We at Arkansas Business have warned for a couple of years now that the student debt crisis is a bubble in the making with the potential to burst as powerfully and dangerously as the housing bubble.
Unafraid to be called Cassandra — and backed up by the statistics in our stories in these pages by Editor Gwen Moritz and Senior Editor Mark Friedman — we’ll repeat our prophecy: Pay attention, all. This tidal wave of unsecured debt could swamp the country’s still less-than-robust recovery.
Consider:
As the number of college students has leveled off and even started to decline, the number of people carrying student debt has increased and the typical size of those debts has inched up. People with any college debt tend to have more than ever — and even smaller balances can be overwhelming to an entry-level career.
Michael Moore, chief academic and operating officer of eVersity, the University of Arkansas System’s new all-online institution, put it this way:
“The people with the six-figure debt are the ones we worry least about. They are the ones who have gone to law school or medical school. But the ones we are actually more concerned about are the ones that are in the $50,000 range. And the highest default rates are less than $10,000.”
Education is like housing in that everyone needs it. Of course, not everyone needs 10,000 SF and a home theater any more than everyone needs a Ph.D. from Harvard. But when an unsophisticated, unwary population meets unscrupulous, or even just overly enthusiastic, lenders, bad things happen.
There’s a saying: “Would you rather be right, or happy?” Being right about a student debt-caused recession would carry absolutely no satisfaction. We’d much rather be happy.