May 05, 2008
A MARKET BUBBLE in student loans? I wonder if it's a student-loan bubble -- or a higher-education bubble? Bubbles are usually inflated by easy credit, and usually end when the credit market gets less generous. I suspect that runups in higher education costs have been underwritten by the availability of easy credit to students and parents, and I wonder if colleges and universities won't meet a lot more market resistance if that credit dries up even partially.
UPDATE: Reader John Costello sends this bit of anecdotage: 'My girlfriend works for a bank that bundles student loans. They just let most of their people go. She reports that many people who had gotten loans for their first two or three years are now unable to get loans to continue (which means, of course, they are likely to default on the loans for their uncompleted educations.)"
ANOTHER UPDATE: Dean Esmay writes: "I think it’s probably true. The market of easy credit for student loans has resulted in a glut of people demanding to go to school and thus lowered the value of a college degree. I went to school for four years and in my heart of hearts I truly wish I’d never done it."