By Prab Randhawa, Special to The Black Voice News –
Think the dot-com and housing bubbles were big? Meet the education bubble. The explosive growth of student loan related debt since 1999 has been unbelievable.
Student loan debt has skyrocketed by 511 percent over this period. In the United States in the early part of 1999, there was only $90 billion in student loans needing to be repaid. However, as of May of this year, that sum had ballooned to over $549 billion.
Now here’s the shocking part.
That period was by no means just an average stretch throughout the nation's history for consumer and household debt. This period included the staggering growth of a housing bubble so immense that it caused the global financial sector to teeter on the verge of collapse and has led to the worst global recession in our lifetime.
So, in comparing the housing bubble and the education bubble, how would the housing bubble debt stack up? If you were to add together all of the mortgages including all of the revolving home equity, from Jan. 1999 to Aug. 2008 which was when housing-related debt peaked, the total sum increased from a little less than $3.28 trillion to over $9.98 trillion.
That means that over this very short period of time, housing-related debt had grown a little over threefold.
However, over that exact same time period, the total balance due on student loans and debt grew more than six-fold. The growth of student debt and the lifelong burdens it creates for many has been twice as steep as all mortgage-related debt, but unlike mortgages, it's showing absolutely no signs of slowing down.
Colleges provide a service people want for the benefit of themselves and their children, but clearly the total number of enrolled students didn't and couldn’t grow by 500 percent.
So why are education costs and the associated loans and debt growing so rapidly? A major reason could be demand and another is availability.
The US government backs student loans and it’s virtually impossible to shed the loans via bankruptcy. This results in credit to students gushing freely since the banks and other lenders can loan an infinite sum that has to be repaid.
In turn, colleges and universities across the nation are able to raise tuition consistently and aggressively since students and their parents are willing to pay more and more and can borrow from a limitless pile to later pay through the nose to pay it all back.
Many families are going into this unprepared, as they don’t understand the rules set up by colleges to collect as much money as possible from each family. College planning is becoming increasingly important to families in order to allow them to understand how best to pay for college so they don’t unnecessarily jeopardize their retirement someday.
A growing number of families grapple with increasingly higher student loan repayments for decades of their lives; they'll have less and less money to invest toward their long term stability.
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