Higher "Ed" Could be Next Bubble to Burst

By:  Jack Kenny
08/09/2011
       
Higher "Ed" Could be Next Bubble to Burst

While Standard and Poor's downgrade of the U.S. government's credit rating has drawn much attention in the last few days, a generally overlooked report by Moody's Investment Services on the poor performance of student loans suggests higher education may be in a financial "bubble" that could burst in a stagnant economy that offers declining rewards for a college or university degree.

Titled "Student Lending's Failing Grade" the report appeared in the Moody's Analytics publication for July, 2011.  It notes that dollar balances on student loans have increased by double-digit rates in the past decade and the number of loans has continued to increase in recent years as more people have been seeking education and training in a declining job market. But the tightening of lending standard in other sectors of the economy that followed the financial crisis of 2008 has not affected student loans, the report found.

While Standard and Poor's downgrade of the U.S. government's credit rating has drawn much attention in the last few days, a generally overlooked report by Moody's Investment Services on the poor performance of student loans suggests higher education may be in a financial "bubble" that could burst in a stagnant economy that offers declining rewards for a college or university degree.

Titled "Student Lending's Failing Grade" the report appeared in the Moody's Analytics publication for July, 2011.  It notes that dollar balances on student loans have increased by double-digit rates in the past decade and the number of loans has continued to increase in recent years as more people have been seeking education and training in a declining job market. But the tightening of lending standard in other sectors of the economy that followed the financial crisis of 2008 has not affected student loans, the report found.

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