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Student loans now bankrupting parents

Student loans are not only putting an increasing number of young people's financial futures at risk, but experts report that more parents and grandparents are facing money woes because of academic debt. Financial gurus are observing more money troubles among the older set because of their decision to co-sign student loans, which cannot be discharged as part of traditional debt relief plans.

In one notable example, a woman who accumulated more than $100,000 in student loans before dropping out of the University of Toledo had her debt forgiven, but her parents were not so lucky. They found themselves responsible for the amount, thanks to the decision of a bankruptcy court and their choice to co-sign the loans.

Even more alarming is the fact that parents cannot shirk the loan debt even after they also declare bankruptcy. As an increasing number of young people default on their student loans, more older people are trying to avoid paying the debt by declaring bankruptcy. Few realize that they are unlikely to find judges sympathetic to their plight, largely because of the flood of co-signers who are seeking financial relief.

The majority of government-sponsored student loans do not require co-signers, according to financial experts, but private loans generally call for this extra provision. In fact, more than 90 percent of private loans require a co-signer, which is up 40 percent from just six years ago. This change is primarily due to the waning economy, according to industry frontrunners.

Experts are also observing a markedly different emotional response from parents and grandparents who have to declare bankruptcy because of the loans. These adults assumed that they were helping their progeny by providing a college education; now, they are resentful that the youngsters have not only failed to make a better life, but are also sticking them with the debt they cannot pay.

Still, some people are able to obtain financial relief despite the barriers. Recruiting a skilled bankruptcy attorney can increase your likelihood of debt relief from student loans, whether they are yours or someone else's.

Source: The Wall Street Journal, "Soured student loans bankrupt parents, grandparents," Katy Stech, Oct. 29, 2012.

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