Educational Debt Creeps Up Again

The New York Times reported last week that student loan debt has risen again in the U.S. – apparently, those who graduated in 2009 had an average of $24,000 in student loan debt, up six percent from the amount for 2008’s grads.

The numbers come from a group called the Project for Student Debt, which collects data and advocates for student rights in matters of educational debt.

Student Loans in Bankruptcy

There are a few reasons why mounting student loan debt has gotten so much attention in recent years:

High unemployment: The high unemployment rate that has plagued the country since shortly after the housing market collapsed in late 2007 is one reason why serious student debt is a troubling trend. The Project for Student Debt reports that the unemployment rate for 2009 college graduates was 8.7 percent, the highest such rate in the group’s records. Naturally, without steady income, recent graduates are unlikely to be able to afford to repay their loans.
Loans from the good times: One reason insiders have suggested for the climb in student debt rates is that 2009 graduates took on most of their loans four or more years ago, when the economy was still in good shape – now they’re saddled with serious loans and dismal employment prospects.
Few options for relief: A major source of worry for some indebted graduates is that most student loans are not dischargeable in personal bankruptcy court. Part of the reason lenders are able to keep interest rates for student loans at a reasonable level is that they are more or less guaranteed repayment of the loans at some point in the future.
For-profit colleges called into question: It should be noted that the numbers from Project for Student Debt don’t include figures from for-profit universities, which have gotten some heat in the news lately for their financial practices. In addition to the problems that plague graduates of regular public and private four-year institutions, those who choose to attend for-profit schools may not actually graduate with the skills necessary to earn enough money to repay their debts, according to some researchers.

Any Relief from Student Debt Burdens?

If you’re struggling to make payments on your student loans, you may actually have some options for easing your burden. While the bankruptcy court will likely not be able to excuse from paying what you owe to your student lenders, filing for bankruptcy may excuse you from other debt burdens and so free up your money to make payments on student loans.

Bankruptcy is by no means a cure-all for financial distress, but if you feel like you’re at the end of your rope, it may be time to speak with a bankruptcy lawyer to see what your options are and ask about whether filing for bankruptcy could realistically help you ease some of your load.

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