Student Debt Bubble - part 3

WILL STUDENT DEBT BE THE NEXT BUBBLE?

debt-bubble2Bubbles occur when a particular market is flooded with people eager to buy in, causing prices to skyrocket. This happened with the U.S. housing market and Silicon Valley startups before that. And it’s what we are seeing today with college enrollment, which grew by 11% between 1990 and 2000 followed by 37% over from 2000 to 2010, according to the Institute of Educational Sciences.

Some experts see clear similarities to past economic bubbles like the housing crisis that brought the whole U.S. economy to its knees. The Federal Advisory Council has certainly noticed the disturbing similarities between student debt and past bubbles, calling attention to the $1 trillion student debt record the nation has reached. They emphasize that as student debt rises, colleges continue to raise the price tag on tuition, creating a vicious cycle.

However, others are not so convinced we’re facing an economic bubble. Professor Robert Archibald from The College of William and Mary does not see the connection between student debt and a looming bubble. Professor Archibald explains student debt is different from debts of the recent past, since bubbles occur when an overpriced product suddenly drops in value. Instead, Professor Archibald contends the price will never come crashing down; students will simply be burdened with ever-growing debt and tuition costs each year.