Student Debt: A Bursting Bubble or Overstated Fears?

Career College Central Summary:

  • The next credit bubble may be higher education, argued at least one panelist at a discussion held at the American Enterprise Institute earlier this month.
  • All the markers of a bubble are there, argued the panel’s moderator, Alex Pollock, a resident fellow at the American Enterprise Institute in Washington, D.C. “Pushing credit at any sector makes its prices rise,” Pollock said, “and rising prices, like college costs, lead to cries that since costs are now rising we need more credit and easier credit.” Not everyone at the panel agreed that a credit crisis is brewing.
  • One panelist argued that the real data show student debt is sustainable. Two others suggested alternative lenses that help clarify the real problems, including the high debt for dubious graduate degrees and any debt for no degree.
  • Those with no college degree have about the same income whether they have some college with debt or simply went straight to the workforce, Kelly said, citing data collected by researchers at the Pew Charitable Trust, but those without college who carried debt had much, much lower net worth.
  • Around 37 percent of loans given to undergraduate students, Kelly said, flow to schools with graduation rates of less than 40 percent. For-profit schools are a big part of the problem, Kelly said, but a large chunk of these problem schools are actually public nonprofit colleges.

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