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Experts predict a student loan crisis. Could bankruptcy help?

Young college students often have no choice but to take out student loans in order to pursue their educational goals. As most people in Ohio already know, these loans are no small matter. As tuition rates seem to climb higher and higher by the year, some borrowers may choose to pursue bankruptcy when faced with seemingly insurmountable debts.

In 2017, the average college graduate walked across the stage with $40,000 worth of student loans. This was a relatively significant increase from 2016, when students graduated with an average of only $37,000. These borrowers may have predicted that they would have well-paying jobs waiting for them after graduation, but even if they do they may still struggle to repay their loans.

Experts from the Brookings Institution and the Urban Institute both released reports that indicate the future is not looking good for student loan borrowers. By 2023, around 40 percent of all borrowers are expected to default on their payments. With approximately 250,000 borrowers already defaulting every quarter, there could be a debt crisis on the horizon.

Some borrowers have the option to consolidate loans or defer payments. However, those who owe less than $5,000 default more frequently than those who still owe $35,000 or more. This means that it is not necessarily how much a person owes that causes them to default, but other extenuating life circumstances, which a deferment might not address.

Student loans cannot normally be discharged in bankruptcy under current law, but that does not mean that the process is still not an invaluable tool for people in Ohio. Other types of debt, including credit card balances and some tax debts, are more readily dischargeable. When these debts are successfully discharged and no longer a burden, borrowers may be better equipped to handle their student loan payments.

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