Student loan debt has been rapidly growing in the United States for many years. It has become a cause of concern for economic analysts and college experts alike. Recently, entrepreneur Mark Cuban wrote a blog post on the subject and raised several important points:
Remember the housing meltdown? Tough to forget isn’t it. The formula for the housing boom and bust was simple. A lot of easy money being lent to buyers who couldn’t afford the money they were borrowing. That money was then spent on homes with the expectation that the price of the home would go up and it could easily be flipped or refinanced at a profit. Who cares if you couldn’t afford the loan. As long as prices kept on going up, everyone was happy. And prices kept on going up. And as long as pricing kept on going up real estate agents kept on selling homes and finding money for buyers.
Until the easy money stopped. When easy money stopped, buyers couldn’t sell. They couldn’t refinance. First sales slowed, then prices started falling and then the housing bubble burst. Housing prices crashed. We know the rest of the story. We are still mired in the consequences.
Can someone please explain to me how what is happening in higher education is any different?
Its far too easy to borrow money for college. Did you know that there is more outstanding debt for student loans than there is for Auto Loans or Credit Card loans ? Thats right. The 37mm holders of student loans have more debt than the 175mm or so credit card owners in this country and more than the all of the debt on cars in this country. While the average student loan debt is about 23k. The median is close to $12,500. And growing. Past 1 TRILLION DOLLARS.
We freak out about the Trillions of dollars in debt our country faces. What about the TRILLION DOLLARs plus in debt college kids are facing ?
From an objective perspective, the concerns that Cuban raises are very serious. As the global economy seeks to recover from the financial meltdown of 2007 and 2008, the last thing we can afford is another major “bubble burst” in the form of student loan defaults.
However, most of you reading this aren’t doing so objectively—because you or your children are preparing for college, and are looking at the possibility of taking out student loans as well. You’re not alone. These days, it seems that graduating from college debt-free is a very rare occurrence. Unfortunately, many students find themselves saddled with a significant amount of debt after graduation. Many can’t afford their monthly payments—and those who can afford them must often make significant sacrifices elsewhere, like moving back in with parents and forgoing the purchase of a car.
At US College Planning, we believe that every student should have an opportunity to receive a world-class education. But we also believe that they shouldn’t have to sacrifice their future in order to do so. We’ve helped hundreds of students and their families chart a financially responsible course through college—if you’d like to learn more, our team is standing by to talk to you today!