The Problem Of The Student Loan Bubble

While this is often true, it can create problems when a student does not have the money to pay for a quality education. The cost of college has risen an estimated 250-500% over the last 30 years while consumer price index has only increased by 115 percent during the same time frame (White, 2015; Eskow, 2014). The amount of student loan debt is increasing, along with the cost of college. The income of many young people today cannot keep up with the rising costs of college education and housing. Part of the problem with student loan debt begins when students choose to attend a college that exceeds their financial resources and rely on federal student loans as well as private student loans to make up the difference. Eskow found that even public colleges and universities are becoming difficult to pay for without taking out student loans often averaging $30,000 for tuition, room, and board (2014). Since many people do not have enough money to cover college education expenses, they rely on student loans, both federal and private, to fill the gap. Financial advisor Ramsey stated that often the loans students take out pay “for an off-campus standard of living, and no debt was needed to get the degree” (2013). “The Project on Student Debt reported in 2013 over ⅔ graduating seniors were leaving school with student loans” averaging approximately $28,400 (White, 2015). Taking on almost $30,000 in debt before even starting a career can have a significant impact. It can force people to get a job just to pay off the student loans, not based on what they got an education for prepared for or what they studied. This also can cause a setback in future plans, having to delay many adult milestones due to lack of

Student loan debt has become a discouraging problem throughout today’s economical foundation. “Overall debt is falling but student loan debt is increasing year-over-year and at a much faster rate,” chief executive David Stevens told The Washington Post. “[Young graduates] are already on the margin for being able to qualify for a mortgage. If you add on a

An education is one of the most important tools a person can acquire. It gives them the skills and abilities to obtain a job, earn a wage, and then use that wage to better their lives and the lives of their loved ones. However, due to the seemingly exponential increase in the costs of obtaining a college degree, students are either being driven away entirely from earning a degree or taking out student loans which cripple their financial prospects well after graduation. Without question, the increasing national student loan debt is one of the most pressing economic issues the United States is dealing with, as students who are debt ridden are not able to consume and invest in the economy. Therefore, many politicians and students are calling

After the United States ‘Great Recession’ in 2008, many onlookers have been searching for other aspects of the economy that may eventually present a bubble similar to that of the housing market. It does not take long to locate a potential hazard as the cost of tuition has risen approximately 26% over the course of the last decade (‘Tuition and Fees’). The consequence of this increased tuition is having a negative effect on the future that most graduates try to obtain once they complete school. Some students are required to change their career choices due to the overwhelming debt; examples of this could be they are required to take a higher paying job, even if they do not want to, so they can afford their previous choices (Zhang). Many years ago the notion of being so overwhelming in debt seemed unfathomable; but as student loan debt is estimated at $870 billion to $1 trillion, students’ willingness to acquire debt is strong and has no signs of slowing down (Razaki, Koprowski, Lindberg). The steadily increasing student loan crisis will cripple the United States economy if it goes unchanged.

Here in the United States, there are many forms of consumer debt, which help contribute to the large sums of debt countless Americans find themselves faced with. Directly effecting many college students is student loan debt. Student loan debt is now the second largest form of consumer debt behind housing” declares the Federal Reserve Bank of New York (Grisales). This is due to the fact that student loan debt grew 7.1% in 2014 to $1.2 trillion (Grisales). If this statistic alone is not worrisome this next one is sure to be. The amount of debt in the housing market that helped to spark the last recession was only $1.3 trillion (Grisales). Due to the increased amount of debt required by students to attend college many students are feeling the wrath. According to the U.S. Census Bureau, “In 2014, 11.7 percent of females and 17.7 percent of males between the ages 25 and 34 were living with their parents” (Grisales). The fear of obtaining massive amounts of debt is driving the current generation of student’s to put off many future hopes and dreams. While causing them to move back home to save money. The current student loan crisis is crippling the economy and ruining the lives of American students.

The decision to attend college for most individuals yield promise of advancement in being able to further one’s learning, and assists with developing a marketable educational portfolio from an institution of reputed academia. However, with the pursuit of obtaining a college degree from a university, there are augmented concerns with student loans and repayment issues. In electing to secure a student loan for college, prospective students or parents should realistically, forecast or measure probable (anticipated) student debt. In particularly, with students aspiring to attend college, several organizations or subsidiaries, and for-profit institutions cash in on unknowledgeable hopefuls contributing to the student loan debt dilemma/crisis (or student debt). The college costs and financial constraints for student borrowing, if ill-prepared will substantially effect students in pre-graduate or even post-grad status. The findings suggest that there is eminence of the possibility of default, with repayment behavior which effects long-term financial outlook. In examining the data on cumulative debt, number and characteristics of borrowers, types of institutions, and repayment dynamics there are unsettles that arise in the gest of student borrowing.

This topic has become a very important issue, with some people saying that student loans could be the next bubble and could do what the real estate bubble did to the U.S economy in 2007 and 2009. If student loans are becoming such an epidemic something should be done to better help people with student loan debt. This paper argues that North Dakota should devise a new policy regarding student loans that would help ease the financial burden that student loan debt puts upon college graduates because it would decrease the total amount of student loan debt, it would help stimulate the economy, and it would provide an even greater incentive to go to college. This paper’s intention is not to argue that college is not worth going into. This policy would consist of making student loans dischargeable through bankruptcy, increasing the amortization period with a lower interest rate, providing incentives, and increasing state funding of higher educations institutions.

