Why Has American Household Debt Increased?

Posted on May 31, 2017 at 12:00pm by
Picture of Debt

The Federal Reserve Bank of New York released a report showing that household debt in the United States has reached $12.7 trillion. While this increase in debt may signify that more Americans are gaining access to credit, it could also be a sign of problems. According to an article in the New York Times, student loans are a reason why American household debt has increased. In fact, statistics from the Federal Reserve Bank of New York show 44.2 million Americans hold $1.44 trillion in student loan debt. Nine years ago, Americans owed $611 billion in student loans.

Tuition has steadily increased at most higher education institutions. Easy access to loans has increased the cost of tuition, meaning students must borrow more to complete their education.

Unfortunately, some people who borrowed for college may be too overwhelmed with student loan debt to make other credit purchases. Borrowers with higher balances may also be at risk of defaulting. The Federal Reserve Bank of New York claims 11.2 percent of borrowers are 90 or more days past due – the highest delinquency rate for any type of debt. Unlike other forms of debt, student loans are more difficult to discharge in bankruptcy. It is more difficult for these borrowers to finance mortgages or start businesses.

However, there are solutions for student loan borrowers who are struggling to make ends meet.

Can I Get Help with Student Loans Repayment?

If you are worried about your debt, it is important to focus on solutions instead of worst-case scenarios. Depending on your situation, there may be several options to ease the pain caused by student loans. You may have options that include:

  • Lower monthly payments with an income-driven repayment plan
  • Student loan refinancing
  • Economic hardship deferments
  • Student loan rehabilitation to get out of default

Although it is difficult, some borrowers who meet the correct criteria may be able to discharge their student loans in bankruptcy. We encourage you to read our blog on how Missouri courts use the totality of circumstances test for student loan discharges. This test has more lenient criteria than the Brunner test, which is use across most of the country.

If you are struggling with student loans or other sources of debt, the Kansas City bankruptcy attorneys at The Sader Law Firm can help you look at your available options for relief. Bankruptcy attorney Neil Sader was featured in Missouri Lawyers Weekly for helping reduce a client’s student loan debt by $250,000.

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