the grindstone everyday and make peanuts. Firms expect your to bill more hours and pay you less. And as for going into practice yourself, there are so many clients in crappy situations that its luck of the draw to see if you’ll actually get paid seeing as how the average person doesn’t have 5 – 10K just lying around to pay you a hefty retainer for your work. Then with the added cost of health insurance if you go out as a solo practitioner – in addition to PLF insurance that you’re required to have which is thousands of dollars a year, you’re fighting an uphill battle long before you ever get started. I think it is disingenuous and unkind to tell someone to focus on their career and increasing their income and apply everything they’ve learned in school – the earning potential even in this recovering market is not as easily obtainable as that statement would make it appear. A plan and a budget aren’t going to put this guy swiftly on the path to paying off that amount of debt in the near foreseeable future. It’s certainly not the same as business loan debt, particularly considering that you can discharge that debt in bankruptcy if times get hard for you. He simply doesn’t have that option.

I agree CC about not taking out student loans. The sad thing is that kids are not aware of how bad it could get until its too late. I know I have to take responsibility for my action, but I really didnt think it could get this bad. All your years of high school they tell you go to college, follow your dreams, etc… but never once do they tell you how costly and stressful this would be. Ive heard stories of people trying to do the right thing but living in a card board box in NY and waking up everyday, putting on their suite, and going to work. Sad! Even worst, Ive heard of student being so stressed out with it, they commit suicide. I admit, I actually asked my attorney if I could actually go to court and ask to be put in prison to pay off my debt. My stress level was really high – cant find a decent place to live, cant even apply for utilities or services without being charged deposit fees. When signing a lease, landlord use it to their advantage to increase security deposits or make almost impossible to meet deals. I live now in a 1 bedroom condo for the past year, still sleeping on an airbed and no furniture but a TV stand. Decent neighborhood but because the place needs alot of work, landlord only charges $1,000/month. But when I moved in I had to really negotiate – paid 2 month security, plus 5 months rent in advanced. Thats $7,000 out of my pocket. Thankfully, I had money orders Ive been storing away for about 3 years and had to use it all.

My advice is to do what an attorney told me straight forward – Liquidate all
assets and put NOTHING in your name!!

Here are a few actions I took (100% truth):

-No Assets: About a month after meeting this attorney, God worked a miracle when
a guy slammed into my Acura at a red light and totaled it. I hate financing but
forced myself to finance a new car which means the bank owns the vehicle. To
keep my payments very low, I put a high down payment plus asked the dealer to
extend the payment by maximum allowed (6 yrs). Monthly car payments is $170.
Oh, and I left that accident scratch free. Just had whiplashes for about a
month. Reason: if student loans attempt to sue, they cant take my car cause I don’t
own it.

-Liquidate all assets: On every paycheck, I pay all my bills and once a
month I withdraw $1,000 – 2,000 in cash and store it someplace safe. I make
sure to leave $20 – 100 in there just in case I need it and to show that I have
money but not too much (in the eyes of student loan collection companies).
Reason: believe it or not, they ARE monitoring your assets. If you show below
$5,000 in assets and consistent withdraws, they believe you really cant make
payments and might not waste their time trying to sue someone who “really has
no money”.

-Play hide and seek: After receiving 100’s of harassment calls at work, on
my cell, all hours of the night & day, and tons of letters from collections
(not exaggerating); I unlinked all ties
to finding me. Disconnected my home phone and linked all bills to the
disconnected phone number, sent all bills to my PO BOX to make it seem that I
lived at that address. Once you change your banking and credit card info,
expect student loans to automatically start sending you papers there. Reason:
make it hard for student loan companies and collections to find you. Send them
on a wild goose chase if you have to. Overall the point is to try to avoid
being served for the statute of limitation to end. In my case its 5-7 yrs.

Before speaking to an attorney, the truth is I was paying $200 a month to
one company, when I was working full time and working on my Masters. Then a one
day I got a call telling me that I paid Loan A yesterday, but now Loan B
payments are coming due so that’s another $100 a month, so like an idiot I
started paying. A few weeks later it happened again for Loan C. I later learned
that the same company was not consolidating my loans but charging interest on
each loan I owed. So basically Loans A, Loans B, Loans C, Loans, D, etc… will
have to be paid individually. I believe I had a total of 11 accounts (Loans A –
K) and each with different interest rates and monthly payments due. A paralegal
at my job saw my drained from working two jobs plus school. She pulled me aside
and asked me if I was using drugs because I had changed: got skinny, always
looked drowsy, sleepy, etc.. I broke down in tears and told her. That’s when I
got the advice to seek an attorney and STOP MAKING PAYMENTS!!!

Student loans companies don’t care! So stop making payments if you truly
cannot afford it! You could only afford so much and whatever amount you cannot
afford they mark your entire account as UNPAID. You might as well get your
wallet and burn your money every month, because payments won’t be applied and
you’ll never catch up after late fees, more interest, etc…