The credit crisis that contributed to the recession in 2008 left millions of Americans without a job or financial stability to make monthly payments, leading to one of the worst housing crises this nation has ever seen. Recent employment growth and re-stabilizing housing prices have given the country a reason for hope. According to the United States Department of Labor, the unemployment rate recently dropped to 8.3 percent, after falling from a near-30-year high of 10 percent in October of 2009. However, a recent report by the National Association of Consumer Bankruptcy Attorneys (NACBA) reveals a new potential crisis that could hamper economic growth in the United States.
According to the NACBA's survey of 860 bankruptcy attorneys across the country, 81 percent revealed that potential clients with student loan debt have significantly or somewhat increased in the past three to four years. Approximately 50 percent of all respondents said such clients increased at least minimally. William E. Brewer, Jr., president of the National Association of Consumer Bankruptcy Attorneys, said in a statement that coming from credible sources, the student loan debt crisis could be the cause of the next financial calamity in the United States. Student loan borrowing surpassed $100 billion for the first time in U.S. history during 2010 and outstanding loans passed $1 trillion during 2011. Brewer adds that the cause of this outstanding debt is largely due to the rising costs of college and training, students and workers seeking federal and private loan programs, and parents heading into retirement who are responsible for repaying these debts. John Rao, attorney for National Consumer Law Center and vice president of the National Association of Consumer Bankruptcy Attorneys said that even when the economy is plentiful, young adults are hindered by student loan debts that restrict their ability to purchase cars, homes and start a family in the future. "Piling up student loans in middle age is even more troublesome. And parents who take out loans for children or co-sign loans will find those loans more difficult to pay as they stop working and their incomes decline," Roa said in a statement. "This concern is echoed by bankruptcy attorneys from across the country who report that what they are seeing at the ground level feels too much like what they saw before the foreclosure crisis crashed onto the national scene: more consumers seeking their help with unmanageable student loan debt, and with no relief available." Students and parents heading into retirement may very well be the next major demographic in need of short term financing solutions.