US college debt bubble is becoming dangerous

Mar 2012
57,981
39,546
New Hampshire
#1
Rapid run-ups in debt are the single biggest predictor of market trouble. So it is worth noting that 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 — more than car loans, or credit card debt. Indeed, as an expert at the Consumer Financial Protection Bureau recently pointed out to me, since 2008 we have basically swapped a housing debt bubble for a student loan bubble. No wonder New York Federal Reserve president Bill Dudley fretted last week that high levels of student debt and default are a "headwind to economic activity."

In America, 44 million people have student debt. Eight million of those borrowers are in default. That's a default rate which is still higher than pre-crisis levels — unlike the default rate for mortgages, credit cards or even car loans. Rising college education costs will not help shrink those numbers. While the headline consumer price index is 2.7 percent, between 2016 and 2017 published tuition and fee prices rose by 9 percent at four-year state institutions, and 13 percent at posher private colleges. A large chunk of the hike was due to schools hiring more administrators (who "brand build" and recruit wealthy donors) and building expensive facilities designed to lure wealthier, full-fee-paying students. This not only leads to excess borrowing on the part of universities — a number of them are caught up in dicey bond deals like the sort that sunk the city of Detroit — but higher tuition for students. The average debt load individual graduates carry is up 70 percent over the past decade, to about $34,000.

But there are even more worrisome links between high student debt loads and health issues like depression, and marital failures. The whole thing is compounded by the fact that a large chunk of those holding massive debt do not end up with degrees, having had to drop out from the stress of trying to study, work, and pay back massive loans at the same time.

The US college debt bubble is becoming dangerous
 
Likes: 5 people
Jun 2014
49,519
50,445
United States
#4
The party out of power caused it, Remember obama's student loan reform.

I am just thankful my Children went to college on the pay as you go plan
No they didn't. It was the Republicans who privatized student loans, long before you'd even heard of Barack Obama.

Once again, you don't know what the hell you're talking about.
 
Likes: 4 people
Mar 2012
57,981
39,546
New Hampshire
#5
No they didn't. It was the Republicans who privatized student loans, long before you'd even heard of Barack Obama.

Once again, you don't know what the hell you're talking about.
Student loans aren't privatized, only the servicing part or the ones where the student/parent goes to a bank. The US govt makes a nice profit off of them as well. You also cant even bankrupt on a federal student loan.

https://www.consumerfinance.gov/ask...-student-loans-and-private-student-loans.html
Elizabeth Warren: Student Loan Profits 'Morally Wrong' | The Huffington Post
 
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Likes: 1 person
Oct 2014
33,166
6,066
C-A-N-A-D-A-Eh
#6
I figured a student loan program where anyone can get a loan increases demand on a fairly stable supply (university seats), so, prices go up.
 
Jun 2014
49,519
50,445
United States
#9
My kid's are not privatized.
They aren't the low interest rate, government serviced loans that were available back when I was young. We could nitpick over semantics so far as the word "privatized" is concerned. I'm sure these changes weren't officially called "privatization" when they were passed into law. Then again, Paul Ryan doesn't call his proposal for Medicare vouchers "privatization" either. Neither did George W. Bush call his Social Security privatization scheme "privatization".
 
Likes: 2 people
Mar 2008
15,023
11,831
The last place I lost my keys.
#10
Private student loans are available, generally for higher amounts and higher interest rates. The federal loans are need based.
 
Likes: 1 person