Education is seen as a way for many to start a promising career and hopefully live their American Dream. Unfortunately with the economic crisis of the last few years, many recent graduates and parents are finding themselves with a mountain of debt that often can't be discharged through personal bankruptcy. Many student loans aren't eligible.
Very few cases can be discharged for extreme circumstances. This is seen by many as the next great potential financial crisis. With high unemployment especially for recent graduates, many of them are seeking ways to avoid payments or are forced between living with their parents and paying their student loans.
Debt such as credit card debt could be discharged through personal bankruptcy, but young people have more student loan debt than credit card debt. Many in the industry are hoping laws will change soon to allow some bankruptcy debt to be discharged in order to alleviate the potential larger impact of students defaulting on their student loans.
Last year was the first time that the total outstanding student loan debt exceeded $1 trillion, and new loans exceeded $100 billion in 2010 for the first time. These loans will likely force students and parents to seek help through bankruptcy. The bankruptcy will likely only be able to discharge debt other than student loans, unless change is implemented soon.
Many parents fear losing their assets and retirement because many cosigned loans for their students, without thinking their children would be unable to pay them because of the lacking job market.