The higher education bubble is a hypothesis that there is a speculative boom and bust phenomenon in the field of higher education, and that there is the risk of an economic bubble in higher education that could have unintended consequence in the broader economy like student loan bubble that we will discuss today. Student loan bubble is a consequence of higher education bubble.
According to the theory, while college tuition payments are rising, the rate of return of a college degree is decreasing.
Since the 1970s the difference between what those with a four year college degree earn and what those with only a high school education earn has increased dramatically. So a collage degree is seen as an insurance for the future and parents and students are prepared to pay whatever it takes either by up front or taking loans for a degree regardless on the return on investment . Like the housing bubble, the education bubble is about security and insurance against the future. The thought was ‘You will always make more money if you are college educated so it is the best investments you could make’. But cheap credit has caused college tuitions to vastly outpace inflation and family incomes.
Statistics show that the amount of students now graduate with average debt of $24.000 has increased 50% in last 10 years. Student loan debt has increased 511% since 1999.
The price of a room at collages had doubled and tuition fees has gone up 439% since 1982 in America [continues]
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