The looming student loan bubble – Almost half of all student borrowers were not making payments. 1 out of 4 in debt repayment past due on student debt.

Just like the mortgage industry and the banking industry, higher education is not held fiscally responsible for its decisions. When it decides to admit a mediocre student to its university it helps that student get the loans so he or she can attend even though they know that the student is unlikely to ever get a good job. Instead of turning that student away they fill their heads with the mistaken belief that the only way to be successful in America is if you have degree. Why? Because the loans they helped the student get are guaranteed by the US government just like all of those mortgages that bankers sold to everyone who asked for a loan. 

Higher educations tells students if you give us $100-200K, 75% of you will graduate in four years and 60% of those graduates will have a job after graduation. Unfortunately you have to read the fine print. They never said the job you had would be in your chosen field of study or would be full time. There are currently about a dozen law suits pending in courts around the country alleging that law schools fudged their employment statistics, which all applicants review before applying because why would you waste 100-200K on a job that doesn't require you to be a lawyer. 

The same thing is happening in Universities undergraduate programs and it is going to have a huge consequence on our economy and society. Just remember the OWS protestors and rioters in Greece were primarily students. When young people can't get a job and they have a debt burden larger than most American's mortgages which can't be discharged in bankruptcy you have a population that is ripe for manipulation by either a corrupt government or a violent revolutionary who wants to gain power.

The aggressive growth in student debt is setting the country up for another debt fueled bubble.  Higher education costs have expanded so quickly that Americans now carry $1 trillion of student debt.  Most of this expansion has occurred in a time when the return-on-investment for a college degree has fallen.  

Over the last ten years student debt outstanding has grown from less than $300 billion in 2002 to $1 trillion in 2012.  The cracks in the student loan bubble are already forming with large numbers of students defaulting on their loans.  And the pipeline is only increasing.  Almost half of all student borrowers are not making payments.  Many are in school and many are simply unable to pay.  Yet with a weak economy the prospect increases that many younger Americans are going to enter a market where job growth is weak yet student debt payments are high.

The massive growth of student loans and tuition

The issue is that college tuition even at public universities has far outpaced the growth of the overall CPI.  College earnings for recent graduates, those who left school in the last decade, has been marginal since many younger Americans are carrying a big load of this recession:

The looming student loan bubble – Almost half of all student borrowers were not making payments. 1 out of 4 in debt repayment past due on student debt.