10 monster bubbles

10 Monster Bubbles Currently In The Making

1/11

Student Loans

Image: www.financemymoney.com

Student loan debt now exceeds revolving credit facilities as Consumer Enemy Number One. That's right -- Americans now spend $3.285 billion more to fund their education than to buy five-bucks-a-pop coffees at Starbucks. The massive loan market and the quiet web of underwriters and collection agencies doing their best to reel in cash-strapped young adults now boasts an average default rate of 17.9% (for-profit institution attendees) and an average of 40% for 2-year college graduates who received their diploma in 1995.

How did this happen? A federal and private student lending system with almost no consumer protection for students (student loans cannot disappear with a bankruptcy filing or even with a death certificate) and limitless leeway for debt collectors to slap fees on those who default on their monthly payments. All of this lays the ground for predatory lending from loan originators whose rewards are divorced from the risks of potential defaults.

Oh, and not mention, it costs more than FOUR TIMES as much to get a degree today than it did in the early 1980's while median income has only increased approximately 150% since then.

Betty Jin | Aug. 13, 2010, 1:20 PM | 96,150 | 32

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Let's face it, there's always a bubble inflating somewhere and the world just seems to go from one to the next.

One bubble pops, and then we run for safety in the next one.

Many bubbles actually have valid long-term arguments, it's just that markets usually take a good idea ten steps too far.... until it pops.

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Read more: http://www.businessinsider.com/10-bubbles-now-in-the-making-2010-8#student-loans-1#ixzz0wYiALF7z