Student loan debts currently exceed every other type of debt balance besides mortgages, and this $966 billion debt total is dragging down economic recovery, according to experts. Wisconsin students seeking debt relief from tremendous loan balances are finding that they cannot discharge students loans in a bankruptcy in most cases, leading to focuses on how to pay off thousands of dollars in debt without the help traditionally available to over-extended debtors.
One of the results has been that new graduates have cut back on spending. Since consumer spending accounts for about 70 percent of the country’s gross domestic product, it is unlikely that economic recovery can flourish with such a large number of people avoiding major purchases. These students may also have trouble securing financing for a home or other major acquisition. In fact, only 7 percent of the students with the highest debt took out mortgages last year compared to 17 percent in 2005, even though housing prices have dropped.
Student loan borrowers increased by 70 percent between 2004 and 2012, with the average borrower now owing $24,301. At least 13 percent of graduates owe more than $50,000, and 3.7 percent now owe more than $100,000.
Those who are facing massive student loan debt may believe that there is no solution to the problem, but a bankruptcy attorney may be able to assist these borrowers with debt relief efforts. By discharging other types of debt, a student borrower may be able to save enough to pay off large student loan balances even if the student loans themselves are not covered under the bankruptcy proceedings.
Source: The Economist, “Student debt is a drag on U.S. recovery,” Shannon Bond, March 5, 2013
