Will the Higher Education Bubble Pop?

The American student loan debt has risen in the past decade from $240 billion to $1.2 trillion with the average graduate exiting school having approximately $29,400 in student loan debt, with government and private student loans. Such a rapid increase has mimicked the housing market bubble and the steady increase has many wondering if the higher education bubble will soon pop as well.

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Is History Repeating Itself?

With the high national average of student loan debt, that number is expected to rise by 6 percent each year. These loans students secure are similar to the mortgage loans that left many homeowners, without a home. Of the $1.2 trillion in student debt, about $1 trillion is comprised of Federal student loans. With interest rates climbing on both private and federal loans, students are expected to pay much more over the coming years.

The Bubble May Not Pop

However, students are still graduating in an economy, though improving, still has left many unemployed. Students and their families are realizing that because they seek out higher education opportunities does not mean they will secure a job where they can make affordable payments. Students are now either waiting until they can find affordable options to continue school or finding alternate methods. So, private lenders have changed their lending standards and loans are not as popular. So some would say, the bubble has stopped growing or already has burst.

There however is a way students can receive their education and avoid the higher education bubble all together. They can get a budget together while still in high school. This helps planning to be easier. They can apply for scholarships, grants, and negotiate with schools for reduced to no tuition rates. Also, they may inquire about work-study opportunities on campus while living at home to decrease the cost of living. If they must take a loan, they should pay the interest while in school so the bubble doesn’t grow.

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