Just as college seniors prepare to graduate, experts are warning about an alarming new trend. More students are declaring bankruptcy to help get out from under a mountain of student loan debt.
“We are starting to see the first big wave,” says Christina Henry, a bankruptcy attorney at Seattle Debt Law.
Henry said she has seen a notable increase recently in clients coming to her with student loan debt. Unlike most debt, student loans cannot be discharged through bankruptcy, so Henry is working with students to pay off other loans so they can focus on the student debt.
“In my opinion, we are going to see a whole generation of people where standard of living is going to be diminished because they can’t find a job to keep up with payments,” she said. “Most people don’t understand the terms on these student loans are inflexible.”
Total student loan debt just reached $1 trillion this year in the U.S. That's higher than total credit card debt. About two-thirds of college graduates have some student loans to pay off, and their average debt is about $25,000 to $28,700, according to estimates by education experts and organizations.
Matt Davis is one student who graduated last year with $16,000 in debt, and has a job with the University of Washington Food Services just to make ends meet in a tough job market.
“Interest accrues faster than I thought,” he said. “It’s scary.”