Bankruptcy lawyers: Student debt is looming economic bomb

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Bankruptcy lawyers: Student debt is looming economic bomb

Postby yhendra » Thu Feb 09, 2012 8:44 am

If US economy is getting better, unemployment getting lower, these students are able to payback their loan, then everything will be fine.
Otherwise, every year ten of thousands graduates every year coming from universities find it hard to find jobs, cannot payback the loan then it's a BIG problem and one of a factor may trigger the next crisis(?)


Bankruptcy lawyers: Student debt is looming economic bomb

By James Goodman, Rochester (N.Y.) Democrat and Chronicle

ROCHESTER, N.Y. – Student debt is looming as a national problem that could have repercussions reminiscent of the mortgage crisis, says a report by the National Association of Consumer Bankruptcy Attorneys.

Total debt from student loans is about $1 trillion, about 14 times more than 15 years ago, and well above the estimated total credit card debt of $798 billion.
The study, released Tuesday and based on a nationwide survey of 860 bankruptcy lawyers, said bankruptcy attorneys nationwide are seeing "what feels too much like what they saw before the foreclosure crisis crashed onto the national scene."

The report calls for a change in bankruptcy laws.

In the survey, 81% of respondents said potential clients with student loan debt have increased "significantly" or "somewhat" in the past four years.
And 95% of respondents reported that few student loan debtors have any chance of discharging what they owe through a bankruptcy proceeding because they have to prove "undue hardship" — a standard that is difficult to meet.

The bankruptcy attorneys association's report urges a change in bankruptcy laws so those burdened with student debt would be on the same footing as others facing bankruptcy.

"It's not fair and needs to be corrected," said U.S. Rep. Steve Cohen, D-Tenn., sponsor of legislation that would make changes suggested in the report.
Cohen outlined the revisions in a conference call with reporters Tuesday, along with officials from the bankruptcy lawyers association. Douglas Lustig, a trustee for federal bankruptcy court in western New York, agreed that something should be done.

"The problem is that you have former students who filed for bankruptcy and are not able to get a fresh start," said Lustig, who also represents clients in bankruptcy court.

Those with student debt should be able to discharge all or part of the money owed in a bankruptcy proceeding and the law should be changed so the debt can be paid over a longer period of time, Lustig said.

The high cost of college tuition and room-and-board, plus high interest rates charged by some private lenders, are all adding to the problem, experts say.
"The rising cost of education definitely needs to be in the forefront of people's minds," said Cassandra Robinson, 23, who graduated from the University of Rochester in 2010 and owes about $100,000 in student debt.

William Brewer Jr., president of the National Association of Consumer Bankruptcy Attorneys, offered a warning.
"Take it from those of us on the frontline of economic distress in America," he said. "This could very well be the next debt bomb for the U.S. economy."
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Re: Bankruptcy lawyers: Student debt is looming economic bom

Postby dvortex » Tue Feb 14, 2012 4:29 pm

As a matter of fact, alot of student have study loans in the US and face issue with repayment. Another sad fact is that in that part of society it seems, it is OK to have debts.

Why i say that? If you regularly watch CNBC Suze Orman show you will see that there is a segment of the show where people will call in and asked for "approval" to buy what they wanted and they have to "show me the money" as Suze puts it, where callers have to declare they financial status, from here you can see that most callers have bad debts not good debts! And yet, they are taking more of these bad debts...

There are some instances where after deducting whatever installment that needs to be paid, they are only left with a few hundreds...and we're talking about adults here...

Another part of the show is where there are people asking for help from her to advise how to help them get of of their debt....

Whoever created such a social norm is probably quite successful considering how many people are in such a situation.

Spend within your means, if need to take on loans, make sure its purpose can offset the interest paid -Good debt!
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