Americans are still talking about the recently deflated
housing bubble, but there’s a new bubble in town. It’s the student loan bubble
and when this one pops, it might dwarf the wreckage we’ve witnessed in the
real-estate markets.
In the latest news, the Federal Reserve’s Board of
Governors warned that soaring student-loan debt has “parallels to the housing
crisis,” according to a May report in Bloomberg. As with housing, free-flowing
cash will lead to widespread default. Of course, it’s easier to repossess a
tract house than to take back a potentially worthless degree.
Federal Reserve Chairman Ben Bernanke dismissed these
concerns by saying that most of the money in the student-loan sector is federal
money, which just means taxpayers – rather than lending institutions – will
take the initial hit. But the board of governors makes a salient point as
student loan debt soars to $1 trillion and exceeds the nation’s level of
credit-card debt....To Read More....
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