A graph released by a federal reserve bank shows federal spending on student loans has spiked dramatically in the last five years, prompting some observers to voice concern about the consequences of such a steep and exponential hike.
Federal student loans, while increasing, generally hovered at around $100 billion from 1995 to 2010, but spending since then increased tenfold to a whopping $1 trillion.
Economists believe the amount of federal money allocated to student loans shown in this graph is highly “unsustainable.”
Ryan McMaken of the Mises Institute, which teaches Austrian economics and libertarian political theory, told The College Fix via email that “there is no way that loans can continue at that rate since, if they did, eventually everyone would be spending every dime they make on debt service to pay the loans.”
McMaken analogized the unsustainable lending rate to the housing crisis that helped usher in the Great Recession of 2008.
“If home loans did something like that, we’d all being saying ‘bubble,’ and I think it’s reasonable to say the same about student loans,” McMaken stated.
The trillion dollar question now is: When will the bubble burst? (more...)
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