In the United States, it is generally accepted that college (or any form of higher education for that matter) is a wise investment that each and every individual should strive for. Each and every year thousands of parents open college funds and future investment plans to ensure that once their child is of age he or she can participate in quality educational programs. While college attendance rates are at a positive all-time high, right behind it follows an astounding $1.3 trillion dollars in student loan debt. Let’s face it, college is expensive, and it’s only getting worse. Could the outstanding quantity of student loan debt be the next national crisis?

In recent decades, student loan debt has increased dramatically causing a so-called, “education bubble”. This ‘education bubble’ is essentially the ‘housing bubble’ within higher education. The Federal Government, like those in the housing market crash in 2008, are lending money to those who receive a low income and can not afford college. According to The Weekly Standard, “the Federal Reserve Bank of New York reports that during the past decade, student loan debt has nearly tripled and the number of students with debt has risen by 70 percent” (Cochrane). The Federal Government needs to decrease the amount of loans they are giving out in order to prevent another crash within our economy. As a senior in high school who will not be receiving

In 1976, the average cost to attend a four year public university was $2,175; today, the average cost to attend a four year public university is $25,000 (Snyder). This means it is 1150% more expensive to go to college in The United States today than it was 30 years ago. This obviously would create a problem on how we as people are going to pay for our higher education. Today college has become almost a necessity to have a satisfactory life, and with these rising prices some individuals believe student loans are the only option. There are many reasons as to why the prices have risen, but the one undeniable fact is that this has created a problem within our country. Which, is known as the student debt crisis, and it has been on the rise the past couple years. This problem is affecting people all around the United States, and is causing multitude of problems for them all because they wanted to pursue higher education. Wanting to better your opportunities by bettering yourself is not something that needs to be punished, and sadly that is what is happening. This problem is something that needs to be fixed for the sake of Americans and our economy, but will also take time and a multitude of steps to correct.

In the U.S. students are encouraged to earn a college degree, but the cost of an education turns many away. “Driven by the allure of a decent salary with a college degree, Americans borrowed to go to school. Outstanding student debt doubled from 2005 to 2010, and by 2012 total student debt in the U.S. economy surpassed $1 trillion” (Mian, Sufi 167). There are plenty of opportunities to obtain funds for college, including one of the most common, student loans. A student loan is defined as “a common way to fund education, specifically college and graduate school, and they provide educational opportunities that you otherwise may not be able to afford” (Barr). Student debt is at an all-time high in America. Over half of all lower income

The United States student loan debt crisis is worsening by the minute. According to analysts about two students who had taken out a sum of student loan debt default every minute. This default rate is setting the United States up for a major financial crisis. What is driving the nation deeper into the red is the greed of the loan servicers. Although not illegal, loan servicers direct students who appear as a troubled applicant to sketchy and costly loan repayment plans. A branch of what is now known as Sallie Mae is responsible for a majority of the problem, because their sister company Navient “services roughly $300 billion in loans taken out by 12 million borrowers.” (1)

With the 2016 presidential election looming in the near future, the subject of student loan debt has become a major issue on the campaign trail. The national amount of student loan debt is 1.08 trillion dollars, with 11.5% of that amount in default or in 90+ day delinquent. To put that in perspective, total consumer debt at the end of 2013 was 11.52 trillion .(Forbes, 2014) According to an in class poll, only 7 students out of 169 students were completely confident in their knowledge of student loans. However, if we had lower tuition and expenses students wouldn’t have to take a loan out in the first place.

In the United States today, the number of students graduating college with student loan debt is quite astonishing. In the article titled, “How the $1.2 Trillion College Debt Crisis Is Crippling Students, Parents And The Economy”, we will examine and break down the student loan debt crisis by the numbers. Today, almost two-third’s of students graduating college are graduating with an average of $26,000 in debt. For most students, $26,000 is a lot of money when the average annual income for a first year graduate is only in the mid $40,000 a year range. According to the Consumer Financial Protection Bureau, student loan debt has reached a new milestone, crossing the $1.2 trillion mark (Denhart, 2013, Introduction, par. 2). With student loan debt levels

I will be examining the risks of the student loan bubble. A bubble in financial terms regards to the rapid rise of asset prices that isn’t backed by fundamentals. This will eventually cause a large sell off leading to a sharp depletion in those asset values. Over the last 5 years the American federal reserve bank has increased spending on federal student loans over 1,000%. From $100 billion to over $1 trillion dollars. According to Kate Hardiman from University of Notre Dame “Economists believe the amount of federal money allocated to student loans shown in this graph is highly “unsustainable.””. With the increasing amount of risky student loans being distributed, its not going to be uncommon for students to default. Defaults occurs when the borrower fails to repay a loan. Unlike mortgages or auto loans, there is very little background checks, no cosigner, and no checks to make sure that the student is even ready to be successful in college.