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Monday, August 22, 2011

The Student Debt Bubble

There are those out there who think we have a serious student debt bubble and that it will soon burst.

The idea is that costs of higher education are going up and students are taking loans to cover them.  The available jobs to pay for those loans are not out there.  Therefore, the former students will not be able to pay back those loans (unless their employed parents do it for them).  Either way, someone has to backstop those loans, be it private lenders or the Federal Government.  There is no such thing as a free lunch.

On the other hand, some potential students may decide to avoid college or just go to the lower priced local Land Grant School, thus putting a financial strain on some of the more pricey institutions.

Frankly, I don't think the fix from the Democratic Congress back in March of 2010 will overcome the problems we are facing.

Hat tip to the InstaPundit.

Regards  —  Cliff


Jack Mitchell said...

This makes me wonder, if raising the retirement age is all but inevitable. Figuring, young professional Americans will be saddled with school loans, facing stagnant wages and unemployment. They will not be within range of home ownership until their mid-30s~early 40s. So they will leapfrog from debt burden to debt burden.

That pushes them into their 70s, just to break even.

If the middle class is stuck treading water, than ultimately America is dead in the water.

C R Krieger said...

I think it is. I was talking to someone about another person in their 50s and I made my calculation based upon the idea that retirement is going to move out to 70.  The problem is, at least today, not everyone is fit at 69.  I don't know how we are going to work that out.  Like everything, the age to retire is on a spectrum.  Will "retirement physical" take on a whole new meaning?

And, I think home ownership is an important thing for the American Middle Class (and when I say American Middle Class I am talking a wide swath of people, sweeping up what in other countries might be called the "working class" and the "local shop owner" as well as the "professional class").  I may be daydreaming, but I like to think of the Middle Class as that great machine that sucks people in at the bottom while sometimes spitting people out at the top.

I absolutely hope you are wrong about the middle class treading water, but if it comes to pass then, yes, America is dead in the water.

Regards  —&nbps; Cliff