Are Student Loans the Next Financial Bubble?

Posted on Jun 02, 2012 By Bond & Botes, PC

There are record numbers of student loans out for collection in the United States. The number of graduates who are now due to start paying is rising, but a dim economy has dampened the dreams of many of the grads. Could student loans be the next financial bubble to pop in this country?

There are an estimated 70 million Americans with student loans totaling over $800 billion in student loans. The U. S. Department of Education is not requiring that any student that accepts a student loan undergoes loan entrance and exit counseling online in an effort to educate students in financial matters.

This all comes from a lack of educating students on financial matters from a very young age. Often times, a student may qualify for loan amounts in excess of their needs. A young person, just out of high school, with financial illiteracy may just take the extra money and use it for fun money rather than it’s intended school use. This is often the beginning of their downfall in finances.

The goal of the Federal student loan programs were to be able to help students pay for schooling at a better interest rate than a credit card would. Students generally don’t have any kind of credit rating yet and often don’t have an income. The loan process allows those students to be able attain higher education, regardless of their financial status.

As the debt continues to skyrocket, the cost of tuition also continues to rise. This two events alone might not be so bad, if not for a weak economy and over 8% unemployment. American students are not alone in sharing this burden. We, as a nation, will shouldering this responsibility for some time to come.