Bankruptcy attorneys say student loans may be the next economic crisis

A new report released by the National Association of Consumer Bankruptcy Attorneys show that student loan debt could be the next financial crisis America faces. The report serves as a warning that something has to be done about student loan debt.

Total student loan debt has reached a staggering $1 trillion dollars. That is 14 times higher than 15 years ago, according to USA Today. Student loan debt has far surpassed credit card debt which estimated to be $798 billon. Forbes reported that the average college senior owes over $25,000 by the time they graduate from college. A student loan can take decades to pay off as the interest rates cause the debt to rise.

The study of 860 bankruptcy lawyers nationwide showed that student debt has reached an all-time high and creates the concern that it could cause another financial crisis. Over the past three to four years 25 percent of the attorneys surveyed saw a 50 percent increase in student loan cases.

Student loans generally cannot be discharged in a bankruptcy proceeding unless the debtor can prove it causes undue hardship which is very difficult to establish in court. Only 5 percent of people seeking relief from student loans are successful.

Congress passed a law in the 1970s that prohibited student loans from being discharged in bankruptcy court. Bankruptcy attorneys are urging lawmakers to change the laws regarding student loans to avert the next economic crisis.