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More Baby Boomers, Seniors Struggle with Student Loans; Out Pace Other Debt

According to a recent survey, many older Americans are struggling with student loans, along with their younger counterparts - boomers owe over $112 billion

Oct. 23, 2013 - The financial strain that student loans can cause has been a popular topic in the media. We all have heard stories about graduates, who cannot find jobs due to the poor economy, finding it difficult or impossible to pay back their loans. However, a recent story that looked at student loan data found that they are not just the bane of the young.

According to student loan data, compiled by the New York Federal Reserve, people in their fifties now owe $112 billion in outstanding loans. This is a significant jump from 2005, when this group only held $34 billion in loans.

In addition to the middle aged, the data also showed that those who are about to enter retirement carry a significant debt load. The student loan data showed that people in their sixties and over now owe $43 billion. Seven years ago, this group only had $8 billion in outstanding debt.

Experts blame the trend on unprecedented year-over-year increases in college tuition. As a result, many parents (and grandparents) have taken on student loan debt to help their children pay for college. Overall, the Federal Reserve data found that since the recession began in 2008, student loans were the only type of consumer debt that has grown, as Americans have cut back on other types of spending.

Relief is limited

Student loans have proven profitable for lenders, partly because they are very difficult to have discharged in bankruptcy. This virtually guarantees that the loan will be paid back. Although they were once dischargeable, over the past thirty years, Congress has responded to lobbying by lenders and amended the bankruptcy laws to limit the dischargeability of student loans

Understanding Bankruptcy and Student Loans

By Minion & Sherman, New Jersey bankruptcy attorneys

Student loans are some of the largest debt obligations people take on. As of 2012, the amount of student loan debt in the U.S. exceeds the amount of credit card debt. That has never happened before. As your lawyers, we are ready to sit down and discuss options for dealing with your overall debt. There are really two possibilities when it comes to bankruptcy and student loans:

   You have an extreme financial hardship that would qualify you for discharge of student loan debts. The hardship does need to be extreme, such as a disability that prevents you from working.

   If your loans are not dischargeable, we may be able to take steps to deal with credit card debt, medical bills and other obligations through Chapter 7 or Chapter 13 bankruptcy, or alternatives to bankruptcy.

As a result of the changes to the bankruptcy laws, courts are reluctant to discharge student loans. However, it is possible for borrowers that can prove that repaying their student loans would result in an undue hardship to have their loans wiped out. What constitutes an "undue hardship" varies by jurisdiction. However, many courts (including New Jersey) have interpreted this to mean that the borrower must prove three factors:

- That good faith efforts were made to repay the loan;

- An inability to maintain a minimum standard of income as a result of the loan; and

- The bleak financial situation would likely persist for most of the loan's repayment period.

Many borrowers can successfully prove the first two undue hardship elements, the last one is much more difficult, because it requires the borrower to prove that no future event (e.g. a higher paying job) would likely alleviate his or her bleak financial situation. However, courts have allowed discharges in cases of extreme financial hardship.

Although bankruptcy cannot relieve borrowers from student loan debt for many people, it can make student loans more affordable for many. Other types of debt, such as medical bills or credit cards are dischargeable in bankruptcy. Often by relieving student loan borrowers of the obligation to pay these debts, bankruptcy can allow borrowers to devote more of their income towards paying down their student loan debt.

As bankruptcy may not be right for everyone struggling with student loans, it is important to consult with an experienced bankruptcy attorney. An attorney can review your situation and recommend the debt relief option (including bankruptcy alternatives) that would leave you in the strongest financial position.

Analysis provided by Minion & Sherman, bankruptcy attorneys, www.minionsherman.com

20131023_More Baby Boomers, Seniors Struggle with Student Loans; Out Pace Other Debt

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