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How young people? can we rein in these rapidly rising cost that threaten long term financial stability for millions of young Americans?
"Consumer credit funded by the federal government primarily through student loans has exploded, up 274% since mid-2010, accounting for two-thirds of the increase."
"What’s most worrisome in the debt arena is that the government is pushing students into more and more debt to pay for education. Young borrowers don’t think as clearly about the return on that education as older, more cautious borrowers.
Compare this to the subprime boom, when borrowers overpaid for homes. Government said this was fueled by Wall Street greed. Well, now, student borrowing is being fueled by Academics, Professors and College Administrations who want to be paid to teach. Think of student loans as a jobs program for the “intellectual” class.
And just like housing in the early 2000s, this tsunami of credit is resulting in higher prices for college. The colleges are capturing the benefits that are supposed to go to students. The US economy would be much better off using student loan money to cut tax rates, which increases the returns to intellectual capital.
So, it’s not the debt that is a problem, it’s what the debt is paying for. Student loans won’t bring down the economy. But they have created a bubble in education. Outside of this, the consumer and economy are doing just fine."
Brian S. Wesbury
"Consumer credit funded by the federal government primarily through student loans has exploded, up 274% since mid-2010, accounting for two-thirds of the increase."
"What’s most worrisome in the debt arena is that the government is pushing students into more and more debt to pay for education. Young borrowers don’t think as clearly about the return on that education as older, more cautious borrowers.
Compare this to the subprime boom, when borrowers overpaid for homes. Government said this was fueled by Wall Street greed. Well, now, student borrowing is being fueled by Academics, Professors and College Administrations who want to be paid to teach. Think of student loans as a jobs program for the “intellectual” class.
And just like housing in the early 2000s, this tsunami of credit is resulting in higher prices for college. The colleges are capturing the benefits that are supposed to go to students. The US economy would be much better off using student loan money to cut tax rates, which increases the returns to intellectual capital.
So, it’s not the debt that is a problem, it’s what the debt is paying for. Student loans won’t bring down the economy. But they have created a bubble in education. Outside of this, the consumer and economy are doing just fine."
Brian S. Wesbury