March 7, 2013

M.D. Harmon: Student debt threatens to burst higher education bubble

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Some analysts now say we are undergoing a "higher education bubble" that poses risks similar to the "mortgage bubble" that led to bank, real estate and construction collapses in recent years.

Ominously, the Wall Street Journal reported Tuesday that sales of securities backed by private student loans were soaring even as the loans' risk of default increased. High potential payoff rates were given as the reason for the boom, even though defaults in high-rate securities based on risky mortgages was a chief spur for the housing crisis of the past five years.

Some say the only way out of the mess is to create "the $10,000 degree," procured at least partially through online education that avoids the high costs charged by schools with huge, expensive faculties and physical plants.

That won't help current debt-holders -- only changing bankruptcy laws can do that -- but it could provide longer-range relief, if it is allowed to happen.

Online schools are often strongly opposed by those invested in the current system, but those vested interests will face increasing challenges if the situation gets worse.

And hardly anyone is saying it will get better anytime soon.

M.D. Harmon, a retired journalist and military officer, is a free-lance writer and speaker. He can be contacted at:


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