The Student Loan Debt Bubble is the next Debt Crisis
Consider these facts about student loan debt:
- Over the past 10 years the amount of student loan debt in the U.S. has grown by 170 percent, to a whopping $1.4 trillion
- 44 million people have student debt. Eight million of those borrowers are in default
- The average debt load individual graduates carry is up 70 percent over the past decade, to about $34,000
How exactly did we get there? Let’s just call it greed.
According to this article, a great deal of the tuition hike came as a result of hiring and increased payrolls for additional employees charged with bringing in big donors and building their school’s brand and of course building new buildings and facilities. It is about attracting students not to a school based on academics but based on the benefits that it offers. You spend money to make money. Of course, they fund all of this spending through borrowing money, dependence on donors that they can name buildings after, and increasing tuition. The math is the math and the math is based on greed. Realistically the cost of educating a student doesn’t have this high of an inflation rate.
Parents want to send their kids to college. The problem is that they are just not prepared to do so especially at these costs. As a result, they look to the government to fund the endeavor just hoping that they can figure out a way to pay the money back. Unfortunately, it is the government that is enabling this student loan bubble. According to this article, 90% of the loans made are backed by the government. Imagine that…. the government is at the heart of the problem.
The saddest part of this student loan bubble are the default victims. Unlike any other type of debt, there is no walking away from student loan debt. There is even relief for IRS debt. It is like being in a debtor’s prison. Sure, there are programs that help…when they work. Yet, they are so unknown by the masses and complicated that students are unaware of them or understand how they work.
Of course, this ends up catching up with the economy through consumer spending. There is a whole generation who is bogged down in student loan debt that is preventing them from buying houses and doing other consumer spending.
Colleges with their fancy sports programs, big buildings, and activity centers won’t always be so grand. At some point this debt binge has to come crashing down. Debt bubbles always pop. When it does, it won’t be pretty.