July 4 is tomorrow. But if you’re struggling with overwhelming debt, it can be hard to enjoy the holiday, especially if that overwhelming debt involves student loans.
As Paul Combe writes for the Huffington Post, more debt with little understanding of that debt can lead to big problems. He’s really talking about student loans here. Some of these loans recently had interest rates that doubled (on subsidized Stafford Loans) when Congress failed to act.
The whole “not understanding debt” thing is a common gripe among those outside of the bankruptcy system. After all, people who want to file bankruptcy must do pre- and post-financial courses (which can be done online) purportedly to school you in the ways of personal finance, as required by law.
The thinking is that you can manage your way out of financial trouble, as if overwhelming debt had nothing to do with circumstances outside of your control, like losing your job or getting injured.
But Combe is writing about student loans. Student loans generally cannot be discharged in bankruptcy, which means, according to Combe, that having a full understanding of the type of student loans a young person takes on – like the interest rate and how the loan will be paid off – can make a big difference in preventing hardship.
And a full understanding of student loans these days is a hard thing to come by.
That said, discharging other debt in bankruptcy (like in Chapter 7) can make paying off student loans easier.