• College Debt – the next bubble?

    by  • August 22, 2013 • Life • 0 Comments

    The other day I wrote a post that included a bit on why you should follow Mark Cuban on Twitter. Yesterday he sent out the following message:

    Student Loan Debt

    Student Loan Debt

    I had also mentioned in a previous post that I didn’t think everyone should and outlined the three reasons I think it makes sense for a person to go to college.  One of the reasons that I wrote this post is that, like the article and Mark Cuban, I think the amount of debt that is being amassed to attend college these days is ridiculous!  I know that in 15 years the cost of the education I received at Pepperdine University has doubled , whereas the starting salary of recent college graduates that I know from Pepperdine have either gone down or increased by 10%, depending on the sources you look at for 1999 and 2013.

    If my history serves me correctly, I believe much of this was thanks to Bill Clinton’s Presidential Administration as he began phasing in Direct Loan Programs to provide low cost loans to students.  As basic economics tells us, if you loosen up money supply, especially for desirable items like cars, houses and college, this will increase demand on these products.  As demand rises so often does the price of the items.  We recently saw this with the housing bubble.  So the question is, have we been creating a college debt bubble over the last two decades?  Are we now approaching a time when the cost of a college education does not equal the opportunity cost of carrying the debt needed to obtain the education?  Have we gotten to a point where recent graduates are going to financially collapse because they can’t afford the loans they have along with basic living expenses?

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    Dad, sales guy, entrepreneur, and technology geek.

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