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Originally Posted by LadyShea
I keep hearing reference to the "student loan bubble". Like the housing bubble and the credit bubble. Banks are starting to pull out of the program (like JP Morgan Chase). So what happens when this one bursts?
Seriously, I've told my kid that he will either need to get scholarships, or join the military, unless things drastically change in the next decade-which they might. We can't save enough to put him through school...we can't save enough to retire on...we no longer have home equity to borrow against (which was not a good idea even when we did, so we didn't do it), and student loans have become some kind of indentured servitude for so many people it scares the shit out of me.
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Student debt is definitely a bubble. The question is how harmful the bubble actually is. If the banks aren't creating derivative markets based on student loan debt, and people aren't speculating on the outcome of student loans, the effect of the student loan bubble is primarily going to be disastrous to the students who want to go to college and the colleges who rely on student loans. It (probably) won't threaten the entire banking system like the mortgage crisis did.
That isn't 100% bad, as there exist some private colleges whose marketing plan is to suck up as much student loan money as possible and issue a useless degree. It's not a tragedy if these colleges fail or are required to shape up.
The trouble is, lives will be ruined before it all shakes out.