Kelli Space & TwoHundredThou.com: College Debt Bubble Ready to Explode

The Federal Government has turned college graduates into professional debtors with the entitlement program known as the federal student loan program. It's not free money, but its an entitlement that promises cheap interest rates in exchange your mortgage your life off for a piece of paper that says you have a few more skills to work. Now we are getting ready for another bubble to burst and of course another bank bailout that follows. The college debt bubble is going to bust.

Kelli Space, 23, graduated from Northeastern University in 2009 with a bachelor's in sociology — and a whopping $200,000 in student loan debt. Space, who lives with her parents and works full-time, put up a Web site called TwoHundredThou.com soliciting donations to help meet her debt obligation, which is $891 a month. That number jumps to $1,600 next November.

I hope nobody gives this loser a dime. Are we supposed to feel sorry for her? She got a worthless degree, still lives with mom and dad, and is scared to death because the system sold her a bill of goods that simply isn't true. I wouldn't give this woman a dime. She is the poster child of stupidity. $200,000 in debt for a sociology degree? For crying out loud! She could have been a doctor with this type of money, and what is she doing? Social work?

In creating the site, Space, of course is hoping to ease her financial burden, but it's "mainly to inform others on the dangers of how quickly student loans add up," she said. So far she's raised $6,671.56, according to her site.

It's idiots like Space who borrowed more and more. By the way, before we let her off the hook, how in the hell did she borrow $200,000 in student loans? These aren't federal loans, because they put yearly limits on federal student loans. She's been out of High School for five years, and I don't think it's possible to borrow this money from just federal student loans. Anyway, the article from Yahoo! continues...

Space is just one example — albeit an extreme one — of a student loan bubble that may be about to burst. Over the last decade, private lenders, abetted by college financial aid offices, eagerly handed young people hundreds of thousands of dollars to earn bachelor's degrees. As a result of easy credit, declining grants and soaring tuitions, more than two-thirds of students graduated with debt in 2008 — up from 45 percent in 1993. The average debt load is $24,000, according to the Project on Student Debt.

In some respects, the student loan crisis looks remarkably like the subprime mortgage crisis. First, outstanding student loan debt has ballooned: It grew roughly four-fold in the last decade to $833 billion as of June — surpassing outstanding credit-card debt for the first time.

Secondly, defaults have soared amid a difficult job market. In 2008, the most recent year for which data are available, nearly 3.4 million borrowers began repayment, and more than 238,000 defaulted on their loans. The number of loans that went into forbearance or deferment (when borrowers receive temporary relief from payments) rose to 22 percent in 2007, from 10 percent a decade earlier, according to The Chronicle of Higher Education. Over a 15-year period, default rates range from 20 percent for federal loans to 40 percent on loans to students who attend for-profit schools, The Chronicle found.

So we have created another entitlement--college education. Politicians like Barack Obama and new fed up with Washington Billy Long is encouraging more of this as they push for eight million new college graduates by 2012, and few in Washington seem to be worried that we are setting up another bailout.

Here's the dirty truth. Had there not been a federal student loan program, there would be less money in education, which would have forced colleges to become more competitive in order to attract students. This would probably lead to lower tuition and better education. However, because we have a federal student loan entitlement, we are producing professional debtors like beggar Space.