by ERIC PIANIN
Stef Gray, a Hunter College graduate from New York who has paid $300 in forbearance fees to Sallie Mae since May, organized a petition drive in hopes of persuading the company to drop the $50 forbearance fee. CREDIT/Stef Gray
Bankruptcy lawyers have a frightening message for America: They’re seeing the telltale signs of a student loan debt bubble that is placing increased financial pressure on families struggling with their children’s mounting debt. According to a recent survey by the National Association of Consumer Bankruptcy Attorneys, more than 80 percent of bankruptcy lawyers have seen a substantial increase in the number of clients seeking relief from student loans in recent years.
In most cases, those clients could not meet the federal hardship standards that are necessary to discharge a student loan through bankruptcy proceedings. Instead, many of these parents or guardians who co-signed the student loans face the prospect of losing their life savings, cars or homes to collection agencies for aggressive private lenders.
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The amount of student loan debt has skyrocketed in recent years to a total of $867 billion last year — or more than the $704 billion in outstanding U.S. credit card debt, according to the Federal Reserve Bank of New York. Of the 37 million borrowers who have outstanding student loan balances as of third-quarter 2011, 14.4 percent have at least one past-due student loan account.
During the 2010-11 academic year, students and families borrowed $104 billion in loans from the Education Department, a 50 percent increase over three years. Private education loans fell by 65 percent in that time, to $7.9 billion in 2010-11.
Washington Post for more
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