Mounting Student Loans a 'Debt Bomb" Waiting to Explode

Paying for College
1

<p>There's an excellent article on msnbc.com today about the student loan debt crisis. Bottom</a> Line - Mounting student loans a 'debt bomb' waiting to explode</p>

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Student loan debt in the U.S. now totals more than $1 trillion. That’s more than all the outstanding credit card debt in the country.</p>

<p>A recent report by the National Association of Consumer Bankruptcy Attorneys found that both students and parents are borrowing at record rates. </p>

<p>Advertise | AdChoicesCollege seniors who graduated with student loans in 2010 owed an average of $25,250, up five percent from the previous year. Parents had an average of $34,000 in student loans for their children. The report says the number of these parental loans has jumped 75 percent since 2005-2006. </p>

<p>“These are enormous numbers,” says Ike Shulman, a bankruptcy attorney in San Jose, Calif. “They’re basically setting us up for having a large number of fellow citizens become economically non-functional for the rest of their adult lives.” </p>

<p>Growing numbers of people are being crushed by this debt -- unable to pay and unable to get relief. A recent nationwide survey of bankruptcy attorneys by NACBA found that most (81 percent) had seen a spike in the number of people with student loan debt looking for help. But in most cases, there is nothing a lawyer can do. </p>

<p>Current law makes it almost impossible to discharge student loan debt through bankruptcy. And unlike other unsecured debt, there is no statute of limitations on student loans. Lenders can pursue borrowers to the grave. </p>

<p>“It’s not fair and it needs to be corrected,” says NACBA president William Brewer. “It is a debt bomb that could cripple our society.” </p>

<p>The association’s report says the country faces a serious economic threat from this growing mountain of student debt, one that could be every bit as devastating as the mortgage meltdown. </p>

<p>“This will be a drag on the economy for the foreseeable future,” warns John Roa, an attorney with the National Consumer Law Center and NACBA’s vice president. </p>

<p>It’s a problem for students and parents who co-signed loans
Dave Ingham, a disabled Vietnam veteran who lives in Minneapolis, fears he could lose his savings and his house because he co-signed student loans -- now in default -- for his son. Ingham is being sued by collectors. </p>

<p>His son Shannon has been unable to find work since October 2009. He’s now been diagnosed with acute anxiety disorder and depression. He’s still looking for work, but his father says the loan defaults keep him from getting hired. </p>

<p>“It seems that whenever he comes close to a job interview, they run a credit check, see his loan defaults and the interview does not proceed,” Ingham said at a recent telephone news conference arranged by NACBA.

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<p>Advertise | AdChoicesCollege seniors who graduated with student loans in 2010 owed an average of $25,250, up five percent from the previous year. Parents had an average of $34,000 in student loans for their children. The report says the number of these parental loans has jumped 75 percent since 2005-2006. </p>

<p>“These are enormous numbers,” says Ike Shulman, a bankruptcy attorney in San Jose, Calif. “They’re basically setting us up for ** having a large number of fellow citizens become economically non-functional for the rest of their adult lives.” **</p>

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<p>I completely agree with Mr. Shulman. And, the debt load that he seems to be remarking about isn’t even that huge…we know of many borrowing greater numbers. </p>

<p>I once commented that kids taking out huge loans (and I was talking about those with 80k+ student loan debt) were ruining their future adult lives and I got flamed for saying that. these kinds of debt stagnates a person’s ability to move forward with their life…buy a home, save money, start a family, have some security.</p>

3

<p>Agree with Shulman, but the story really should be about taking on too much debt without figuring out first how & when to pay it back. Certainly, the non-dischargability status makes it almost worse than a foreclosure right now.</p>

<p>I really, really think that as more of these stories are coming out (we on CC have been chronicling this for at least a year now) in the mainstream media, parents entering the college selection scene may become somewhat more savvy over time & will choose schools of value over schools of prestige for their kids.</p>

4

<p>JNM, I think non-dischargeability makes it absolutely worse, not almost worse, than a foreclosure in many places. With a foreclosure, you can hand the keys to the bank (declare bankruptcy may be needed in some places, not all), and then get on with your life. Go rent a place. Whatever. But with student debt, you will be paying them for the rest of your life.</p>

5

<p>It seems like consumer ignorance is the problem here. It’s a simple return on investment calculation.</p>

<p>Note: I’m not cracking on the following degree, I am just making a point.</p>

<p>If you want a degree in Music Therapy, you should know how much the bottom quarter and the top quarter makes in that field. If the bottom quarter makes $25k and the top quarter makes $50k, don’t you think it would be unreasonable to spend $50k on the education? Yes! Now if the starting salary of a Music Therapist was $100k, that’s an entire different story. But it’s not.</p>

<p>So instead of having the government forgive your miscalculation on your degree and its ROI, let those people suffer.</p>