The amount of outstanding student loans surpassed the nation's credit card debt, reaching $1 trillion, in 2011. Those with student loan debt are reportedly delaying buying houses, getting married and having children. And the crisis hasn't only affected young students--co-signing parents or adults returning to college are also affected.
According to a recent USA Today report, one 73-year-old graduate of the University of Arizona is dealing with wage garnishment in order to pay back more than $136,000 in student loan debt related to her 1996 master's degree.
Lawmakers agree that something must be done to tackle this issue, but there is disagreement about how to fix this problem. Some believe that the bankruptcy code should be reformed to include student loans when discharging debts in bankruptcy. Currently, Chapter 7 and 13 bankruptcy filings address most debts so a filer can start fresh, but college loans are not discharged unless undue hardship is proven.
The problem was heightened in recent years, at a time when most households saw their income decrease, and public college or university tuition rose by more than 33 percent.
Currently, some students may qualify for loan forgiveness. For example, borrowers who enter public service full-time may qualify for loan forgiveness in 10 years, and loans can be forgiven in 25 years for borrowers in the income-based repayment program. However, only borrowers who remain current on their payments qualify for these forgiveness programs. Proposed legislation could reduce the number of years before loans are forgiven in both the income-based repayment and the public service employment plans, and extend the options to more borrowers.
Other proposals include increasing the scope and availability of Federal Pell grant program.
As the 73-year-old widow realized, job prospects and low wages affect the feasibility of student loan repayment. Although student loans are not currently dischargeable in bankruptcy, those who are drowning in student loan debt may benefit from a discussion with an experienced bankruptcy attorney. A variety of debt relief options may make it more possible to pay down student loan debt.
Source: USA Today, "Five proposals to solve $1 trillion college loan crisis," Sandra Block and Christine Dugas, May 21, 2012