Student loan debt grows among those nearing retirement

When you think of those who are struggling with student loan debt, you tend to think of young graduates. However, this type of debt is increasingly a problem among people that you would not expect-those about to enter retirement.

According to data from the New York Federal Reserve, which keeps track of student loan data, people in their fifties owe $112 billion in outstanding loans as of the end of 2012. As a comparison, members of this group only owed $34 billion at the end of 2005.

In addition, the Federal Reserve found that outstanding student loans among those on the cusp of retirement age have increased significantly as well. The data showed that Americans in their sixties owed $43 billion in student loan debt as of 2012. This is a whopping $35 billion increase from just seven years earlier.

Not only is the amount of debt growing among those approaching retirement, but the average amount of debt owed has significantly increased as well. According to the Federal Reserve, the average 50 and 60-year-old that carries student loans today owes an average of $23,820. Only seven years ago, this group only averaged $14,714.

Bankruptcy can help some

Student loans, and the interest that they generate, have proven profitable for lenders. The Federal Reserve data indicated that it was the only type of consumer debt that has continued to grow since the recession of 2008.

Part of the reason behind student loan profitability is the difficulty of getting them wiped out (discharged) in bankruptcy, unlike other consumer debt. Federally backed student loans have been nondischargeable for about twenty years. In addition, Congress, responding to the lobbying efforts of lenders, has amended the bankruptcy laws in recent years to make private student loans more difficult to get rid of.

Although private student loans can technically still be discharged in bankruptcy, it requires the borrower to prove, among other things, that his or her bleak financial situation is likely to continue for the life of the loan. Since this requires the borrower to convince the court that his or her financial situation would likely not be alleviated by a future event, such as a good paying job, most fail to get their loans discharged.

Although bankruptcy cannot directly relieve student loan debt in most cases, it can help student loan borrowers who are struggling with other types of debt. Many other types of debt (e.g. medical bills, credit cards or personal loans) are dischargeable in bankruptcy. Bankruptcy can eliminate the obligation to repay these types of debts, allowing the student loan borrower to devote more of his or her financial resources to paying down his or her debt.

Bankruptcy should not be undertaken on a whim. If you are struggling with student loans and other debts, it is important to know your options. An experienced bankruptcy attorney can advise you of your bankruptcy and non-bankruptcy options and recommend one that would be right for you.