Things To Consider Before Getting A Student Loan

College gets more expensive every year and paying for it isn't easy. But before signing up for student loans, you might heed some words of advice from Detroit-area bankruptcy attorney Michael Greiner.

If financial crisis strikes, you may be forced to declare bankruptcy. But student loans can't be charged off in a bankruptcy. By law they must be repaid.

With many parents applying for financial aid for their college-aged children, Greiner says this fact is rarely considered. And with the cost of college going up, and colleges expecting more and more of their expenses to be paid for with debt rather than grants, many parents and students are finding that most of their debt is non-dischargeable student loans.

"Every day I have someone come into my office with a mountain of debt," said Warren. "It is often heartbreaking to see that there is nothing I can do for these people."

Private loans

Greiner also pointed out that more and more of the student loans available are private student loans, not backed by the government. He says Sallie Mae has even gotten into the act of financing private student loans.

"The interest rates on these private loans are typically much higher than for government student loans,” he said.

When considering a student loan, Greiner says applicants must read the fine print and stay away from private student loans. Just because a loan is from Sallie Mae or similar entity, doesn't mean it is a lower interest loan, he says.

Check the fine print to make sure you're not getting a private student loan with high interest rates. In fact, student loans that are not financed by the U.S. Department of Education are likely higher interest, private student loans.

Greiner says a home equity loan, and even some credit cards, would be a better alternative to a private student loan. In a bankruptcy proceeding, they will be dischargeable while a student loan won't.

Don't delay repayment

One often-cited advantage of student loans is the ability to defer payments, but Greiner says the deferred repayment doesn't stop interest from increasing. In fact, even for relatively low-interest student loans, with compounding interest, deferrals can take a manageable debt load and make it unmanageable relatively quickly.

Greiner said that many students are graduating from college getting jobs that barely enable them to pay their student loans and nothing else.

"This is one of the untold stories about the economic crisis," Greiner said. "Though the government has taken steps to address this problem, it is still too little, too late."