Reply #33: Moody's Analytics Warns Student Loans May Be The Next Financial Bubble To Burst

[Demeter]

http://www.huffingtonpost.com/2011/08/09/moodys-student-loans-bubble-burst_n_922646.html

Record borrowing by college students who are graduating without jobs could lead to major problems in the nation's economy, according to a recent report by Moody's Analytics...The Moody's report points to the fact that student loan volume growth, unlike other lending, has accelerated during the recession. This is due in part to people seeking more education and retraining as well as some students opting to remain in college longer to avoid poor job prospects.

The report indicated that in addition to college enrollment tripling over the past four decades, "demand for student loans is driven by the cost of education, which has grown at an extraordinary rate over the past three decades." Based on Consumer Price Index data, the cost of tuition and fees has more than doubled since 2000, and has outpaced inflation across all goods, health care, housing and energy.

Student lending has also increased due to state governments making cuts to their public education institutions, causing colleges to raise tuition. Further, college endowments have recovered slowly throughout the economic downtown, forcing schools to increase tuition and limiting the amount of in-house money for scholarship use.

The student loan debt load now outpaces credit card debt, and according to Mark Kantrowitz, who publishes the financial aid websites Fastweb.com and Finaid.org, the average 2011 college graduate carries $27,200 in student debt.

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