The next “BUBBLE”

 

    With the waves of the ‘Great Recession’ settling down(though creating some butterfly effects throughout the world) the economists seems to have discovered that it was just the start, like a froth of bubbles covered under a big one. Recently there have been talks that the world can expect another subprime crisis just similar to the one during 2008 – 2012 due to a steep rise in the higher education debts provided in the U.S .The amount withdrawn on student loans crossed the $100 Billion mark last year and till date the amount is a staggering $1 Trillion. There is more to this than just a bubble, like, this event would set a drag in the economy in the future and students borrowing more than what they should do would be set back in their life cycle accomplishments like buying a car, house and marriage.


    The common belief in the U.S is that an educated American has a high chance of getting employed and paid a handsome salary, which has triggered aspiring graduates to go for their higher education at any cost, as loans are easily available. Most of the ‘for profit institutes’ see this as an opportunity to tap into the federal funds by shooting their fees way above the public universities and these educational brokers, greedy for commissions lend even if the recipient’s financial credibility is not worthy enough - sounds familiar to the home loan debt scheme in the U.S

   
    Reason is that the lenders (Banks) are disconnected from the success of the borrower(student). Over the last 30 years, the cost of college has soared by approximately 500 percent.  This has outpaced medical care costs and the median family income by a sizeable portion. The Wall Street and the government should be blamed for this outrageous inflation but they deflect it by telling the rise in operating and various other costs, which is utter non sense

    Story after story is now coming out about students coming out with $50,000, $75,000, and over $100,000 in student loan debt from private schools and students are unable to find jobs. This is exactly what happened with the home loans creating a huge crunch in the liquid assets. Employment problem existed throughout the human history which is not the issue here. The issue is inflation and an article on the educational fees inflation by chronicle explains this effect more precisely

    The University of Phoenix is number one, pulling in $656 Million every year through the Pell Grants. Educational system when coupled with a banking sector for funding becomes a business ground through which the state funds are drained.This is taxpayer money going to an institution that does not have to show educational learning or career placement outcomes.  How many of their graduates are working in the field that they studied for?  What is their career placement data?  Of course these’ for profit institutions’ are fighting tooth and nail to stop any legislation that will tie funding to educational outcomes because it will expose them for the subprime education market that they are exploiting. Famous names of the Great Recession like Wall Street, JP Morgan and Citi Bank play an important role in this bubble too. Billions of dollars as Student loans in various banks are listed below (apart from the huge subsidies given by the government).

Image source : link

    This inflation is flooding into the public school system which on an average has increased the fees to around 5 folds. This is a very serious issue to be handled by the president as soon as possible as it may take the citizens of U.S back to 1990, financially. One of the major reason behind this is that the U.S government is operating under the advice of the Banks for which they learnt a lesson back in the 2008 but still I don’t understand why they are lost on a road they had already traveled through.