Potential Market Crash

The article that I read was about how college cost could lead to a potential market crash. College costs keep rising and almost everyone wants a college degree now. Every year the college graduates debt breaks the record of the debt for the previous year. This generation is the first to shoulder the cost of college primarily through interest bearing loans rather than grants. The debt is not a problem, as long as income keeps pace. As long as businesses keep making money, things will all work out. Students treat their student loans just like another debt that they need to keep track off. As long as they have a job, they will be able to pay it off. You receive a higher income with a college degree than without one. That's why the college students see it as an investment. Whatever you spend on college, you'll make it back many times over once you are working. But unfortunately you have to be in it for the long haul because the money really doesn't come in until years later but the repayment of the student loans start immediately after graduation.

The issue in this article is how the student loans could possibly cause a market crash. It states that there is a ripple effect with how in debt the young educated college graduates plan their future. They hold off on buying a house or getting married or having children because they are too much in debt with their student loans. It also makes the hold off on starting new business ventures. All of these issues are a possible link to the slow down of the economy.

The reasons are that students use to be able to pay for college by family contributions, work study, their own savings, and grants. Back in 1981, the students could save about two-thirds of their income at a summer job working at minimum wage and be able to pay for a year of public college. But minimum wage stayed at a stand still while college tuitions increased. Because of the increase in college tuition, more students started to seek out financial aid. At the beginning, most of the financial aid came in the form of grants and then came the loans. As more and more students went to college the supply and demand became unbalanced. The government was not able to keep up with the supply of government aid and more students turned to the private sector and started taking out loans from banks with higher interest rates.

Then you have the result of students being so indebt that they aren't willing to