Federal student loans generally hovered at around $100 billion from 1996 to 2010, but spending since then increased to a whopping $1 trillion dollars in the US. So it’s not really a surprise that a massive bubble may be on the horizon. Some of the student loans are also being synthetically included in financial instruments similar to CDOs, that crashed the market in 2008.
Credit creates almost every bubble. Currently a Bachelor’s degree has become the new high school diploma, a Master’s degree has become the new Bachelor’s and in science you have to study for at least 8 years to be recognized by the community. Does this seem normal to you ?
New universities are being established every day. They are accepting almost everyone that has a social security number. The bar is being set very low and nowadays anyone can get into a university and graduate successfully.
The simple truth of the matter is this: too many people are graduating from university -> there are not enough available work places for all these graduates -> those who can’t find jobs, won’t be able to repay their loans.
And this is problem is far from contained only in the US. The same is true for the UK. The government subsidies student’s loans, making them freely available to students from Eastern Europe, East Asia and the Middle East. This creates an artificial Market failure. If the bubble burst, which it will eventually, this could potentially collapse the global economy.