I read an article predicting the trillions of dollars in student loan debt will eventually cause colleges to go out of business and cause financial crisis much like what happened in the housing market. What I don't understand is who in the financial world allows such practices to get that far out of control? If most of us
Student loan debt next bust?
Answers
Abuse will occur in any market that has a guarantee. Student loans are a little different. The housing market fell primarily based on liar loans, I.e. fraud in the applications. In theory, students have no history of bad debt. They do not lie. They just sign on the dotted line and are guaranteed by Uncle Sam.
It is more of an ethics issue. Why are students not honoring their debts?
Lenders were providing money for anyone without much concern for probable repayment and just kept lending more and more. Students graduate and aren't finding the jobs they need and can't repay their debt. The other issue is they have so much to repay that it's having economic issues because they can't afford much else post graduation. Just like the housing market bubble at some point it will burst. What happens when more and more students can't repay back their loans. It's going to be tough for educational institutions to balance their own budgets.
Christie
You may a good point. But, vested interests in higher
Institutions have known for years that the debt tsunami is coming, but they have "faith" in the politicians to rescue them.
Big picture, the university education industry is going thru a transformation like we did going from horse & buggy to automobile.
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