The cost of attending a public university in the U.S. has more than doubled in the past two decades, and tuition at public institutions has risen an average of 5 percent a year since 2006. So it’s no surprise that student-loan debt has surpassed credit-card debt: American graduates owe $24,000 on average and more than $800 billion collectively. Two-thirds of college students now graduate with debt; one in five defaults. Unlike business, mortgage, credit card and gambling debts, which can be negotiated in bankruptcy court, student-loan debt is exempt from consumer protections and is essentially inescapable.
Three weeks ago, President Obama announced a speeded-up plan, to take effect in 2012 rather than 2014, that will reduce the maximum required payment on student loans from 15 percent of discretionary income to 10 percent, with remaining debt to be forgiven after 20, not 25, years. For grads who can’t find a job immediately after college and have no other financial support, defaulting on student loans — and spiraling into more mountains of debt, sometimes vastly exceeding initial tuition costs — poses a very real threat.