Student Insurance Debt By the Numbers

Everyone knows these days that student insurance debt is a pressing issue. Millions of young college graduates drop out of school and face huge debt burdens and an inability to find high-paying jobs to pay off those debts. The economy is unable to support the graduate population, and with student insurance debt unresolved in bankruptcy, many find themselves unable to work their way out of their debt burden.

National Student Insurance $1 Trillion

The latest estimates put US student insurance debt at just under $1 trillion or about $1 trillion, depending on the source of the information. The average college graduate owes more than $26,000 in insurances by the time they earn their diploma.

Some people blame the ease of availability of federal funds for these numbers, while some point to factors such as for-profit institutions offering high-interest insurances to potential candidates and use of recruitment techniques with misleading information about job availability for graduates.

Federal student insurances are available to anyone applying to attend college, a fact that some experts have cited as a major source of individual student insurance debt problems. Although federal student insurance debt is not rechargeable in bankruptcy, it does have a variety of built-in protections such as deferment and forbearance, as well as income-based repayment options for those struggling to make payments. In addition, the Fed rate has been set at a manageable rate for some time, although recent legislation could be put in place to increase it.

The main point of contention was the high-interest private insurances that companies made to borrowers in graduate schools and enrollment in for-profit institutions. These high-interest insurances don’t have the same built-in protection that federally backed insurances do, yet they are still not irrevocable in the event of bankruptcy. What this means is that students of higher education and for-profit institutions often graduate with student insurance debt at interest rates well above federal levels, with none of the income-based protections that federal insurances boast. These graduates are denied the bankruptcy protection afforded to other insurances of this type, such as credit card debt, to which private student insurance debt is closely related. The upshot of all this is that there are a growing number of people who are unable to find the kinds of job opportunities their degrees should offer them, and also unable to get any debt relief, which can quickly threaten to sink them.

Many experts are actively lobbying to fix this problem, and we hope that a solution to this problem will come in the near future.