Mounting student loans a 'debt bomb' waiting to explode

Herb Weisbaum of The ConsumerMan writes:

It’s a vicious cycle. Many families in this country cannot afford the skyrocketing cost of higher education without student loans. But many graduates cannot find a job and cannot pay off the loans. As a result, they wind up in a much deeper hole (as the interest and collection fees accrue) with no way out.

Student loan debt in the U.S. now totals more than $1 trillion. That’s more than all the outstanding credit card debt in the country.

A recent report by the National Association of Consumer Bankruptcy Attorneys found that both students and parents are borrowing at record rates.

College seniors who graduated with student loans in 2010 owed an average of $25,250, up five percent from the previous year. Parents had an average of $34,000 in student loans for their children. The report says the number of these parental loans has jumped 75 percent since 2005-2006.

“These are enormous numbers,” says Ike Shulman, a bankruptcy attorney in San Jose, Calif. “They’re basically setting us up for having a large number of fellow citizens become economically non-functional for the rest of their adult lives.”

Growing numbers of people are being crushed by this debt -- unable to pay and unable to get relief. A recent nationwide survey of bankruptcy attorneys by NACBA found that most (81%) had seen a spike in the number of people with student loan debt looking for help. But in most cases, there is nothing a lawyer can do.

Current law makes it almost impossible to discharge student loan debt through bankruptcy. And unlike other unsecured debt, there is no statute of limitations on student loans. Lenders can pursue borrowers to the grave.

“It’s not fair and it needs to be corrected,” says NACBA president William Brewer. “It is a debt bomb that could cripple our society.”

The rest of the bone-chilling article at the Bottom Line.