Dayton Business Journal...
seek to escape rising debts
by Laura Englehart
Tuesday, February 21, 2012
A growing number of Dayton-area college graduates are looking for
relief from insurmountable debts. More often these days the lion’s
share of their financial burdens stem from student loan debt, and some
of them initially are seeking to shed the debt through bankruptcy.
However, many grads are surprised to learn they can’t wipe out student
loan debt that way, and are seeking other alternatives.
Wayne Novick, who has practiced as a consumer bankruptcy lawyer for
more than 30 years, said excessive student loan debts do not just hurt
the graduates. Having more graduates lassoed with high debt translates
to fewer dollars spent in the local economy.
“It stops (graduates) from contributing to economic growth of the whole
nation,” Novick said. “You have these students for whom debt comes six
to nine months after graduation, and instead of paying on a car
payment, there’s no car they’re buying; they can’t afford to pay for a
house; and their debt is so bad, who would lend to them? You’re taking
them out of the economic picture.”
Because federal law makes it nearly impossible to discharge student
loans through bankruptcy, many graduates who can’t afford the payments
have no way to dig themselves out of debt, and some lawyers and higher
education leaders say something has to give before student loan debts
and tuition costs spiral out of control.
Statewide, the situation is going from bad to worse. Ohio ranked
seventh-highest in the nation in 2010 for student loan debts, according
to an analysis by the Institute for College Access and Success. That is
a worsening of the situation in the state from 2005 when Ohio ranked
16th in the nation. Within the Dayton region, the average student loan
debt for 2010 graduates ranges from $23,000 to more than $37,000,
according to a recent report.
In response, more graduates have turned to lawyers for help. In a
recent survey of 860 bankruptcy lawyers, more than 80 percent said
potential clients with student loan debt have increased “significantly”
or “somewhat” in the past three or four years, according to the
National Association of Consumer Bankruptcy Attorneys.
Novick, of Centerville bankruptcy firm Wayne Novick and Associates,
said he has noticed an increase in potential clients locally with
substantial student loan debts, though he cannot put a hard number to
But helping those graduates get back on their feet is another problem.
In addition to the challenges of discharging student loans, court fees
for bankruptcy filings have increased in the past few years. Also,
tuition costs continue to climb, accounting for some increases in
Michael Fishbein, president of Antioch University Midwest, said that
before too long institutions must address student loan debt problems,
which recently have been exacerbated by the down economy.
Fishbein said reducing employee costs and required student credit hours
for certain academic programs could serve as a solid place to start
deflating college costs.
“The challenge of student debt is only going to grow more serious and
institutions will have to approach it,” Fishbein said.
In 2005, the federal government separated public and private student
loans and made both non-dischargeable, except in extreme undue hardship
cases. Because student loans rarely are forgiven, Novick advises
graduates on how to rid themselves of other unsecured debts, such as
those from credit cards, through bankruptcy to free up cash for student
Sometimes even that is not enough, Novick said.
“Sometimes we just have to put our hands up and say, ‘There’s nothing I
can do for you, because I can’t stop them from collecting,’” he said.
Two forms of bankruptcy, chapters 7 and 13, apply to individuals:
• Chapter 13 is designed for a person with a regular income source. It
allows them to keep a valuable asset, such as a car or a house, and
repay creditors overtime with a negotiated plan; and
• Chapter 7 is a court-supervised procedure in which a trustee collects
the assets of a debtor’s estate, reduces them to cash and makes
distributions to creditors.
Chapter 7 costs $306 in court fees and Chapter 13 costs $281, according
to the U.S. Bankruptcy Court Southern District of Ohio. On top of that,
Novick said a lawyer could cost between $1,000 to $1,500 for Chapter 7
and $3,500 for Chapter 13.
Individuals also must pay for credit counseling before and after the
proceedings, which separately cost another $15 to $50.
Because of the associated cost, Novick said, despite more graduates
having turned to lawyers for help, fewer are filing bankruptcy.
The down economy and increases in tuition have only exposed a problem
that has boiled under the surface for a while, said Fishbein of Antioch
Midwest, who advocates for a complete overhaul of the higher education
Antioch Midwest, a private university with about 600 students, mostly
adults, in Yellow Springs, charges about $320 per credit hour in
The average debt of 2010 graduates of Antioch Midwest was $23,000,
which is about $7,700 below the state average and one of the lowest
amounts in the Dayton region, according to the Institute for College
Access and Success.
University of Dayton graduates on average had more
than $37,000 in student loan debts in 2010 — the highest in the region.
Fishbein said now that student loan debts have caught the spotlight,
institutions should “bite the bullet and change the model,” though he
admits he could be in the minority in pushing some of his ideas for
For instance, Fishbein thinks schools should take a serious look at
their expenses to rein in tuition. At the same time, they should
consider reducing the number of required credit hours for certain
Fishbein said some programs force students to take unnecessary
electives to fill a 120 credit-hour requirement.
“Sometimes those (electives) can be the best (courses) you’ve taken in
your life, but if the issue is cost, why charge for 120 credits if you
don’t need them?” he said.
Where the blame should fall for climbing student loan debts is not an
easily answered question, but the result is obvious to Novick.
“If (graduates) can’t get out from under their debts and they’ve made
an effort, they’re almost tossed back into servitude,” he said. “They
cease being a productive part of the economy, and therefore, their
ability to move the economy disappears. That’s why it becomes a crucial
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