Is college tuition a bubble that's about to burst?
There's a fascinating article on Avvo's Naked Law site, titled 8 Reasons College Tuition is the Next Bubble to Burst.
It's of particular interest to me not only because I have a son about to enter 11th grade but also because the article implicates the 2005 "reform" of bankruptcy law in the Tuition Bubble.
Here's the theory in a nutshell: Private colleges have been riding the same debt bubble that real estate and derivatives were riding - spiking profits based on consumers getting easy credit. And since student loans are nondischargable in bankruptcy, the lenders take no risks that students will default. In other words, we have a system that encourages private schools to hike tuition rates, since students can always get those giant loans, and encourages banks to lend the money, since they know they will not be left holding the BK bag.
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