Total Student Loan Debt Reaches the Frightening $1 Trillion Mark ...

The Consumer Financial Protection Bureau announced this week that the amount Americans owe on student loans is far higher than previously thought, and U.S. officials warned that high levels of debt could lead to more home foreclosures for struggling homeowners.

The total amount of student debt apparently passed the $1 trillion mark late in 2011, according to a report from the Wall Street Journal.

This estimate of student loan debt, provided by the newly minted Consumer Financial Protection Bureau, offered a figure that was 16 percent higher than the estimate given by the Federal Reserve Bank of New York Last Year.

Student Loan Debt Reaches Staggering Heights

The Wall Street Journal recently provided several interesting pieces of information about what some are calling a looming student loan debt crisis:

• Survey method. In finding that total student loan debt had reached $1 trillion, the bureau surveyed a broad range of private lenders, which it claims offers better information than simply relying on consumer credit reports.
• Reasons for rising debt. Officials from the bureau said that student loan debt is rising for a number of different reasons, including an increase in the number of Americans going to college in the shadow of a weak labor market. But the most important reason for the high level of debt may be rising tuition costs, which have been increasing dramatically in the wake of state funding cuts for education.
• Is college worth it? Many economists say that college continues to be a good investment because of the large gap in pay between college graduates and people who did not attend college. In response to rising levels of debt, some experts suggest that students look for cheaper, in-state schools and seek scholarship aid.

Sources indicate that, as more people take out massive loans for education, they may delay making home purchases, which could further weaken the housing market and place considerable strain on the fragile economy.

Student Loan Debt in Bankruptcy

In order to discharge student loan debt in bankruptcy, filers must prove that they would suffer undue hardship if forced to repay their debts. Such hardship is difficult to prove in bankruptcy court, but not impossible.

Of course, students filing for bankruptcy may also be able to discharge some or all of their other unsecured debts, like credit card debt or medical bills, which could free up some money that could be used to repay student debts.

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