Senator Warns of a Student Loan Bubble

March 27, 2014
NPR Online 
student loan news
The federal government provides more than $150 billion in grants and loans to college students each year. While experts say a bachelor's degree is increasingly valuable, students are borrowing record amounts for these degrees. On March 27, the Senate held a hearing on reauthorization of the Higher Education Act, a 1965 law that governs federal financial aid. Sen. Tom Harkin (D-Iowa), chairman of the Health, Education, