Hi there,

I just wanted to pose a question regarding some 'advice' I was given on how to deal with my student loan debt.  First off I should mention that I'm Canadian, so I'm not sure if the legal frameworks are compatible as they relate to student loans or bankruptcy in the American context , however I'm sure some general insight would be relevant. 

So my student loans stand at roughly $30,000 in total, a sum which seems staggering to a low income student such as myself.  Now during that past decade Canadian bankruptcy legislation has been altered to exclude student loan debt.  It was suggested to me that I accumulate the credit equivalent to the value of my student loan debt via credit cards.  So the scenario suggests that I acquire $30,000 worth of credit in credit cards, use that to pay off my student loans, then file for bankruptcy, which will absolve the credit card debt.  

My adviser here suggested this was an attractive option for me because a) I'm young (23) so I will be able to build up my credit again and b) I have no real assets so there is nothing for me lose while filing bankruptcy.

While this does sound attractive to me, this particular individual does not have a financial or legal background, so I'm naturally suspicious of his actual depth of knowledge on the matter.  

I'm curious whether or not this potential course of action is possible in the way it was described to me, or whether there would be some legal recoil that I'm unaware of.  I only ask because I am in a very low income situation, and the prospect of paying off this massive student loan seems near impossible.

thanks for the input Mike, I appreciate the quick response.

As far as a more detailed financial snap shot of my current situation, it's more or less 'zero sum'.  Meaning that I have virtually no real assets of any notable worth ( I do not own property, nor do I own a vehicle, my possessions are limited to books,clothing, and a computer) and I have no outstanding consumer debt.  I've always paid my credit cards off without delay, and my net credit worth is at $12,500.  Recently I've been upgraded to a Visa Gold and a subsequent doubling of my credit limit.  I'm always getting letters from different providers to subscribe to their cards, so acquiring more credit would not be a problem.  For the sake of this 'plan' I foresee no difficulty in acquiring enough credit to unload my student loan debt.

Considering that my educational debt load is the sole source of my financial burden, you'll understand why I'm so keen to be rid of it, and continue on with life, free to accumulate wealth, rather than play the compound interest game.  Which I might add is calculated at prime plus a floating interest rate of 2.5%.  I find the fact that a wealthy institution is profiting off the educational debt of a low income student is morally abhorrent.  It's my firm conviction that education is not a privilege, nor is it a commodity to be sold to the highest bidder, it is a human right that should not be restricted by economic barriers.  In many European nations access to university education is universal, free to all domestic citizens that qualify.  The fact that Canadian and American students are subject to such outrageous fees when attempting to further educate themselves is  inexcusable in my mind. 

 Furthermore, there is very little sympathy within me for the credit card industry, whose reckless loaning practices create a vicious cycle of debt that literally ruin the lives of good, honest, working class people.  For these reasons I have no remorse for the potential consequences my actions may have for the respective credit lenders.  I feel that the inherent systemic corruption has created the problem in the first place, and failures to address it will result in the continuation of a morally perverse state of affairs, which allows the wealthy to profit off the poor.  

With all that said, I still share your sense of concern over the ethical nature of this plan.  No doubt this is an 'easy way out scheme' for me to unload the debt quickly so I can save 2-3 years of time and wages.  It's not like I don't have options, so by choosing this path I am clearly taking advantage of system that is meant for people who don't.  I understand there are people on this forum who are in real 'do or die' situations, to which my plan may seem like a mockery.  However I only consider this course of action because it seems like the path of least resistance.

Mine is a question of opportunity cost.  With current job prospects, upon graduation I can expect to pay of the debt in 2-3 years time.  So if I choose this route, bite the bullet, and pay off the debt I lose $30,000 worth of savings, keep a good credit rating, and start from zero to save up more money for continued education.  On the other hand, if I carry out this plan, I absolve the debt completely, ruin my credit for the time being, and in the same 2-3 year span I come out with enough money to complete another degree.  

Rationally I can justify this move as 'an efficient use of time and resources', but in another sense it is just plain sleazy.  You bring up some good points on how this would effect long term considerations such as insurance rates, job advancement, and getting new credit.  On a personal level I don't feel these aspects effect me in a deep way.  Once I am debt free I plan to stay that way, I have no desire to acquire more credit, nor live beyond my means to borrow for a lifestyle I can't afford.   On the contrary I consider a willful acceptance of material poverty to be an admirable mark of virtue and spiritual character.  

I have much to consider…..

oh and your points about considering time and spreading the debt over a longer period was valuable.  

Still not sure what direction I'll take, the easy way out seems tempting from this standpoint but is it worth it?  

hmmm…. definitely not a light decision to make…. though in the end I feel I'll go with my gut instinct…  

You are absolutely correct in your latter remarks, the key words being 'honoring' and 'obligation'.  Despite my own ideological opposition to the established lending doctrine of these industries, I as an individual have entered into a valid contract, which is legally binding.  While I may snub the corruption and malicious intentions behind the very nature of their practices, the fact remains that I have signed my own intention in good faith.  More than anything else, the path I tread will be a reflection of my own character, rather than the institution I am rebelling against.  

Regardless of the circumstantial short comings of my situation, I would be lying if I said that I was indeed 'trapped'.  Sure I have options, I'm a 23 year old  university student on the verge of completing a degree.  While it may not be ideal as I would have envisioned, I suppose there is a certain dignity that arises when one is able to stand on their own two feet and confront adversity on their own terms, rather than cowering in defeat at the first sign of turmoil.  In one light I suppose you could say it's a test of character.

In truth I was aware of this all along, my curiosity came from the temptation of a 'free lunch', hoping that someone else could deal with the bill while I enjoy the meal.  The socially responsible thing to do would be to swallow my pride, bury my naive idealism and deal with the harsh reality of my own financial short-sightedness.  I mean in all honesty I could have mitigated a great deal of this debt during my studies if I were to be more fiscally prudent.  As I reflect on it now, and look back on the reckless, laid back, and out right irresponsible manner in which I handled my finances through my university career, I'm beginning to see my current situation as the harvest of a seed I planted some years ago.  As the old adage goes, 'you reap what you sow',  so should I pay what I owe.  

I can say with confidence that this now marks the end of this chapter.  It's been rolling around in my mind, but the more angles I consider, the less I can convince myself that it's a legitimate enterprise.  

I am truly thankful and grateful for your time and input into this silly matter.  

All the best….