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EDUCATION and STUDENT loan
BUBBLE
www.Analyst.lthttps://www.facebook.com/analyst.lt
Basis of Higher Education Bubble
• Bubble “belongs“ to U.S.
• It is rising due to soaring tuition fees.
• Tuition fees are rising but value of degree is
falling.
Going to College = Taking a Loan
CPI for tuition fees
Comparison to housing bubble
• At the peak housing prices (2005) rose x 4;
• Tuition fees has soared by x 10;
• Tuition fee – average $ 50 K per year.
College tuition vs. Home prices
Reason for higher education
bubble
• Demand for loans due to rising prices;
• Today’s average student graduates with
50% more student debt than in 2001.
• Student loans made by government rose
by 40% only in period 2011 – 2012.
Repeat same mistake as in Housing Bubble:
OFFERING LOANS FOR BORROWER’S THAT
CANNOT AFFORD THEM.
Loans for education hold by
students and government
Nowadays consequences
• Default rate by student loans is already
rising;
• Subsidies inflate college bubble because:
the ease to get a loans increases tuition
fees as much as possible;
• Rising number of graduates decreases
average starting salaries and ability to
repay the loan.
Risky . . .
If the bubble of $ 1 trillion pop there is no doubts
that it will damage financial system.
U.S. had huge housing bubble which was one of
the reason for 2008 – 2009 global financial crisis.
So… DON’T WE REPEAT
SAME MISTAKES AGAIN !?

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Education and student loan bubble

  • 1. EDUCATION and STUDENT loan BUBBLE www.Analyst.lthttps://www.facebook.com/analyst.lt
  • 2. Basis of Higher Education Bubble • Bubble “belongs“ to U.S. • It is rising due to soaring tuition fees. • Tuition fees are rising but value of degree is falling.
  • 3. Going to College = Taking a Loan
  • 5. Comparison to housing bubble • At the peak housing prices (2005) rose x 4; • Tuition fees has soared by x 10; • Tuition fee – average $ 50 K per year.
  • 6. College tuition vs. Home prices
  • 7. Reason for higher education bubble • Demand for loans due to rising prices; • Today’s average student graduates with 50% more student debt than in 2001. • Student loans made by government rose by 40% only in period 2011 – 2012.
  • 8. Repeat same mistake as in Housing Bubble: OFFERING LOANS FOR BORROWER’S THAT CANNOT AFFORD THEM.
  • 9. Loans for education hold by students and government
  • 10. Nowadays consequences • Default rate by student loans is already rising; • Subsidies inflate college bubble because: the ease to get a loans increases tuition fees as much as possible; • Rising number of graduates decreases average starting salaries and ability to repay the loan.
  • 11. Risky . . . If the bubble of $ 1 trillion pop there is no doubts that it will damage financial system. U.S. had huge housing bubble which was one of the reason for 2008 – 2009 global financial crisis. So… DON’T WE REPEAT SAME MISTAKES AGAIN !?