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Why huge Student Loan Debt will Crash and Cost Tax payers big time.

Trillion Dollar Student loan, Higher interests, Increasing college costs, stagnant wages and education reforms.

In recent years, there has been many markets that have caused financial crisis like the real estate market that crashed and cost tax payers a lot of money to fix. Many people worry that the huge student debts will eventually become un-payable and when borrowers default, this will cause the next financial crash.

The total student loan debt in the US right now is almost One Trillion dollars, a mind boggling amount. With the increases in tuition and college costs, there is even more need for Student loans hence this problem is not going away. It may actually be getting worse.

College costs are increasing at about 8% per year but the corresponding wages increase is less than 3% and this wage increase is at-per with inflation hence it's not therefore going to result in an increase of disposable income which parents can then pay College for their students with.

Therefore if the borrowers start defaulting on their student loans, the loan companies that lent this money will be in serious problem and may start failing en masse requiring another bail out from tax payers, just like what happened in the housing and mortgage market.

Some of the issues people should consider is to limit the amount of student loans one is allowed to borrow based on their expected earnings upon graduation. So if one is studying to be a doctor, they can be allowed to borrow more than a person studying art because doctors are expected to make more money than artists in their careers.

This however may create issues of equality in access to education because all people should be given a chance to get the best education available no matter what their talent lies.

There should also be rules proposed to tie the disbursement of the loans to the students progress in college. so if the student fails their classes and drops out, they should not be allowed to get the loan any more because they have little chance of graduating, hence having a career to enable them repay that loan.


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