Bankruptcy Continues to Rise: A Glimpse into Student Loan Bankruptcy
More than 80 percent of bankruptcy attorneys reported that potential clients with student loan debt have increased in the last four years. In other words, bankruptcy attorneys are serving more clients with student loan debts than in the past. Conducted by the National Association of Consumer Bankruptcy Attorneys (NACBA), the recently released survey, “Student Loan ‘Debt Bomb’: America’s Next Mortgage-Style Economic Crisis” reports the following startling findings on student loan debt:
Impact on Students
- 2010 college graduates carried a student loan debt average of $25,250, which is up 5 percent from the previous year.
- For non-traditional students in the 35-49 age group, the loan debt burden increased by almost 50 percent.
Impact on Parents
- Parents who took out loans on behalf of students have increased 75 percent from 2005 to 2010.
- The average student loan taken by parents was $34,000, which is estimated to rise to about $50,000 over a standard 10-year loan repayment period.
Bankruptcy Attorneys’ Workload on the Rise
- Nearly two out of five of bankruptcy attorneys (39 percent) have seen potential student loan client cases jump 25-50 percent in the last 3-4 years. An additional quarter (23 percent) of bankruptcy attorneys have seen such cases jump by 50 percent to more than 100 percent.
- Most bankruptcy attorneys (95 percent) report that few student loan debtors are seen as having any chance of obtaining a discharge as a result of undue hardship.
According to the NACBA president, William E. Brewer, Jr., warns that the increase in student loan debt is serious issue for the U.S. economy, “This could very well be the next debt bomb for the U.S. economy. 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. The reason: Students and workers seeking retraining are borrowing extraordinary amounts of money through federal and private loan programs to help cover the rising cost of college and training. In many cases, parents responsible for the student loans are in or near retirement years and facing repayment demands.”