Student Loan Debt

The Student Loan “Debt Bomb”

Americans now owe more on student loans than on credit cards.
(Federal Reserve Bank of New York; US Dept. of Education)

As the cost of college continues to rise in conjunction w

ith the number of students and workers seeking higher educations; the amount of student borrowing is extraordinary. The amount of borrowing has surpassed $100 billion for the first time in 2010 and total outstanding loans have exceeded $1 trillion for the first time in 2012.

  • 2010 graduates owe an average of $25,250 in student loans
  • Parents have an average of $34,000 in student loans for their children
  • Of the Class of 2005, 25% of borrowers have become delinquent, 15% have defaulted.
  • Borrowing has increased 47% in the last three years among ages 35-49

What is fueling the debt bomb?

  • The tough economy has pushed more people to pursue mid-career training and higher education. (Kenneth Linn, Credit Karma CEO)
  • In the current economic state, while many are losing their jobs and alternatives are tough to come by; borrowers are still only allowed a small margin for missing payments resulting in uncontrollable debt.
  • Missing just one payment on a student loan results in delinquent status, after nine months of missed payments the borrower is in default. In addition to harming the borrower’s credit; once in default, the total expense of the loan is due immediately.
  • As of 2005, both private and federal loans are not dischargeable in a bankruptcy.

Suggestions on planning for student loans:

  • Plan Early
  • Set up a 529 plan. A 529 plan is a tax-advantaged savings plan intended to benefit saving for future college costs. 529 plans, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code. (U.S. Securities and Exchange Commission)
  • Avoid Private Loans, and use a federal program

For additional information please reference the NACBA report.

Attorney Jonathan Frutkin has been named an Advocacy Leader by the National Association of Consumer Bankruptcy Attorneys. In that role, he fights for the rights of consumers and brings their concerns to the attention of legislators and policy-makers in Arizona and throughout the United States.


Student Loan Debts on with Jonathan Frutkin

Jonathan Frutkin contributes to the on-going discussion of student loan debt and bankruptcy in this article, College Debt Costly for Parents