It is common knowledge that in the hierarchy of bubbles, not even the stock market comes close to the student loan bubble. If it isn't, one glance at the chart below which shows the exponential surge in Federal student debt starting just after the great financial crisis, should put the problem in its context.
And while we have previously reported that a shocking amount of the loan
proceeds are used
to fund anything but tuition payments, a major portion of the funding does
manage to find itself to its intended recipient: paying the college tuition
Which means that with student debt being so easily accessible anyone can use
(and abuse), it gives colleges ample room to hike tuition as much as they see
fit: after all students are merely a pass-through vehicle (even if one which for
the most part represents non-dischargeable "collateral") designed to get funding
from point A, the Federal Government to point B, the college treasury account.
It should thus come as no surprise that in a world in which colleges can hike
tuition by any amount they choose, and promptly be paid courtesy of the federal
government, and with endless amounts of propaganda whispering every day in the
ears of impressionable potential students the only way they can get a
well-paying job is to have a college diploma (see San Francisco Fed's latest
paper confirming just this) there is no shortage of applicants willing to take
on any amount of debt to make sure this cycle continues, that soaring tuition
costs are one of the few items not even the BLS can hedonically adjust to appear
End result: tutitions have literally expoded across the country in both
public and private colleges.
But while we know what the answer looks like at the Federal level, the
question arises just how does this price shock look at the state level?
(Click link below to read more)
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- Judy Chaffee
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