Source: www.silverdoctors.com

George Leef over at Forbes just posted an op-ed citing some striking similarities between the housing bubble and the probable student loan debt bubble. By now you’ve probably heard all of the daunting numbers: student loan debt has exceeded credit card debt, more than half of recent grads end up unemployed or underemployed, and the list goes on. Like nearly every bubble and subsequent recession in recent history, easy access to capital has been our downfall.

From 02′ to 08′ people reached for the American dream of home ownership and were told that they could afford to purchase homes they really couldn’t, better yet, the banks underwriting their mortgages didn’t bat an eye either (they we’re making too much money packaging your debt and selling it to institutional investors, eliminating any default risk). This toxic cocktail of easy access to credit, over-confidence in the housing market, and every consumer’s desire to own a home led to one of the most crushing recessions since the great depression. The housing bubble eventually burst, but at which point does higher education become equally as unsustainable?  

Source: Forbes.com

During that same period from 02′ to 08′ tuition rates actually grew at a faster rate than housing prices. Unlike housing, this trend didn’t come to a halt in 08′, it actually got worse. With the recession still in full force, politicians, schools, and everyone in between pushed furthering your education to ensure career success. Then came the easy access to credit with government programs making it simpler to attain a student loan. Like housing, you no longer had to actually be qualified to receive a loan, and it’s probably safe to say it will end in similar fashion. The first signs of the bubble deflation came this year with a 6% decline in college enrollment. Accurate default rates have yet to surface, as grads push loans into deferment while they try to find well paid work. Some economists estimate nearly 30% of student loans are actually delinquent, compared with the just over 10% mortgage delinquency rate at the peak of the housing crisis. 

Leef makes the point that the higher ed bubble probably won’t burst as dramatically as housing. What do you think? Read the original post here.  

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