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Experts say out-of-control student loan debt is not a ‘bubble’

Student Loans

Student loan debt is a growing problem and has been compared to the housing crisis of 2008, however some economists and higher education experts are now saying that this crisis is entirely different.

Although the cost of getting a college degree is increasing, the value of a degree is not significantly decreasing in the long run.

“I don’t understand the analogy [to a bubble] at all,” said Robert Archibald, economics professor and co-author of “Why Does College Cost So Much?”. “A bubble is about a financial asset increasing unreasonably in value and people then recognizing it,” he explains.

There are different ways to measure the payoff of a college degree and students and parents need to look at how much people earn in the long run, according to Jeff Selingo, author of “College Unbound” and editor of The Chronicle of Higher Education.

“I think too many people look at the value of college for those first couple of years out, especially when they’re paying their student loans,” Selingo said. “You’re going to make much more over the course of your lifetime if you have a college degree.”

While it may not be a ‘bubble’, there is no doubt that the skyrocketing cost of a college education is causing student loans to be one of the largest shares of household debt, second only to mortgage debt.

According to the Federal Advisory Council student debt is nearly $1 trillion, and “now exceeds credit-card outstandings and has parallels to the housing crisis.”

A new study by Fidelity found that 70 percent of the class of 2013 is graduating with an average of more than $35,000 in college-related debt, including federal, state and private loans, credit cards, and debt owed to family.

Studies have shown that nearly one-third of recent college graduates regret attending school and wish they had gone straight to the workforce instead.

Paying off student loans and trying to find employment in a tough economy remain major issues for millennials, however, fear of a ‘student debt bubble’ may not be necessary.


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