Wednesday, April 25, 2012

Is the Student Loan Bubble About to Burst?

Eric Blair
Activist Post

In February of this year, the S&P warned that student loans may be the next bubble to burst in US economy. Moody's also issued a similar warning in 2011.

With the interest on student loans set to double on July 1st, will it pop the student loan bubble, or is it the necessary medicine to slow down the growth of the bubble?

It seems we won't have that debate because politicians in Washington, including both Obama and Romney, agree that raising the interest on student loans will be an "enormous burden that threatens the economic recovery."  In other words, keep the bubble going to win middle-class votes and avoid any pain.

In either case, students are already suffering from having to paying back massive principal balances because the cost of attending college has increased 439 percent from 1982 to 2007, and even more since then. Meanwhile, during that same period, median family income only rose 147 percent.

If those numbers weren't ugly enough, CNBC reports that the total student loan debt in the U.S. is $870 billion, surpassing credit card debt, with two-thirds of it being owed by citizens under 30 years old. What's more, this interest-rate increase comes just when it was reported that over half (53%) of recent college graduates are unemployed or underemployed.

All of these numbers seem to ensure that all recent grads face a lifetime of debt servitude, especially since student loans cannot be canceled in bankruptcy.

Through no fault of their own, students have been lulled into believing that they must attend college to be successful.  This myth is the engine of the college bubble, while cheap, easy, low-interest money from the government has been the fuel that has caused the cost to soar far beyond the rate of inflation.

An increase in interest payments would be even more catastrophic for already over-burdened college graduates. Yet, unfortunately, it may be just what is needed to slow down the growth of the bubble and save a few young people from the prison of debt.  As such, it is just one more of the many reasons not to attend college.

Read more articles by Eric Blair here.

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Anonymous said...

I'm always amazed to find articles about the 'student loan bubble' with no mention of the H 1 B Visa. College grad unemployment could be eliminated by simply telling our foreigners they have to go home.

Sybil I. said...

It's one thing to complain about the magnitude of student loan debt. It's another to say, let's forget about going to college. By that statement, you are playing into the hands of the powers that want to "dumb us down" even further. And this dumbing down process has been going on for 30+ years, like the slow descent of an elevator. Pretty soon we'll all be so ignorant, nobody will have the complexity of thought process needed to discern truth from knee-jerk propaganda. Come to think of it, most are there already.
Instead of discouraging college education, how about widening our educational alternatives? Strengthening vocational education, for instance? We have a growing shortage of skilled workers in the U.S. Having a multitiered educational system like that in European countries makes a lot more sense, both economically and in terms of personal fulfillment.

Anonymous said...

I'm familiar with the student loans &thought it was for school expenses BUT these people are using this money for many things other than school. A lot of fraud here-so cut it out completely and have if ony for serious young people wanting an education.

Anonymous said...

I certainly hope this bubble bursts. The people - not the corporations - need to be bailed out. BTW, Yahoo News had quite the spread today on Chrysler on how they are posting record profits. The last paragraph casually mentions how the US Treasury Dept. doesn't expect to collect the amount of the bail out given to them in 2007 which is only 1.3 BILLION bucks. Just think of what could be done with that amount of money if it were put towards student debt. Ha! But we can dream...or can we?

"Chrysler posts best quarterly profit in 13 years"

Chrysler reports best quarterly net earnings in 13 years as bankruptcy memory fades

Anonymous said...

The comments on this thread as the proof-perfect of how the dumbing down and the brainwashing of the populace was worked to perfection. Wow!

Anonymous said...

April 25th was dubbed "1T Day" as it marked the day when student debt reached 1 TRILLION dollars. Yet, our corporate money bends over backwards for its master corporations. Nothing is too good for them and no amount of money is enough to support, finance and protect their scams, schemes, fraud and theft, yet, they can't even lower the interest rate charged on those usury student loans so that the young ones, the ones that are our future, can pay them off. What a wonderful system we've worked for ourselves here, eh?

Anonymous said...

Doubling the Student Loan interest will only cause more defaults. It is not the answer to the problem.

College costs are way too much. Books are outrageous. Someone needs to find a way to curtail the costs and work a reasonable solution for repayment of Student Loans.

Saying I'm going to double your interest rates because you already cannot afford college is stupid.

Anonymous said...

"Sybil I. said...
It's one thing to complain about the magnitude of student loan debt. It's another to say, let's forget about going to college. By that statement, you are playing into the hands of the powers that want to "dumb us down" even further." Most of what you said is total B.S. I have around $80,000 in student loan debt. I did not learn a whole lot from school doing it. I taught myself most of what I know, ON MY OWN. + I am also unemployed. The jobs they would offer me are too far and don't pay shit, for computer networking, IT, technician work that I am qualified for. So this article hits home %100, dead on the money. It's all a GIANT, huge, BUSINESS SCAM and RIP-OFF that I fell sucker too. So I am the idiot. ;\

Students loan charges said...

Wow! This is a great post. It is true that students loan become the need to get education from international universities. But, it is also necessary to reduce the interest charges to provide the relief financial relief for students.

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