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Student Debt Soars

Posted by Steve Markowitz on March 26, 2012

1Consumer Financial Protection Bureau has released the figures for overall student debt in the United States.  The numbers are of concern for the economy.  The total student debt now exceeds $1 trillion, 16% higher than estimated by the Federal Reserve just one year ago.

According to the Wall Street Journal, the huge student debt will be a drag on the economy for some time as it will cause potential buyers to delay housing purchases and therefore recovery in the important housing market.  The Journal also reports that this debt has soared because of more people going to college to escape the weak economic environment, as well as increased tuition costs.

The student debt is one of many over leveraged aspects of American society.  Ironically, some portion of this debt growth can be attributed to government’s intervention into the education market.  Through various loan and subsidy programs, the government has made it easier for many Americans to attend universities.  At the same time, this assistance allowed colleges and universities to increase tuition much quicker than inflation.  The unintended consequence of these student aid programs is not only increased tuition, but another debt bubble.  This is another example of why the government needs to stop the senseless market interventions.

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