Student Loans Could Be America's Next 'Debt Bomb,' Report Finds

Growing numbers of Americans are finding themselves bankrupt, with their college diplomas partially to blame.

Slightly more than 80 percent of bankruptcy attorneys say the number of their potential clients with student loan debt have increased "significantly" or "somewhat" in the past three to four years, according to a survey by the National Association of Consumer Bankruptcy Attorneys. And there's little hope those debtors will get out of their obligations; 95 percent of bankruptcy attorneys surveyed said that very few student loan debtors will be discharged from their loan as a result of undue hardship.

"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," William E. Brewer, Jr., president of the NACBA said in a statement accompanying the survey.

As college costs spiral out of control and public universities cut back on financial aid, more students and their parents are taking on loans to pay tuition, according to the Los Angeles Times. At about one trillion dollars, Americans' student loan debt surpassed credit card debt for the first time in history in August 2010.

With so many college graduates burdened with so much debt, the potential for bankruptcies is huge. Nearly 25 percent of bankruptcy attorneys said they've seen potential student loan client cases surge by 50 to more than 100 percent, according to the NACBA survey. That despite the number of Americans that filed for bankruptcy overall falling last year, according to The New York Times.

Americans that graduated college with loans in 2010 owe an average of about $25,000 -- a five percent boost from the year before, according to The Project on Student Debt. In addition, because they faced an unemployment rate of 9.1 percent upon graduation they're at a disadvantage when it comes to paying back the loans.

President Obama has highlighted college affordability in recent weeks both in his State of the Union address and during a speech at the University of Michigan last month. He called on public universities to curb tuition increases and touted a plan that would tie federal funding to tuition costs.

Comments

[Jennifer9]

05:49 AM on 06/13/2012

Well, student loan debt still continue to grow while even credit card and mortgage debt reduce.It's already over than $1 trillion and it seems there's no end for this problem.Student loan debt rises according to the prices, the education becomes less and less affordable for families with low and middle income.So they see a solution only in taking out a student loan.It's frustrating that nobody knows where is the solution of this problem,how to make people stop borrowing if there's almost no other way to get a degree?Anyway, student loan debt ruins American economy and there should be the way to reduce the debt at least a little.
Jennifer from http://cashadvancesus.com/

[zedthewizard]

03:02 PM on 02/22/2012

i'm unsure if the law changed, but you can discharge debts in bankruptcy if it was seven years since the loan stopped, ended, or was signed.

[MAR Baltimore]

01:30 AM on 02/13/2012

Bankruptcy is a last resort for most people. Many of the objections I’ve heard to including student debt in a bankruptcy seem to be more of a referendum on the option of bankruptcy than on the legitimacy of including student debt. My suggestion: financial literacy should be included in the curriculum of student beginning in middle school and continuing through high school, however, the curriculum should go way beyond how to maintain a savings account and include critical analysis of predatory lending practices. Essentially the area of student debt should be lumped together with deciphering the predatory practices of banks and financial institutions regarding mortgages and credit cards.

[TheJD]

06:08 PM on 02/12/2012

REPUDIATE YOUR DEBT.
The momentum grows: DEBTORS REVOLT – intentiona­­l *default-e­­n-masse* to hasten the collapse of the predatory lending system and the plutocracy into which our country has morphed.

Join us. Simply refuse to play their game, and repudiate your debts – just walk away. The system, as it has transforme­­d over the past 15 years, is simply rigged against you and offers you no mercy. So show no mercy in return; just default. Watch what happens – their power depends upon OUR cooperation, and our continued fear. Reset and rebuild from there.

DEBTORS’ REVOLT — DEFAULT EN MASSE. The Founding Fathers revolted against England over far, far less.

[OccupyFullSail]

06:57 PM on 02/15/2012

I've been thinking of doing the same thing -- starting the same movement. Follow me @OccupyFullSail

[1oldhippie]

11:58 AM on 02/12/2012

I didn't think college loans were dismissed in a bankruptcy?

[Barbara DeZan]

01:01 PM on 02/12/2012

They aren't....and haven't been in years.

[Tquin]

11:03 AM on 02/12/2012

Obama called for reduced tuition and nobody was listening.

[failureofreality]

10:38 AM on 02/12/2012

It is time for the colleges and universities to face reality. Our ability to support overpaid professors and administrators is gone. It is time for colleges and universities to account for expenditures and justify them.
As many as 60% to 70% of college classes are taught by underpaid adjunct professors. Who gets all the money?
Most advanced degrees result in poor employment prospects. Do most Ph.D. candidates in English know that the best they can hope to achieve is an adjunct position paying $20,000 per year? Do graduate students in History realize that two thirds of college classes are taught by low-paid adjuncts?
Our colleges and universities operate to benefit the few at the expense of the many. They need students to pay tuition and room and board to keep the jobs of the high paid administrators and faculty.

[hungryblackcat]

01:32 PM on 03/04/2012

It's the administrators who are taking home 6 figure incomes. There are as many of them as there are professors.

