BANKRUPTCY UPDATES

• Minnesota Distillery of Fine Vodkas Files Chapter 7 Bankruptcy (February 10, 2012)
• Court Approves Newspaper Magnate Lee Enterprises’ Bankruptcy Plan (February 07, 2012)
• Suspected Felon Filed for Bankruptcy Shortly Before Untimely Death (February 09, 2012)
• Ireland Overhauls Bankruptcy Laws (February 06, 2012)
• IL State Representative Files for Chapter 13 Bankruptcy (February 08, 2012)

Credit Crunch Means More Expensive Student Loans

For those in financial distress, filing bankruptcy can be a good debt-relief option for some.

Even you're struggling with non-dischargeable debts, like student loan debt, bankruptcy may provide you with relief by helping make your other financial obligations more manageable.

The good news is, people might have less student loan debt in the future. The bad news is, that's because student loans are becoming more difficult to obtain, according to reports from CNNMoney.com and the Associated Press.

Sources indicate that a number of forces have combined to make student loans harder than ever to come by for those pursuing higher education.

First, legislation governing student lending that went into effect in 2007 decreased government subsidies to organizations offering government-backed loans to students. Basically, this means that those organizations - mostly commercial lenders - are making less money on the loans they offer.

Second, fears linked to the credit crunch have left investors less than enthusiastic about investing in student loans. This means that lenders have more trouble making money from loans, have less money to lend out, and can offer fewer loans to needy students.

The New York Times notes that one Michigan student lending program, which involved more than 100 schools, has had to shut down because of disruptions and uncertainties in the credit market.

CNNMoney.com adds that Sallie Mae, the nation's largest lender of government-backed student loans, has asked for higher returns in exchange for continuing to offer credit to students. Those "higher returns" could come in the form of higher interest rates for students.

So what does it all mean?

Basically, student loans are likely to be harder to get and more expensive to pay off. Associated Press reports suggest that smaller lenders whose revenue is generated solely from student loans could be hit the hardest, since they might not be able to handle the strain of a less lucrative product.

Larger lending institutions, on the other hand, will likely expand their student lending divisions to pick up the business the smaller lenders can't handle, according to sources.

But the people hardest hit will likely be the students, who can't typically include student loans in a bankruptcy filing, no matter how bad things get.

Some schools and students have allegedly already reported difficulty in getting funding for educational purposes. And with interest rates increasing, these fewer loans will likely be more difficult to repay after graduation.

Subscribe