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Student Loans: The Next Bubble to Pop?

Analysts point to ballooning debt held by jobless college graduates as a potential cause of the next U.S. financial crisis. College enrollment has tripled over the last four decades, and the cost of tuition and fees has more than doubled since 2000, surpassing inflation in other markets, including health care, housing and energy.

Collective student debt exceeded total credit card debt in the U.S. last year. Mark Kantrowitz, publisher of websites on college financial aid, reports that the average 2011 college student will be $27,000 in the hole upon graduation. The prospect of repaying those loans is not promising, with unemployment among those under age 24 much higher than the rest of the labor force. Also, federal student loan subsidies were made eligible for cuts during the deficit-reduction deal reached by Congress and President Obama earlier this month.

All this will place a generation of college-educated Americans in a debilitating state of debt peonage at a time when the opportunity to develop themselves and their careers has traditionally been the greatest. View the report here. –ARK

The Huffington Post:

Record borrowing by college students who are graduating without jobs may lead to the next financial crisis, according to a recent report by Moody’s Analytics.

… The Moody’s report points to the fact that student loan volume growth, unlike other lending, has accelerated during the recession. This is due in part to people seeking more education and retraining as well as some students opting to remain in college longer to avoid poor job prospects.

The report indicated that in addition to college enrollment tripling over the past four decades, “demand [for student loans] is driven by the cost of education, which has grown at an extraordinary rate over the past three decades.” Based on Consumer Price Index data, the cost of tuition and fees has more than doubled since 2000, and has outpaced inflation across all goods, health care, housing and energy.

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