[westcoastsc]

10:05 AM on 02/12/2012

Education should be free because it benefits all. The payback from educating your people is enormous. More businesses, more tax revenue, less crime, lower unemployment, better health, better run government, and happier people.

My grandparents went to Berkeley. My parents went to UCLA. What they had to pay to go to school was negligible and practically free. In fact, in the California Constitution it is written that the state shall provide affordable education for all. What happened?

Putting people in debt slavery is not going to stimulate the economy. These people struggling to pay back their debts should be starting the businesses we need to right our ship.

It seems that there are powerful forces who want everybody in debt and no competition.

[Michael McVerry]

01:08 AM on 02/12/2012

I've paid off 75% of my loans, should I just stop paying and let the government cover the rest? I don't know what to do?!

[spinotter11]

08:29 AM on 02/12/2012

You borrowed it. Pay it.

[VoteThemAllOut]

08:08 PM on 02/11/2012

All together now -- Awe, so sorry for all of those who borrowed monies to get their degrees in disaplines that graduate 1,000s for every job oppertunity. If these are the brightest it is amazing that they were not smart enough to realize that their BS/BA degree in poli-sci, mayan civ, etc. would not get them that high paying job.

Now they want the good old taxpayer to pick-up the tab for their bad choices and 4 years of delta house parties..

[fried52]

01:25 AM on 02/12/2012

You sound highly educated. Thanks so much for your insightful comment. Schmuck.

[VoteThemAllOut]

08:39 AM on 02/12/2012

Sounds like you might be one of those that got a worthless degree by running up a tab and now want someone else to pay your bill.

[indigo ra]

01:29 AM on 02/12/2012

You are right and I couldn't agree with you more, however, there is another side that needs to be looked at, and perhaps you will agree.

In many cases, it isn't a matter of poor judgement on the part of the lender, but actually, a banking system that is bent on driving up the costs and is inhuman in it's collection of debts. In the past 20 years, banks preferred defaulting peope who were late on payments as it would allow them to gain even more control over the loans themselves (and the borrower). If these loans could be written off in the form of personal bankruptcy, the banks would have to change their practices and be a little more supportive of the people they loaned to (rather than making them victims).

It's a tough stance to say that we should write off the debts of people who spent the money for a good party and a poli-sci degree, but then again, there are plenty of borrowers who don't fit that category, and almost all banks have been taking advantage of zero risk lending for more than 30 years. There is a problem that needs to be fixed, and making the borrower the victim is not the solution.

[VoteThemAllOut]

08:36 AM on 02/12/2012

Banks certainly have helped create this mess - cannot agree more.

Those who worked and still had to borrow might deserve some consideration. The problem I have is that they agreed to the loan, knew the parameters and now many are crying poor me. What about those that borrowed and are repaying or have done so, is it right for them to do so while, if it happens, others had a free ride?

[iam99]

01:16 PM on 02/11/2012

Boost the economy by having the fed print those unlimited dollars to pay off everybody's higher education debt and then pick up the tab for everybody else thereafter. That would get us going.

[Y3rMawm]

12:09 AM on 02/12/2012

That would be inflationary. The government already guarantees loans as it is. This guarantee has merely resulted in moral hazard in the student loan space, just as it did in the housing space.

[Artamentous]

07:44 PM on 02/10/2012

Wait, you mean that retail jobs aren't cutting it? The next bubble is always around the corner, welcome to Capitalism my friends.

[Y3rMawm]

12:10 AM on 02/12/2012

That's not capitalism. It is the classic pattern of currency destruction. None of this is capitalism.

[Artamentous]

02:51 PM on 02/12/2012

Keep telling yourself that. I'm not even sure how you can say that with a straight face.

[skttken]

05:01 PM on 02/10/2012

I will work for food

[Dosadi]

09:33 PM on 02/10/2012

You may have to. But will it be real food or processed poison?

[Justin Moore]

01:52 PM on 02/10/2012

his dad didn't graduate from college...it shows...in his son's logic...

[susanbsbi]

10:24 AM on 02/10/2012

If your money if tight, try a state school, where the cost is a lot less than the large for profit Universities. So states have prepaid plans [Florida is one].
this is where you lock in your cost and pay it off in 15 years, this is for a state school, but can be credit to a out of state college, where you would have to pick up the difference.
If it is federal student loans, your payment is based on your income, yes it might take years to pay off, but once you get the actual work experience you take home goes up and so does the loan.
By trying to skate paying for your education by filing bankruptcy you you are hurting those that come behind you to get loans, Also, the bankruptcy will stay on your credit report for 10 years, a lot of employers will see that and think you are not a responsible person and may not get that dream job or the pay raise

[Willowset]

10:45 AM on 02/10/2012

If your money is tight try a community college or trade school, albeit not one of the so-called "private colleges" that hand you a worthless certificate if you pay enough. The problem with state universities is that they are inexpensive only in relation to Ivy League schools. "Paying it off in 15 years" doesn't sound very good unless you are majoring in a subject that will lead to a lucrative career. Besides making that payment -- over fifteen years -- you will have to pay rent or a mortgage, buy a car and gasoline to run it, start paying for your own children's education unless you put off starting a family until you are about forty .......