Students who acquire student loans need to be aware of the ways in which student loans are differentiated from traditional loan products. Almost two thirds of the students in America, including those in Arizona, will take out student loans to finance their education. Many students are encouraged to do so. However, student loans are based on the idea that the student will be increasing their income through the degree that they are acquiring and will thus be able to work off the loan. This is not always true, especially now that there are many for-profit colleges that do not offer any marketable skills to the students. Student loans cannot be refinanced and cannot be discharged through personal bankruptcy.

The delinquency rates on student loans have been rising alongside the rates for other loans as many found themselves in financial trouble during the economic recession. However, unlike other loans, student debt cannot be refinanced or discharged during bankruptcy. A discharge through bankruptcy was seen to enable people to take on large amounts of debt and then declare bankruptcy shortly after college. Unlike other forms of debt, student loans also have no statute of limitations. This means they can be collected throughout the lifetime of the borrower.

The National Consumer Law Center believes that the answer to handling debt lies in debt counseling and debt consolidation plans. They also believe that there needs to be a reasonable statute of limitations for student debt as with other forms of debt.

Those who are considering personal bankruptcy need to consult a bankruptcy attorney about which of their debts will be dissolved and which will not. Student loans are a type of debt that a bankruptcy will not discharge.  However, one method to help deal with student loan debts is a Chapter 13 Bankruptcy.


Source: Salon, “Your student loan isn’t really a loan“, David Dayen, June 05, 2013