Student Loan Debt Forcing More Borrowers Into Bankruptcy
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Via Business Insider
The National Association of Consumer Bankruptcy Attorneys recently reported that 81 percent of those professionals surveyed said that the number of potential clients with sizable student loan balances has increased either “significantly” or “somewhat” in the last three or four years.
Nearly half—48 percent—said the increase was significant, and 39 percent said the number of student loan cases they handled has risen between 25 and 50 percent in that time. Another 23 percent reported increases of between 50 and 100 percent. In all, 95 percent said they were only able to help a small number of student loan debtors to obtain a discharge of those balances as a result of undue hardship.
As a consequence, there are very real concerns that these outstanding balances could create a debt problem nearly equivalent to that observed during the housing meltdown. The average college graduate carried a debt bill of $25,250 in 2010, up 5 percent, and education debt burden has grown 47 percent for those between 35 and 49 percent.
This may be especially troubling because in nearly all cases, consumers who seek out bankruptcy protection are not able to get their student loan debt cleared as part of the filing.
“Take it from those of us on the frontline of economic distress in America: This could very well be the next debt bomb for the U.S. economy,” said William Brewer, president of the National Association of Consumer Bankruptcy Attorneys. “The amount of student borrowing crossed the $100 billion threshold for the first time in 2010 and total outstanding loans exceeded $1 trillion for the first time last year.”
In addition to student loan debts, many college graduates also enter the workforce with at least a few thousand dollars in credit card debt spread across a number of accounts. Recent legislation related to borrowing for those under the age of 21 has helped to mitigate this problem somewhat, but the process has been slow, and is exacerbated somewhat by a job market that is still difficult for many to navigate.