Several years into a slow but steady economic recovery, student loan debt is threatening to wipe away any gains.
As our bankruptcy lawyers discussed last week, the investor-led housing recovery could stall as investors pull back and ordinary home buyers fail to step in because they're grappling with massive student debts.
With the average student debt load topping $25,000 - and many grads paying off debt in the hundreds of thousands of dollars - it's normal for folks to have education loan bills as high as a typical mortgage payment.
According to a new study by Trulia.com, these borrowers are starting to put a damper on the fragile recovery.
In the past, college graduates have been more likely to buy homes and cars than those without degrees because they typically earned more money and could thus afford them.
But these days, people with student debt are less likely to take out car loans and mortgages, as large portions of their paychecks are earmarked for debt - making it difficult to save for a down payment or qualify for a home loan.
And the problem could get worse as the percentage of young adults with student debt grows. Since 2003 - just ten years ago - the portion of 25-year-olds with debt from education loans increased from 25 percent to 43 percent.
As more borrowers default on their student loans, the Consumer Financial Protection Bureau is seeking solutions for making repayment easier - particularly for those with private student loans, which have fewer repayment options than federal loans.
Strategies could include income-based repayment, in which payments are made based on earnings rather than what's owed, and loan refinancing.
Even lowering payments for just a few years could offer enough relief to allow borrowers to catch up or find a financially-stable job, say experts.
One of the biggest problems with student debt has been the unavailability of bankruptcy. While filing for bankruptcy can relieve other unsecured debts like credit card debt and medical bills, student loan debts are rarely discharged.
But while bankruptcy can't directly eliminate student debt, it can still provide a solution. Keep in mind that, along with education loan payments, today's young consumers are also struggling with credit card debt and high rates of unemployment and underemployment.
Chapter 7 bankruptcy can wipe out many unsecured debts in as little as a few months, drastically reducing monthly payments and freeing up the money to get current on student loans.
If the recovery is going to be sustainable, we need to make it easier for borrowers to manage student debt payments. But until then, bankruptcy can be the most realistic way to buy time - and money.