Washington DC Bankruptcy Attorney: Colleges Suing Graduates Over Student Loans

Last week, Reuters reported that Yale University and the University of Pennsylvania are suing graduates who have defaulted on their student loans.

The graduates being sued have defaulted on Perkins loans, and the schools say that the defaults hurt the prospects of current students receiving the loans. Perkins loans are granted to students who show extraordinary financial hardship.

Government statistics show that graduates had defaulted on $964 million in Perkins loans in the school year ending in June 2011, 20 percent more than five years earlier. Perkins loans are administered by colleges, which use repayment from graduates to lend to other poor students.

Reuters interviewed Aaron Graff, a farmer’s son from Denver, who graduated from George Washington University in 2010. Graff, who defaulted on $4,000 in Perkins loans, said he has not been able to find a full-time job.

“I live on the bare minimum,” Graff told Reuters. “It’s not like I’m defaulting on my student loans to live the lavish life. I’m defaulting on my loans because I really don’t have it.”

Graduates who took out Perkins loans are not eligible for income-based repayment plans, unlike borrowers from the Stafford loan program, used by middle-income families.

Unfortunately, for graduates with Perkins loans, it is extremely difficult to eliminate student loans through bankruptcy. However, for most borrowers, a bankruptcy filing can help eliminate other debts like credit cards and medical bills though, allowing them to catch up on student loan payments.

For people who are struggling to pay their bills, Chapter 13 or Chapter 7 bankruptcies are options. Filing for bankruptcy triggers an automatic stay that puts an end to collection attempts by creditors.

If your financial situation is a problem, contact our Washington DC and Maryland bankruptcy lawyer now for a free consultation.

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