Student Loan Bubble Might Soon Burst? Glad I don't have Sallie Mae Bonds

Well it seems that putting oneself in massive debt for a college education might soon bite the economy in the ass.

Research done by the Federal Reserve and Equifax also paints a dismal picture for student loans. Outstanding student loan balances increased $10 billion during the fourth quarter of 2012 to reach a total of $966 billion. Even more concerning was that the number of borrowers who have fallen behind on their student debt by at least 90 days continued to climb higher. In the fourth quarter, it surpassed the delinquency rates of credit cards to reach 11.7 percent. Thirty-five percent of people under 30 years old who have student loans are at least 90 days late on payments, compared to 26 percent in 2008.

So 35% of loans given to people under 30 are more then 90 days or more late? What is worse is that college tuition doubles every 9 years so these numbers will only get worse the further along we get. I can see many graduates decide to go into bankruptcy due to hopelessness to get their loan debt off of their backs. There will be quite a few 30 somethings that can declare hopelessness because they are underemployed. So they get a job at Dairy Queen with their PHD in Medieval Literature (or are denied a minimum wage job due to over-qualification) and they can dump their loan debt.This rush for the exits will pop the bubble.

One thing I can easily see happening is Obama forgiving these loans if things get too hairy. He is all about taking accountability away from the students. After all they were just kids were dupes who were fooled by to bond-bundling Wall Street-types. Then a bailout will happen. However if you are a Sallie Mae bondholder you will get some awful haircut. After all Obama is making you lose money "so the students don't have to hurt."