Wednesday, March 7, 2012

Student Loan Bubble

When Millicent borrowed for college, she
Was taken aback by the knowledge she
Could have them remit
As much for French Lit
As for Health Information Technology.

The Wall Street Journal's Real Time Economics reports that surging federal student loans are confounding the general trend of consumer debt reduction. Thanks to our highly leveraged collegians, overall consumer debt increased by $18 billion (+0.7%) in January. As Dr. Goose and many others have warned previously, the rise in student debt, coupled with rising unemployment among young people, is an explosive trend. One step that could deflate this student loan bubble would be to introduce some form of credit underwriting to the process. Linking the availability of loans to the likelihood of a program of study to produce employable skills would help to restrain excess lending and direct young people into viable careers.

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