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Poor Getting Hosed in Student Loan Bubble


It’s bad enough that student debt has topped $1 trillion, but what’s worse is that most of this debt is held by those least able to pay it off. A sobering new graphic in Bloomberg Businessweek revealed that more than half of all student debt is held by households with a net worth lower than $8,500. The average loan balance, by contrast, is $20,326.

In case there were any doubt, this reinforces the sense that the student loan bubble is inflating the same way as another that led to financial meltdown not so long ago. In the case of housing loans, misguided social activists and policymakers tried (and are trying still) to steer low-income people into home ownership. In the case of student loans, they’re pushing them into colleges. But in both cases, low-income families are encouraged to take on debt that they won’t be able to manage, and in both cases the intended beneficiaries get hosed.

This pattern suggests that we should be more wary about for-profit education in particular. While we believe that for-profit schools have a vital role to play in making American education more flexible and user-friendly when properly overseen and regulated, there are definitely a number of fly-by-night programs out there that specialize in fleecing the poor and the unprepared.

[Ball and chain image courtesy of Shutterstock]

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  • Anthony

    Fleecing the poor and unprepared represents nothing new in America: P.T. Barnum’s a sucker is born every minute and never give a sucker an even break” yet appears operational among some levels of society.

  • Peakview

    It is not because the US is too vast and diverse. This is a fallacy. It is because top-down command control can not react to changes swiftly, never has enough information, and doesn’t recognize that the same goal can be achieved in different ways. A small company will run into the same issues. Everyone here knows a successful businessperson whose company never grew past the point where they could personally manage the entire business.
    It can work in certain places at certain times for certain periods, but is, in general, a poor way to run anything and the main reason against big government in most any form.

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