"Double, double toil and trouble; Fire burn, and cauldron bubble," went the incantation of the three witches in Shakespeare's "Macbeth."
It seems that the infernal magic of bubbles isn't limited to weird sisters of the Elizabethan stage. The entire developed world's economies can't stop puffing themselves until they collapse.
As the United States struggles to recover from the housing bubble recession of 2008, a new bubble threatens to wipe out any modest progress made on this front. This new bubble is that of student loans.
"Student lending balances increased by 10% or more each year of the 2000s, driven by increasing enrollments, easy access to loans and the skyrocketing cost of college tuition, according to an analysis of lending data by Moody's," reports an August 15, 2011 MSN Money article. "Even during the recession, when consumers cut back on other loans and general purchases, student loans continued to grow as many students hoped higher education would improve their employment prospects."
Borrowing to pay for college once represented one of the safest investments a young person could make. The easy terms and low interest charged by federal lenders meant that the debt was eminently worth taking on, especially in light of the fact that with a college education comes increased earning power.
Dramatic tuition hikes are altering the calculus, however. The MSN Money article goes on to report that "tuition costs have increased at a far greater rate than housing, energy and health care costs, as well as the overall rate of inflation." Higher costs mean deeper debt. Suddenly, all those extra zeroes graduates expect to see on paychecks from their postcollegiate jobs begin to look less impressive. Indeed, they begin to look like the minimum amount necessary to keep making loan payments.
And the pricier the college, the worse the problem. Student loan debt tends to be higher for those students who choose to attend private nonprofit and for-profit colleges instead of public state universities.
Increased debt raises the stakes for postcollegiate employment. "[S]tudents who pursue degrees at pricey colleges and fail to find competitive employment may be encumbered by their loans for decades," the MSN Money article reports, "making it that much harder to fulfill their other financial obligations and limiting their amount of disposable income."
The alternative also comes with its downside. Students seeking to dodge added debt may either pursue less postsecondary education (they may content themselves with an associate's degree, for example) or skip higher education outright. Either course, if widely adopted, reduces the U.S.'s ability to put in a strong competitive showing in the world market, which increasingly has come to demand highly skilled workers.
Prospective university students thus have many considerations to weigh. Whether they wish to pursue a course of study in finance or graphic design, they all must learn one thing: A loan can either be a boon or a burden depending on how you arrange the numbers.