• 09
  • February
    2012

We have previously written on this blog about the burden many graduates are facing across America in terms of student loan debts. In many cases, graduates are unemployed or underemployed and unable to make their scheduled payments. This has led some to take legal action by filing for bankruptcy protection.

Unfortunately, as we've noted before, having student loan debt discharged in bankruptcy is a difficult thing to do. Courts are prohibited from discharging student loan debt except in cases where repayment creates an "undue hardship" on the debtor. And this is a rather difficult standard to meet.

A recent Reuters article points out the irony of the situation: that law students are borrowing more than they ever have for their education, precisely during a time when there are fewer jobs to go around. The average law school debt was, in fact, 50 percent higher in 2010 than it was in 2001, and is now increasing graduates' ability to earn money.

And as should be expected, graduates from low tier school are in an even more difficult spot as those going to more prestigious schools.

Although the number of bankruptcy filings decreased 11 percent in 2011, other factors seem to show that law students and graduates are no better off for the overall improvements. Access Group, a major private lender for law school loans, has reported that in 2010, law school loan defaults peaked when students were defaulting at twice the projected rate. Since that time, things have improved, but likely because of a new federal law preventing private lenders from providing government-backed student loans.

In our next post, we'll continue looking at this topic.

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