The explosion of student debt seems a scary looming threat, surpassing general credit card debt as well as auto debt in terms of magnitude and money owed.
And as America struggles to regain its footing after two endless wars and a seemingly-eternal soft jobs market, the cacophony of voices suggesting that the growing student loan crisis be dealt with sooner rather than later grows ever louder. Among them is William Brewer, president of the National Association of Consumer Bankruptcy Attorneys, who spoke to the Associated Press in a piece today on the issue.
According to Brewer, bankruptcy attorneys are seeing the shape of a crisis similar to that of the mortgage bubble dissolution in the mid-2000s- but since student loans can’t be discharged in bankruptcy, it will be interesting to see how this pans out. Brewer explains the similarities between the two bubbles:
“[The student loan crisis] could very well be the next debt bomb for the U.S. economy… As bankruptcy lawyers, we’re the first to see the cracks in the foundation. We were warning of mortgage problems in 2006 and 2007. The industry was saying we’ve got it under control. Nobody had it under control. Now we’re seeing the same signs of distress. We’re seeing huge defaults on student loans and people driven into financial difficulties because of them.”
Chief economist at Moody’s Analytics Mark Zandi told the AP that subsidies and loans from the government don’t put a dent in the problem, because colleges and universities simply raise tuition when money is thrown at the problem. But Zandi adds:
“Of course, it’s very hard on the kids who have gone through this, because they’re on the hook. And they’re not going to be able to get off the hook.”
A recent report indicates 30% of student loans are 30 days or more past due.