Charles Payne

Much noise has been made about the growing student loan bubble and what kind of impact it will have on the economy when it goes “boom.” It is a reasonable question, but if you are thinking this is just like the housing bubble, or the tech/Internet- stock market bubble, you are wrong. There is no doubt that the rapid spike in student loans over the past five-years has been alarming, especially since the funding and now the risk comes at the expense of taxpayers.

However, being accustomed to getting the short end of the stick when the world is turned upside down, taxpayers would loath having to pay for defaults on loans without their consent. There was a chain of events that brought the nation to this point.

Beginning with the 2008 semester loan limits that were placed on Stafford loans, putting a deep chill on private lending:

  • 2007-2008 semester 2.8 million private sector loans averaged $7,041
  • 2011-2012 semester 1.3 million private sector loans averaged $5,870

In the 2011-12 semesters, the federal government issued 93% of all college loans. The numbers are staggering and now it is a Main Street concern. According to a 2011 Pew research survey, one in five US households were holding student loans at an average balance of $23,300. The bottom line is that college is not cheap and the burden of student loan debt continues to impact Main Street and the economy.

Tuition 4-Year Colleges

All

Public

Private

1981-82

$9,554

6,942

15,306

2011-12

$23,066

16,789

33.716

U.S. Department of Education, National Center for Education Statistics

The administration took control of student loans, along with other large foundations including medical and financial ones, when the rug was pulled from under private lenders in 2010. The result has seen student loan debt, largely sponsored by taxpayer funds, spiking more than 50% since 2009.


Charles Payne

Charles V. Payne is a regular contributor to the Fox Business and Fox News Networks. He is also the Chief Executive Officer and Principle Analyst of Wall Street Strategies, Inc. (WSSI), founded in 1991 which provides subscription analytical services to both individual and institutional investors.
TOWNHALL FINANCE DAILY

Get the best of Townhall Finance Daily delivered straight to your inbox

Follow Townhall Finance!