S&P says student loan debt could be next financial bubble
Student-loan debt may become the next U.S. asset bubble as rising tuition costs climb while household income stagnates, Standard & Poor’s said.
Colleges and universities have been struggling with declining endowments and lower state funding at the same time students are facing an inability to repay loans in a tough economy, the ratings company said today in a statement.
“Student-loan debt has ballooned and may turn into a bubble,” S&P said. “There are more defaults and downgrades for some student loan asset-backed securities.”
Federal and private student-loan debt is approaching $1 trillion and surpassed credit-card debt for the first time in 2010, according to Mark Kantrowitz, publisher of FinAid.org, a college grant and loan website. Under U.S. law, student-loan debt -- unlike credit-card borrowings -- can rarely be discharged in bankruptcy court.
President Barack Obama last month proposed linking federal aid to a college’s ability to control tuition costs. The plan calls for increasing campus-based aid only for schools that limit tuition-cost increases and penalizing those that don’t.
Your guide to our new economic reality.
Get our free business newsletter for insights and tips for getting by.
You may occasionally receive promotional content from the Los Angeles Times.