We’ve all heard the dire warnings: rising college debt has spiraled out of control, setting in motion an irreversible economic crisis. But with so many news items vying for our attention, most of us forgot about the issue.
Suddenly, though, the university-admissions scam that rocked the nation brought the matter back into the limelight. To recap, federal investigators accused several wealthy families, including those of formerly well-known Hollywood celebrities, of fraudulently enabling their children to study at elite universities.
Naturally, the scam highlighted the dramatic differences between the “haves” and “have-nots.” On one end of the scale, fiscally-strapped students must fight tooth and nail to have a shot at admission. In doing so, they incur massive college debt that could take a quarter of a lifetime to clear.
On the other end, you simply get mommy and daddy to open their wallets.
Of course, no one is worried about this latter category. They’ve got the money. They’ve always had the money. Students who hail from this privileged class have access to social channels the rest of us can only dream about.
No, what worries astute investors is the former category. Due to the insanity of the educational industrial complex, student loans owned and securitized have now reached $1.57 trillion. That is an astonishing figure from 13 years ago, when the tally didn’t even crack the $500 billion mark.
With so many students behind the eight-ball financially immediately after graduation, a recession seems inevitable. But could this crisis also hold an opportunity?
College Debt has Bottomed Out
At nearly $1.6 trillion, this “educational” liability has taken on a morbidly-fantastical scale. If American college debt was instead a nation’s gross domestic product, it would fall between South Korea and Russia.
Again, that’s just a ridiculous figure. Our students owe more money for tuition and education-related costs than what top-tier nations earn annually! Obviously, we cannot sustain such an absurd dynamic: something has got to give.
But what’s interesting is that college debt growth has flatlined. From 2007 through 2012, year-over-year debt growth averaged 12.73%. But from 2013 onwards, that growth slipped to slightly over 7%. In the years 2017 and 2018, debt growth averaged 5.74%.
First, an important disclosure: this doesn’t mean that college debt has declined. Instead, the rate at which the debt has accelerated over the years has slowed. Students are still racking up liabilities in alarming numbers.
But the declining exposure to debt gives reason for optimism; namely, that the free markets can no longer support the insanity. Many students may want to attend university, but stark financial realities prevent them from doing so.
And this might be the best decision ever forced on them. As young future workers flood the white-collar labor force, the trade industry has gone neglected. Today, opportunistic students can advantage this dynamic and enjoy lucrative, blue-collar careers.
Looking at the slowing college debt growth, that first critical step may have already happened.