With student loan debt now topping U.S. credit card debt and few or no options available for distressed borrowers, America faces the very real possibility of another major economic threat. The threat that is on a par with the devastating home mortgage crisis. As bankruptcy attorneys, we have seen an increase in the last three-four years. That is an increase of potential bankruptcy clients with student loan debt. Further, few student loan debtors are seen as having any chance of obtaining a discharge as a result of undue hardship.
College seniors who graduated with student loans in 2010 owed an average of five percent. This is more in comparison to graduates from the previous year. Borrowing has grown far more quickly for those in the 35-49 age group; with school debt burden increasing by 47 percent. Loans to parents for college education of children have also grown; seeing an increase of 75 percent since the 2005-2006 academic year.
With the limited availability of student loan discharge, there is a big problem barring a fresh start for clients. Student loan debt collections have also become more aggressive in the last 18 months. And, debts more than 15 years old are still in pursuit. Unless the bankruptcy code is changed to allow student loan discharge, bankruptcy attorneys will continue to be able to offer little help to these struggling borrowers.
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