Another bubble, in Student Loans?

Students these days are graduating with unprecedented amounts of debt.  The government now guarantees $450 billion in student loans, more than a 300% increase in just 3 years.  When you add in private sector loans its more than a trillion dollars!

Perhaps this is a sign of the times- those laid of in the recession went back to school, and those in school stayed in school.  In the meantime, students are graduating and cannot get a job. 

The average student graduates with a student loan debt of $24,000, $5000 in credit card debt, and personal loans of $10,000.  They start $39,000 in debt, which is about $100/month in bills they have to cover.

How did we get to this point?  Did you know that the following things are NOT considered when applying for federal student loans:  current income, potential income, high school academic record, and credit history?  Isn’t this how we got into the housing bubble?

Did you know that Colleges often steer students to “preferred lenders” which provide revenue sharing to the college?  This results in higher interest rates to the students.  When you consider that student loans are not discharged in bankruptcy, they are almost risk-free, so why are they charging 7% plus in this environment?  Is this in the best interest of the students?

Another big contributor is the entitlement attitude of many in this generation- I “need” an ipad, a smartphone, a new car, etc.  We have, through our own educational fialures IMHO, raised a generation of financially illiterate, fully unprepared for the harsh economic world in which the emerge.

It will be small wonder to me when this bubble pops. 

 – Reeve Conover