Is student loan debt the next mortgage crisis?
February 15, 2012
A new report is a worthwhile read for anyone considering taking out a student loan to pay for college.
A nationwide survey of bankruptcy lawyers conducted by the National Association of Consumer Bankruptcy Attorneys (NACBA), found that 81 percent have witnessed the number of individuals with college loan debt increasing either "significantly" or "somewhat" over the past few years.
"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," said NACBA president William E. Brewer Jr.
Those figures mean that student loan debt now surpasses the credit card debt (estimated at $798 billion, according to USA Today) in the United States.
The report found that college seniors who graduated with student loans in 2010 owed an average of $25,250, up 5 percent from the previous year. In addition, borrowing has grown far more quickly for those in the 35-49 age group, with school debt burden increasing by a staggering 47 percent.
The report also calls for changes to the bankruptcy laws. It found that 95 percent of respondents say that few student loan debtors have any chance of discharging what they owe through a bankruptcy proceeding because they have to prove "undue hardship," which is difficult to do.
The group alleges that the student debt problem is becoming so big, it could become the next major economic threat to our country, much like the mortgage crisis.
"This concern is echoed by bankruptcy attorneys from across the country who report that what they are seeing at the ground level feels too much like what they saw before the foreclosure crisis crashed onto the national scene: more consumers seeking their help with unmanageable student loan debt, and with no relief available," said NACBA vice president, John Rao.
While some think that changing bankruptcy laws will help alleviate some of the problem, others say it could create different issues for students looking for money to pay for a college education.
"While letting students discharge their loans will certainly help the students pay off their college debt, it may have the unintended consequence of driving lenders away from making student loans which will negatively impact all students," Joseph Orsolini of College Aid Planners told the Business Insider.
The good news for many mothers who want to earn a college degree is that loans are not the only way to make paying for college degree a reality. Various grants for parents, scholarships for mothers and single mother scholarships help student parents fund their education without going into debt.
