3/6/2012 2:43 PM ET|
Student loans push up bankruptcies
A typical college graduate now owes about $25,000 when he or she finishes school. This could be the economy's 'next debt bomb,' a bankruptcy attorney warns.
A new study has found that there has been a significant increase in the number of consumers seeking the help of bankruptcy attorneys as a result of outstanding student loan debt.
The National Association of Consumer Bankruptcy Attorneys recently reported that 81% of those professionals surveyed said that the number of potential clients with sizable student loan balances has increased either "significantly" or "somewhat" in the past three or four years.
Nearly half -- 48% -- said the increase was significant, and 39% said the number of student loan cases they handled has risen between 25% and 50% in that time. An additional 23% reported increases of between 50% and 100%. In all, 95% said they were able to help only a small number of student loan debtors obtain a discharge of those balances as a result of undue hardship. (Will you be able to pay off your student loan? Check with MSN Money's calculator.)
As a consequence, there are concerns that these outstanding balances could create a debt problem nearly equivalent to that observed during the housing meltdown. The typical college graduate carried a debt of $25,250 in 2010.
This may be especially troubling because in nearly all cases, consumers who seek out bankruptcy protection are unable to get their student loan debt cleared as part of the filing.
"Take it from those of us on the front line of economic distress in America: This could very well be the next debt bomb for the U.S. economy," said William Brewer, the 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 their student loan debts, many college graduates have at least a few thousand dollars in credit card debt spread across a number of accounts. Recent legislation related to borrowing for those under age 21 has helped mitigate this problem somewhat, but the process has been slow, and the problem has been worsened by a tough job market.
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I agree with what sickandtired2010 said. I will be getting my bachelor's in computer science next year. It's a 4 year degree and only in the last year have I started taking the degree specific classes. It's ridiculous all of the prerequisite classes you have to take. I had to take a science fiction literature class. Seriously? I probably owe $1,000 on that one class alone. I wish my debt was only $20 something thousand. When I finish, I will owe around $80K. If I had known then what I know now, I probably wouldn't have ever went back to school. I just hope I'm not going to be one of those graduates who can't get a job because I have no professional experience or because the economy still sucks. It used to be that a higher education was a guaranteed path to a better life. Not so anymore. It's a sad time when you start to question your decision to get a degree.
I know it is debt I incurred and I plan to do everything I can to pay it back. I don't want anyone to bail me out, but it shouldn't be such a burden to get a better education. Seriously, the resources used to get me to a degree could not possibly add up to $80,000. It's ridiculous.
Anyone else notice a theme in America? Too much debt! Even our Governments are addicted to debt.
We seem to not be able to live like we want to without going into debt. Their is a problem when your debt cannot be reasonably handled by your paychecks. I know someone who works at a home improvement store and owes $100,000 in student loans. Tell me how is that education going to help him? He has a physical education degree? I do not know of many places where that kind of degree with provide him with the income to justify what he spent on education.
Best advice from me: if you are not participating in extracurricular or have a specific major in mind - go to a community college and live at home with mommy and daddy working the entire time. When it comes time, finish 2 years at a state college and live off-campus and work. As much as you want to get away from the parents at 18 and 19. Being 25 and married and living with mom and dad is much worse.
To those who keep stating that people should stop whining and work for something... I worked 35 hours a week all four years of my undergraduate degree, which was a biology degree and took a great amount of hard work and dedication to complete. I then worked full time in the pharmaceutical industry while completing my graduate degree. Even with working full time, I ended up owing $73,000 and have to have my monthly payments adjusted for my current income. Owing money for your college education is not due to paryting and being lazy. The fact is that a quality education comes with a very high price tag these days.
Why is it I can refinace my home mortgage to 4.85% yet my student loan is stuck at 7.5%?
Also, I have been re-paying my student loan for eight years now and my principal has reduced from $29,900.00 to $25,750.00. How is that possible?
Ahhhhhhhhhhhhhh! How I love to read the posts of those who live a perfect fairytale world where it rains lollipops and gumdrops, money grows on trees and nothing ever goes wrong.
Here in the world I live in, it doesn't work that way. There are actually people who worked full-time in college, had their parents contribute to their education, got scholarships and STILL had to take out student loans. Also in this world, the jobs that people get which allows them to save to go to college usually pay you on a scale that makes it take years before you can afford to go to college. That's because, wait for it..............they don't have a college education. By that time, you're probably looking to start a family so..............where does that leave you?
College should not be so high and neither should loan interest rates. Simple as that.
Why are student loans basically non-dischargeable? Granted, there are various protections for creditors carved out of the bankruptcy code but no other class enjoys what is essentially a sacrosanct, untouchable status. Furthermore, why are private loans given the same status as stafford loans for ex. but private lenders don't have to comply with the same repayment guidelines?
You can stick you head in the sand and try to blame the stupid, irresponsible kids who went to school to get a degree in pottery (yeah, they're all pottery majors) but that's not going to solve amything and it is ignoring the root causes of the problem.
The problem with the student loan system is like every thing else the government is in involved. This allows Universities and Collages to over inflate the cost of tuition because it is guaranteed. The Universities also employs many professors that indulge in educating in useless degree programs. If the Government would set up metrics on income potential on the degree that the student has chosen and only guarantee those degrees that have a potential success. It would eliminate the so called partying degrees. This would also persuade the higher education provider to repeal most of the useless degree programs that they offer. Just an example UCLA offers a degree in Dolphin Training. I don't know about you but I do not see any fortune 500 companies in need of a Dolphin trainer. This is easy to fix.
Students loans are killing America’s middle class. Think about it. The wealthy and upper middle class can save and pay for their kids’ college. The poor go to college for free on FAFSA.
Let’s just assume there is no wasteful spending and students were only allowed to get a loan for tuition and nothing else. They have to work to cover all cost of living expense. Would this fix the issue? NO. Why not.
You can’t loan out tuition cost for 100,000 people to get a Bachelors in Education if there are only 10 jobs available. How are the other 90,000 suppose to pay back their loans? Why is the government loaning out all this money if the kids can’t get jobs to pay it back? Seems to me that the youth of America are being setup to fail.
Stop loaning money to kids to get jobs that DO NOT exist. Problem solved.
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