The National Association of Consumer Bankruptcy Attorneys recently released a report into the burgeoning problem of student debt in the country. The report titled The Student Loan Debt Bomb: America's Next Mortgage-Style Economic Crisis?’ contains several findings that are no surprise to any California bankruptcy attorney. However, consumers may be unaware of exactly how widespread the problem has become.
As the report indicates, it's not just college students who are struggling with massive debt. Much of the debt is now being carried by parents who took loans for their college-age students. Loans to parents for the education of their children have increased by 75% since the 2005-2006 academic year.
According to data, federally backed educational loans given to parents comprise up to 10%, or $100 billion of the $1 trillion that is currently outstanding in student loans. Parents now hold an average of $34,000 in student debt, and over a ten-year period, that figure could rise to about $40,000. Among students who graduated in 2010, approximately 17% had parents who got loans for their children.
Another interesting fact that emerged in the report is that borrowing is up not just for the below-24 age group, but also for the 35 to 49 age group. In fact, borrowing has grown substantially for this age group, and this is probably an indication that during a recession, many mid-level professionals had to go back to college to bolster their employment and promotion prospects.
California bankruptcy lawyers note, the report also found that loan delinquency is widespread. Out of the class of 2005 students who began paying back their loans after they graduated, about a quarter became delinquent at some point in time, and about 15% defaulted on their loans. On government loans, the default rate was high as 20%.
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