The Student Loan Debacle: a Clear Moral Hazard

Gary Jason:

Here, in a nutshell, is the human toll of the student-loan mess: it is forcing many recent grads to defer marriage and having children; it is hobbling many prospective entrepreneurs that our economy badly needs and may well delay the retirement of new grads by 11 or 12 years.
The total student-loan debt hit $1 trillion dollars two years ago, eclipsing total durable goods debt, and credit card debt. It is now one-fifth higher, at about $1.2 trillion. Student loan debt tripled between 2004 and 2012, with more than 40% of 25-year-olds now carrying student loan debt, averaging $24,000 per debtor. And remember, it is nearly impossible to discharge student-loan debt in bankruptcy.

By "debacle," I mean this sad process: the ramping up of federal government guarantees for banks lending money to more and more students over the last 15 years (culminating in the complete nationalization of Sallie Mae in 2008), which led to an explosion in college tuition and consequently an explosion in total loan debt.

Posted by Jim Zellmer at December 7, 2013 12:01 AM
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