Student loans could be next 'debt bomb'

Feb. 8, 2012 at 12:22 PM
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WASHINGTON, Feb. 8 (UPI) -- More than four of five U.S. bankruptcy attorneys say the number of potential clients with student loan debt has increased in the past three to four years.

The National Association of Consumer Bankruptcy Attorneys said a nationwide online survey of 860 bankruptcy lawyers found 81 percent said the number of potential clients with student loan debt has increased "significantly" or "somewhat" in that period. About half of bankruptcy attorneys reported significant increases in these clients.

"Take it from those of us on the front line of economic distress in America: This could very well be the next debt bomb for the U.S. economy," William E. Brewer Jr., the association's president, said in a news release.

Nearly two of five bankruptcy attorneys, 39 percent, said potential student loan client cases have increased 25 percent to 50 percent in the past three to four years.

In a report released with the survey, "Student Loan 'Debt Bomb': America's Next Mortgage-Style Economic Crisis," the association said college seniors who graduated with student loans in 2010 owed an average of $25,250, up 5 percent from the previous year.

The report said among borrowers from the Class of 2005 who began repaying loans the year they graduated, an analysis found 25 percent became delinquent and 15 percent defaulted.

Parents are also taking more loans for their children's college education, the report said.

Brewer said the amount of student borrowing exceed $100 billion for the first time in 2010 and outstanding loans exceeded $1 trillion for the first time last year.

Many parents responsible for student loans are retired or close to retirement and facing repayment demands, Brewer said.

The survey was based on 860 responses to 4,500 invitations to association members to participate.

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