“Loan” is a word every college student is familiar with — but it is also becoming a word many students can’t get to go away.
Although officials say Ohio University students have a low loan default rate, a new survey of more than 850 U.S. bankruptcy attorneys by the National Association of Consumer Bankruptcy Attorneys shows a major increase in private and public college students unable to repay their student loans.
A conference call Tuesday brought up the concern that student debt could become the next major economic threat in the U.S., in the same way the mortgage crisis damaged the economy.
“We can’t afford to do nothing about this,“ said William Brewer Jr., president of the National Association of Consumer Bankruptcy Attorneys. “We have to do something to take steps to not create another debt bomb that can hinder the government or economy for the next decade.”
“Even if a consumer may be eligible, they may need medical experts to prove so, which is economically too difficult to pursue,” he added.
The amount of student-borrowed money for college crossed the $100 billion threshold for the first time in 2010, and total outstanding loans exceeded $1 trillion for the first time in 2011, surpassing U.S. credit card debt.
As for why college tuition continues to increase, Rep. Steven Cohen, D-Tenn., said there is a direct correlation between the money students can borrow and the price of school.
“The more money that is readily available, the more tuition can and will continue to go up,” he said.
In 1998, the seven-year period for discharge was eliminated for public loans. In 2005, the same was done for private student loans.
The only way a student loan debt may now be discharged is through
undue hardship.
“The problem is the provision is not defined, leaving courts to define undue hardship, which results in individual bankruptcy tests that have results that have been somewhat random,” said John Rao, an attorney with the National Consumer Law Center and vice president of National Association of Consumer Bankruptcy Attorneys.
Unless consumers can show they have no chance in the future of repaying the loan and can prove they are unable to work, they cannot get undue hardship.
Historically, Ohio University students have had a relatively low loan default rate, said Becky Watts, chief of staff to OU President Roderick McDavis. However, she said, the university still works to decrease financial burdens on OU students.
“It’s not just about tuition rates, but about financial access and making sure we offer support to students that need the support or have earned the support through talent,” she said.
af234909@ohiou.edu
