The Student Debt Plan Is A Bad One

Posted By on February 8, 2012

Student debt is rising to records with almost every government consumer report, and for a mulitude of reasons. They include steadily spiraling college costs, financial aid cutbacks at public universities and a weak economy to name a few.  And schools across the country are encouraging it because they need the money, most having expanded rapidly in the past few years to accommodate growing but seemingly unsustainable enrollments(let’s not forget the negative demographics problem going forward). This all makes things difficult for graduates once they get to the real world trying to find jobs because they are burdened with an instant debt load which seemed like monopoly money while in school. But the fact is, it’s not monopoly money, and student loans aren’t discharged in a bankruptcy…..  definitely food for thought!

Student loan debt is pushing an increasing number of young people and their parents toward bankruptcy, according to a survey released Tuesday.

More than four-fifths of bankruptcy attorneys say they’ve seen a notable jump in the number of potential clients with student loan debt, with nearly half the lawyers reporting a significant increase in such cases, according to the report by the National Assn. of Consumer Bankruptcy Attorneys.

Nearly one-quarter of attorneys say the number of potential student loan clients has risen 50% to 100%, while 39% of attorneys report increases of 25% to 50%.

The average student loan debt of 2010 college graduates topped $25,000 — the first time it has exceeded that inglorious mark. Graduating seniors had an average loan burden of $25,250, up 5.2% from the $24,000 owed by the class of 2009, according to the Project on Student Debt in Oakland.
Unlike many other forms of personal debt, student loans cannot be discharged in bankruptcy, meaning the debt can hang over students well into their adult lives.  And that is looking more and more like the new normal.

The bankruptcy attorneys group says worsening debt levels could spur a financial crisis similar to the mortgage meltdown.

“Take it from those of us on the frontline of economic distress in America,” said William E. Brewer Jr., the group’s president. “This could very well be the next debt bomb for the U.S. economy.”

Parts from Walter Hamilton of the LA Times

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