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The Education Bubble: Will Ballooning Student Debt Sink Higher Ed?

by Daniel Indiviglio

You think the housing bubble was enormous? Meet the education bubble. A recent article here by Andrew Hacker and Claudia Dreifus explained the debt crisis at American colleges. But some startling statistics will help to make their analysis a little more tangible. The growth in student loans over the past decade has been truly staggering.

Here’s a chart based on New York Federal Reserve data for household debt. The red line shows the cumulative growth in student loans since 1999. The blue line shows the growth of all other household debt except for student loans over the same period.

 

This chart looks like a mistake, but it’s correct. Student loan debt has grown by 511% over this period. In the first quarter of 1999, just $90 billion in student loans were outstanding. As of the second quarter of 2011, that balance had ballooned to $550 billion.

The chart above is striking for another reason. See that blue line for all other debt but student loans? This wasn’t just any average period in history for household debt. This period included the inflation of a housing bubble so gigantic that it caused the financial sector to collapse and

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