Will student loan default cause the next recession?

Student loan debt now exceeds total credit card debt in the U.S. and about 10 percent of those loans are delinquent. This has led many in the financial media to wonder if the student loan “bubble” will be the next to burst, bringing us yet another financial crisis., the Huffington Post reports.

“The Obama Administration’s student loan policy to promote a college education shares many attributes with the 1995 Clinton-initiated Bush-promoted policy to promote homeownership that subsequently led to the subprime lending debacle,” says Kevin Villani, former Freddie Mac chief economist in the early 1980s, in a recent column. “First, declare that the opportunity to own a home — go to college — is a basic right. Then set a public goal for homeownership — college attendance — well above private individual demand. When budgets become tight, have government lenders replace private lenders, mitigating the need to save in advance or demonstrate the ability to repay.”

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