Wednesday, February 19th, 2020  |  3:06 AM

A Conservative Newspaper Promoting,
Life, Liberty, and the Pursuit of Happiness

Subscribe Now: Get your own copy of The US Journal

Effects of the Student Loan Bubble

Written By: Gary Jason  |  Posted: Wednesday, December 5th, 2012

                For a number of years now, a number of critics of the American system of higher education have rightly insisted that there is a "bubble" in the system, with more and more students running up loans in amounts they will find difficult to pay back.  This bubble has been fueled by the federal government's lavish subsidization of the student loan program (which was nationalized four years ago), in a way similar to how the housing bubble was fueled by government agencies pushing subprime mortgages.

                This extensive government largess has produced a number of unintended -- though not necessarily unforeseeable -- negative consequences.  First, it has dramatically driven up the tuition and fees charged by colleges, which in turn has forced more students to take out loans.  This should have been easy to foresee, since the agents running the colleges would know that their clients had access to government-backed loans and so would jack up tuition quickly to extract that money.

                Second, this flood of money has only encouraged administrative bloat, which in turn has increased college costs with no increase in the quality of education.  Again, this should have been foreseeable.  The administration would be rationally well-informed about the new honey-pot of taxpayer-backed loans, and the self-interested administrators are the ones who decide where to spend the money, so you don't need to guess where they will (and did) spend it.

                Third, the rising price of college tends to erase the potential returns of a college education for students of only average ability.  In effect, like homeowners who refinance their homes only to squander the increased equity, many students are spending more (and borrowing more) of whatever future extra earnings their college educations will bring.


Share this on Twitter  |  Share this on Facebook  |  Email to a friend.  |  Contact the editor.

What are your thoughts?

Want full access to all the articles on this site?

You must be a subscriber to read entire articles.

Gain 24/7 access to all the content on this website by becoming a subscriber.
Choose your subscription plan and get full access in minutes. Subscribe now. »

If you are already a subscriber, sign in now to read more full articles.

More Business News

Subsidies Galore: Corporate Welfare

Gold Backed Currency?

Go For The GOLD!

Poor CEO Demands Raise Because He Can Only Afford $20M Vacation Home

What the Millennials Believe About the Future of Capitalism is Terrifying

Inflation is Coming

Why is Profit So Important?

End of Malls will not make Shopping any Better

Elderly - Get Out of Stocks and Mutual Funds

Thinking Outside the College Box