For the first time in history, student loan delinquencies exceed credit card delinquencies, the Federal Reserve Bank of New York has reported. While the number of consumers falling behind in their credit card payments has decreased four years in a row, recent figures indicate that more than 11 percent of the nation’s student loans have not been paid in over 90 days. With $956 billion owed in student loans nationally, this is a problem of huge proportions. And it may be worse than it looks; when student loans in grace periods, deferment or forbearance are factored in, the real delinquency rate may exceed 20 percent.
There are a number of reasons behind the exploding student loan debt. While banks and federal legislation have made it more difficult for high-risk borrowers to obtain credit cards, student loans remain easy to come by and are given to people who are least likely to pay back their debt. Defaults always have been high among college drop-outs, but now, even graduates are having difficulty paying back their student loans given the weak job market. Also, it is nearly impossible to discharge student loan debt in Chapter 7bankruptcy.
There are options for someone with overwhelming student loan debt. Student loans may be incorporated into a Chapter 13 bankruptcy petition to restructure monthly payments. Chapter 7 bankruptcy may be possible if the consumer can show an inability to work due to long-term disability or other hardship. Even the elimination of other debt through bankruptcy may put the consumer in a position to pay back student loans.
Someone who is struggling with student loan debt may benefit by consulting with an experienced bankruptcy attorney. The attorney can review the person’s financial situation and outline the available options.
Source: FOX Business, “Credit Card Delinquencies Fall Below Student Loan Delinquencies for the First Time,” Joe Taylor, Jr., Dec. 18, 2012by