The Next Big Bubble Burst – Higher Education and Student Loans

Not long ago, an acquaintance asked me what I thought the next economic or industry bubble to burst. I had to mention healthcare, but I also explained how we were really on a mad tear down a dead end road with regards to college costs and college loans. Let’s talk shall we?

The Senatorial Committee Hearings on Federal Student Loan Program in late March 2014 were quite telling. Many Democrat Senators would not hear any of the reality to the default rates or trending challenges, instead they wanted to separate real-world banking, financing and lending expert advice for a notion that lending money to poor students regardless of their ability to repay would better help close the “inequality gap” but the truth is that economically enslaving the poor students with unbelievable debt for their college degrees, many of which will not be helpful in the job market when they graduate is quite insidious indeed.

One Republican made note of the need for skin in the game, and many giving testimonials explained how part time students were taking out loans in excess of full time students, using the money to pay bills or buy a new car, even though they were already on other social programs, perhaps single moms who may not be able to work even once graduated due to their mother duties. There was testimony about how many dropped out of school, never got their degree and were then defaulting. All the while tuition costs are skyrocketing and raising the price of the education and the amount of the loan.

The Senators wanted to reduce the collection agency calls to help collect on the 10s of millions of bad loans which are in default or over 90-days now. Last time this was an issue in our political conversation was during the 2012 Presidential Election. What has changed since then? Nothing, well that’s not really true, things have gotten worse, the default trend lines are continuing. One Senator a Democrat from Washington State noted that what we need is Financial Literacy and Loan Counseling. Sure, that makes sense, but most left-leaning colleges do not teach free-market economics, amortization, personal finances, budgeting, or even how to balance a friggin checkbook.

It is quite obvious right now that we have a fundamental ideological problem with these Federally Guaranteed College Loans and Federal Direct College Loan Programs. This problem is exactly what happened with the Housing Crisis, it’s about political agendas, not about financial reality. Might I say; here we go again, and this time it’s not like no one didn’t warn us. The writing is on the wall. Please consider all this and think on it.

Lance Winslow has launched a new provocative series of eBooks on the Future of Education. Lance Winslow is a retired Founder of a Nationwide Franchise Chain, and now runs the Online Think Tank; http://www.worldthinktank.net.

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