Student loan bubble--one trillion

[eridani]

http://www.doctorhousingbubble.com/bubble-university-student-loan-accounts-equal-auto-loan-accounts-for-profit-education-colleges-housing-future-loans/

Student loans will keep a lid on how high housing prices will recover once the economy does settle down. It is amazing to think that currently $1 trillion in student loans still need to be paid and the amount of student debt is only growing. The question of higher education worth always comes up during recessions. Yet the one thing that pundits miss, just like they missed with the housing bubble this last time around, is that we have an enormous market of subprime college players eating up a large portion of government backed loans. Of course these toxic outlets usually grab headlines once bubbles burst but you also have students going to top quality institutions that routinely charge $50,000 a year or more. This is similar to what was seen in the housing market. No one is disputing that a home in a nice area is valuable but to go into massive debt without really thinking about the underlying value is financially disastrous. Millions of Americans are in massive debt or are preparing to go into massive debt to pursue a college degree. How will this impact future home buyers as more and more people carry debt loads that amount to a pseudo-mortgage even before buying a home?


In 1997-98 for-profit institutions made up 3 percent of total undergraduate enrollment. In 2007-08 they made up 9 percent. What is more troubling is their oversized reliance on government backed loans to fund their enterprise. For example, for-profits eat up 21 percent of all Pell Grants when they only enroll 9 percent of students. These institutions also eat up 21 percent and 22 percent of subsidized and unsubsidized Stafford Loans. It would be one thing if these institutions were showing solid results in the real world but they are not. The only results appear in the profits of those running these institutions. Default rates are atrocious for these institutions. Career placement is a joke for the most part. Yet so much money is being funneled here because it is easy profits and the current environment is like a Wild West show. Just like in housing, the banks dictate government policy.