By Kyle Olson
Feel buried under student loan debt? According to some new research, you're definitely not alone.
Americans have recently racked up over $150 billion in private student loan debt. That figure is part of the $1 trillion student loan debt that has recently surpassed credit card debt as the nation’s number one cause of debt.
A staggering figure to envision, and a terribly transparent sign of our economy as a whole, student debt might be justified reaching these numbers if jobs were available to pay off said debt, according to experts.
Despite the amount of student loan debt that Americans have accumulated, many are unable to pay back their loans due to the extremely tough job market and low wages many post-graduates are earning.
The difference between the federal student loan debt and the private loan debt is that students with private loans aren't privy to forbearance or flexible payment options as with federal loans.
Many private student loans were dished out like hot cakes before the housing market crashed the economy. Many of these were loaned for more than the borrower needed, causing a long-term financial headache for the student.
Since then, borrowers have learned from these mistakes and made it harder for students to borrow more money than is actually needed.
However, it may be too little too late according to some experts.
What’s Being Done?
Now a federal agency is asking Congress to look into bankruptcy as an option to wipe out student loan debt, according to The Wall Street Journal. As nice as that may seem, a consumer advocacy agency says that will do little for the majority of borrowers who find themselves under mounds of debt.
However, as it stands, student loans cannot be discharged through personal bankruptcy, including Chapter 7 and Chapter 13 bankruptcy, among any other forms of bankruptcy.
Some ease has been put on federal student loans as of late after Congress voted to extend the 3.4% rate on federal subsidized loans that otherwise would’ve reached over 6-7% if not agreed upon.
Both private lenders and the American government can garnish borrowers' wages if the loans are defaulted on. What many people don’t know is that the government can withhold federal tax returns for Americans who default on their loans as well.
According to The Wall Street Journal, nearly 850,000 private loans went into default status between 1998-2009. During that same time period, nearly 2.1 million federal loans went into default.
Although many people fall into bankruptcy after their student loans go into default status, a bankruptcy option for borrowers would be a bad option due to the amount that taxpayers would be on the hook for.
Private student loans used to be dischargeable under bankruptcy laws like any other consumer debt, but under a 2005 change in the bankruptcy code, private student loans can no longer be discharged unless borrowers can prove undue hardship which is the same case for government backed student loans.
As drastic and critical as a situation the student loan debt is, experts say that something must be done to ease the burden on the many Americans stifled with debt.