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Student loan debt next bust?

I read an article predicting the trillions of dollars in student loan debt will eventually cause colleges to go out of business and cause financial crisis much like what happened in the housing market. What I don't understand is who in the financial world allows such practices to get that far out of control? If most of us CFO's operated our budgets in this fashion we'd be increasing the unemployment rates.


Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

Abuse will occur in any market that has a guarantee. Student loans are a little different. The housing market fell primarily based on liar loans, I.e. fraud in the applications. In theory, students have no history of bad debt. They do not lie. They just sign on the dotted line and are guaranteed by Uncle Sam.

It is more of an ethics issue. Why are students not honoring their debts?

Topic Expert
Christie Jahn
Title: CFO
Company: Prime Investments & Development
(CFO, Prime Investments & Development) |

Lenders were providing money for anyone without much concern for probable repayment and just kept lending more and more. Students graduate and aren't finding the jobs they need and can't repay their debt. The other issue is they have so much to repay that it's having economic issues because they can't afford much else post graduation. Just like the housing market bubble at some point it will burst. What happens when more and more students can't repay back their loans. It's going to be tough for educational institutions to balance their own budgets.

Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

You may a good point. But, vested interests in higher education and banking are going to expect another taxpayer bail out led by the politicians whom they lobby.
Institutions have known for years that the debt tsunami is coming, but they have "faith" in the politicians to rescue them.
Big picture, the university education industry is going thru a transformation like we did going from horse & buggy to automobile.

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