You’ve probably heard of the dangers of excessive student loans in your life, but what exactly does it mean for our country’s future?
Four out of five bankruptcy lawyers point out that over the past four years, they have been seeing more and more potential clients burdened with student loans arriving on their doorsteps. Nearly half of all bankruptcy lawyers report that they have also seen a marked increase in these kinds of clients. Despite these disturbing trends, 95 percent of these attorneys say that only a few student loan debtors are qualified to get a discharge due to undue hardship. What this simply means is that an increasing number of people are unable to escape the debts they took out for their education. Case in point: 25 percent of student loan debtors in the class of 2005 were delinquent in their payments at some point. 15 percent of them defaulted.
John Rao, vice president of the National Association of Consumer Bankruptcy Attorneys, emphasizes that we as a nation need to “relieve the pressure [from student debt] before this whole thing blows sky high.” You know these words mean something when someone who makes his living handling bankruptcies raises a red light.
While the subprime mortgaging recession of 2008 was a sudden punch to the gut when real estate prices crashed, student loan debt is a slow, insidious poison that will kill our nation from the inside out. What makes student loan debt dangerous is the fact that it cannot be expunged by regular bankruptcy.
Take the case of Dave Ingham. He and his wife live in a condominium unit in Minneapolis, along with their 35-year old son. The son has been out of work since 2009, forcing him to default on his loans. Any time he looks for work, employers see his battered credit score and deny him the job. So he stays unemployed while his credit score continues to freefall thanks to his default. Ingham, the father, cosigned for his son’s student loan and now stands to lose the family's assets, including their home. Ingham points out that it was their fault for being suckered by predatory lenders, but he adds that the rest of their life should not be ruined because there is no escape route for student loans.
Here’s hoping that someone in Congress hears their plea and makes it possible for bankruptcy to expunge student loans. At the very least, maybe our government can find some way for individuals to handle their student debts better when they are unemployed or underemployed.