Growing numbers of Americans are finding themselves bankrupt, with their college diplomas partially to blame.
Slightly more than 80 percent of bankruptcy attorneys say the number of their potential clients with student loan debt have increased "significantly" or "somewhat" in the past three to four years, according to a survey by the National Association of Consumer Bankruptcy Attorneys. And there's little hope those debtors will get out of their obligations; 95 percent of bankruptcy attorneys surveyed said that very few student loan debtors will be discharged from their loan as a result of undue hardship.
"Take it from those of us on the frontline of economic distress in America: This could very well be the next debt bomb for the U.S. economy," William E. Brewer, Jr., president of the NACBA said in a statement accompanying the survey.
As college costs spiral out of control and public universities cut back on financial aid, more students and their parents are taking on loans to pay tuition, according to the Los Angeles Times. At about one trillion dollars, Americans' student loan debt surpassed credit card debt for the first time in history in August 2010.
With so many college graduates burdened with so much debt, the potential for bankruptcies is huge. Nearly 25 percent of bankruptcy attorneys said they've seen potential student loan client cases surge by 50 to more than 100 percent, according to the NACBA survey. That despite the number of Americans that filed for bankruptcy overall falling last year, according to The New York Times.
Americans that graduated college with loans in 2010 owe an average of about $25,000 -- a five percent boost from the year before, according to The Project on Student Debt. In addition, because they faced an unemployment rate of 9.1 percent upon graduation they're at a disadvantage when it comes to paying back the loans.
President Obama has highlighted college affordability in recent weeks both in his State of the Union address and during a speech at the University of Michigan last month. He called on public universities to curb tuition increases and touted a plan that would tie federal funding to tuition costs.