I've been wondering about this student loan thing. Credit has clearly accelerated for the past few years which is a clear sign of a bubble. But what are the effects if credit slows?
I don't see how ABCT applies to student debt because ABCT deals in the miscoordination of capital. It makes sense with the housing boom, because there's a construction business, but I don't see how it fits with students. When they slow the credit, less students will get into college. Some graduates will default and some banks issuing student credit will get hurt (although Citi and JPM have already sold out of this game). But what industry is there? Most of the costs of college are in personnel.
People are acting like the student debt bubble will be the one to end them all but I don't understand how it can be so bad or how exactly it can 'pop'?
The Anarch is to the Anarchist what the Monarch is to the Monarchist. -Ernst Jünger
College: Why It Is Not a Bubble
Maybe college education isn't in a bubble, but Gary North provides a weak argument for that to be the case. I know I'm just cherry picking quotes here, but these stood out to me:
This is no bubble. This has been going on since 1636 in Harvard's case. Parents want to get their children certified as the best. They will pay the price. Is this foolish? I think so. But let's not call it a bubble. A pricing structure that works for almost 400 years is not a bubble. It has worked in Europe for 900 years.
Um, houses have been around for 400 years too, but the housing market sure went through a bubble. What kind of counter argument is this? The reason the housing market was in a bubble was because of the credit being pumped into that particular market. The same thing is happening with college education. This is a terrible analogy.
This is no bubble. This is the outcome of a systematic program of propaganda. It promotes the salvation of mankind through formal education. It offers the hope of access to jobs that are restricted to college graduates. Parents think that the ticket to success is higher education. They do not care about the content of education. They never have. They think they are buying success through hoop-jumping. So do their children.
Again, propaganda does not make people buy something; we need resources and wealth to buy things. We'd all love to have million dollar yachts (or whatever big ticket item that you fancy), but we don't all purchase million dollar yachts. This is because we don't all have the wealth to own one. But if the Fed starts pumping credit, and everyone wants a yacht, then you can bet your ass that people will start buying yachts they can't really afford.
I don't think that Gary North is right on this one. Anyway, here are a couple of relevant Mises Daily articles:
The Education Bubble
Yeah there was already kind of a thread on this and I included other articles too...
I don't see how ABCT applies to student debt because ABCT deals in the miscoordination of capital.
It doesn't. Some people call every high price a bubble.
The education bubble is fueled by financial aid and federally backed student loans. It's dumping more people with degrees than there are jobs to fill them. http://mises.org/daily/5533
Public Education is feeding the idea that you can't get a job with a highschool eduaction and that you absolutley have to go to college. Who owns most of the educational facilities in the US? So people flock to college. The cost of going to college is rising faster than the average family income. It's a debt trap $25-30,000 is the average debt.
New facilities have to be built, more teachers and staff, more tech. equipment in the classes to modernize them. Text books, vending machines, fast food restaurants on campus.
It may or may not be as severe as the housing bubble, but the feds are fueling it.