Is Student Loan Debt the Next Bubble To Cripple America's Economy?

POSTED: Thursday, October 6, 2011 - 3:35pm

UPDATED: Friday, October 7, 2011 - 2:14pm

While the banks and economy are still reeling from the housing crisis, there is concern that the next money bubble to burst could be unpaid student loans. Gordon tokumatsu has more.

"I would say it's between $30,000 and $50,000," says Ryan Rice.

That enormous student loan debt is only part of what Rice faces upon graduation in December.

"Because I didn't qualify, because I have bad credit it's a variable interest rate. It can go as high as 23 percent," says Rice.

Sound familiar? Like the mortgage default crisis that plunged the U.S. economy into recession in the first place, student loan debt is a balloon that's ready to pop.

Half a million people, students and graduates, expected to default, partially because tuitions have gotten so high, but also because private loans are displacing government loans at a rapid rate.

By 2012, student debt is likely to approach a trillion dollars.

Professor Estella Bensimon at USC's Center for Urban Education says when students like Rice demonstrate against Wall Street, maybe they have a point.

"It has been much more responsive to market forces and the raising of tuition is part of that movement," says Bensimon.

"I owe $12,000 for my loan," says Amber Barrero.

Barrero, also a demonstrator, works as a housekeeper after her cosmetology school went bankrupt. She couldn't even get her certificate.

But she's still saddled with the loan debt. She's considered defaulting, but then the collection agencies start calling and threatening.

"My credit score, I can't buy a car. I can't buy a house," says Barrero.

"I’m eating rice and beans, and you know it's living paycheck to paycheck," says Rice.

And experts say, consider the larger picture too.

When people like Rice and Barrero can't afford to move up today, what happens to the overall economy tomorrow? What happens, for example, when baby boomers want to sell their homes?

"If we do not have a new generation that is able to afford them, we will be in trouble. All of us," says Bensimon.
 

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Well this is what happens when we allow higher education to be operated as private businesses.

All they are worried about is higher paychecks for the board and federal funding...UTEP is guilty of this...how is it it costs 10k annually for a full time student at UTEP?

Whats worse is they give immigrants jobs and tuition discounts because they are considered "staff" plus if they are from mexico they get 5k annually reimbursement.So this only affects american non-finacial aide students

Our education system is all about money, at every level. Too many kids are pushed to attend college when they have little chance of succeeding. The schools just want more butts in the seats so they can get more money.

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