And it's us taxpayers who will be on the hook.
From Investor's Business Daily:
Taxpayers On Hook For $850 Billion In Student LoansWhy aren't we hunkering down? Cheap student loans just encourages the colleges and universities to raise their tuitions and use that money to offer more amenities to attract students who borrow more money and... A classic death spiral. Then when little Johny cannot find relevant work with his advanced Generic Studies degree, he is saddled with $200K+ in debt and no realistic long-term means of repayment. Would you like fries with that?
With a possible higher-education bubble looming, taxpayers are on the hook for about $850 billion in student loan debt.
Exactly how much of that the federal government would have to bail out if the bubble bursts is unknown, but with delinquency and default rates rising, it could be substantial. Yet Congress may exacerbate the problem with current efforts to maintain lower interest rates on student loans.
The amount of outstanding student loan debt has skyrocketed from about $440 billion in late 2008 to about $1 trillion today.
Of that, $500 billion is owned directly by the Education Department, according to Sallie Mae data. Another $350 billion was originated by private lenders with a government guarantee under the now-defunct Federal Family Education Loan Program. Sallie Mae estimates that the DOE will originate $113 billion in student loans this year vs. just $7 billion from the private sector.
"I think this data � $1 trillion in outstanding debt and a lot of it held by the federal government � is fairly persuasive evidence of a bubble," said Jonathan Robe, a research and administrative associate at the Center for College Affordability and Productivity.
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