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Law students face overwhelming debt

Graduates with law degrees are finding it difficult to find lucrative jobs, a situation made worse by the oppressive debt they often accrue while completing their education. One such graduate, with $150,000 in student debt, found herself in bankruptcy court before she even graduated. She filed for Chapter 7 bankruptcy protection and was tasked with proving that repaying the student loan would cause "undue hardship." It is a difficult measure to prove and many who seek bankruptcy protection from student debts cannot meet that burden of proof.

For the first time, law graduates are unable to find jobs that are sufficient to pay off their debts. Students graduating with the median amount of debt are unable to make ends meet with a median starting salary. In 2010, the median starting salary for a law graduate was $63,000. According to the Institute for Financial Literacy, bankruptcy filings by college graduates increased 20 percent between 2005 and 2010.

One of the largest private lenders to law school students is Access Group. According to Access Group, law school defaults began to rise with the recession and peaked at the end of 2010. In March 2010, however, Congress passed a law that effectively prevented private lenders from issuing government-backed student loans. Access Group did not issue any new loans after that law was passed.

Like many Americans who have faced bankruptcy in recent years, some students simply made bad financial decisions. Their bad decisions, however, carried the added weight of substantial student loans that often could not be discharged in bankruptcy. One law graduate finally filed for bankruptcy five years after her graduation. Though her student loans were not discharged, her personal debt of $36,000 was. Sometimes this can be enough to help someone get back on their feet.

Source: Reuters, "Law grads go to court for bankruptcy protection," Leigh Jones and Moira Herbst, Feb. 3, 2012

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