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How To Avoid a Student Loan Bubble

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  • Description

    AEI resident fellow Alex Pollock weighs in on student loan debt.

  • Duration 2:59
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Our next guest notes many similar circumstances between student loan debt and -- mortgages.

That lead led to the housing prices so are we headed towards -- student loan bubble as well.

Joining us out -- eight EI resident fell out with more to talk about this.

-- there are some Larry's I think that people at home especially at a kids on -- their way to college are noticing the easier it is immediate alumni hire my tuition seems ago.

That is precisely.

The interaction of credit and prices.

Which goes to make up -- bubble or an unsustainable.

Boom.

As you push credit and the sector or make it very easy to get a loan.

People spending the money drive the prices are up.

The prices going higher makes people feel like they have to borrow more about makes the prices go higher.

As you suggest that's -- really interest in parallel.

Between what happened with house prices and mortgage credit.

And what has happened with the price of college and college credit the -- high prices have been pushed higher and higher and the debt.

Gets bigger and bigger and then you have to say Rangel what comes at the end than what could you do about it.

That's -- big question -- because we're seeing student loan debt is actually higher than the outstanding credit card debt these days.

So more and more people holding student loan debt you say the way to do this.

Is to make -- -- universities -- cons is a little more accountable for debt outstanding how do that.

That's for -- say that would be one thing which would be very helpful.

What everybody observed looking at mortgages was when you have the so called originate and sell -- mortgages which meant.

That -- the the organization making the loan didn't keep the loan and had no risk -- just sold to somebody else in the risk went somewhere else.

You got much -- -- lending standards.

And that -- the bubble.

Likewise if you think about in student loans who's really promoting student loans turns out it's the color -- themselves.

And when somebody gets a student loan the college gets all the money.

And they spend it.

-- about the risk of non payment all goes.

Someplace else so just as people have said in mortgages we ought to make sure the lenders have what we call skin in the game or ongoing risk.

My idea is the colleges should have been serious.

Portion of the risk of non payment of student loans maybe 20%.

Buy -- -- by class so that they have a an incentive.

To make good loans to keep down their costs -- the loans are productive and to make sure the students are really learning something which will.

Help them get a job not just feeding the college's revenue please check.

It -- I'm gonna make big that with a bunch of friends yesterday how it is a tough sell these days to send our kids to college Alex -- Thank you so much for your insights -- great idea thank you.

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