Nerd News: Are Student Loans + Academia the Next Toxic Financial Bubble?

Ready to pop.

Forbes has an alarming article about the education market and the student loans that are part of it. Blurb:

. . . an unfolding education hoax on the middle class that's just as insidious, and nearly as sweeping, as the housing debacle. The ingredients are strikingly similar, too: Misguided easy-money policies that are encouraging the masses to go into debt; a self-serving establishment trading in half-truths that exaggerate the value of its product; plus a Wall Street money machine dabbling in outright fraud as it foists unaffordable debt on the most vulnerable marks.

Student loan debt IS a huge problem, and plenty of good people spend too much of their post-graduation years trying to pay off their mountains of school loans. I was far luckier than most in that I got a scholarship for a big chunk of my undergraduate education, but I still had to get a couple student loans. Many of my colleagues and friends graduated from college not only with a BA or BS, but also MOUNTAINS of debt that take years to pay off. A Nerd Lord friend of mine
told me not too long ago that he had finally paid off his undergraduate loans. It took him over 20 years, for goodness sake.

See what the TaxProf blog has to say specifically about law school debt. Ouch.

UPDATE: Some more thoughts, such as this piquant bit:

The root cause of this impending bubble is the same for the housing market. Politicians decided that all students should go to college, just as they decided that all people should own their own home. {MM comments: politicians/edu-crats/various influence-peddlers have turned college and/or homebuying into some kind of social fetish. EVERYBODY is supposed to do these things, regardless of whether it's practical, feasible, possible, or even desirable for an individual to do so.} Those are certainly admirable goals, but prescriptions for disaster as public policy. {MM comments: Absolutely!} Rather than create public colleges with no requirement for tuition, which would have been the honest way to implement that policy but completely unpalatable as a spending plan, the federal government pushed for tuition loans, upping the demand at universities. With billions of dollars flooding the market and consumer demand dramatically rising, prices increased across the board, predictable from the basic economic law of supply and demand. When prices increased, the subsidies increased, which increased demand and pushed prices higher, creating a vicious cycle … exactly [sic] as it did in the housing market.

Government has to get out of the lending markets altogether. If politicians want to subsidize education, they should create more supply and lower the price in order to create the increased accessibility they want, not create bubbles in lending markets. Better yet, government should stay out of it altogether and let the market take care of itself.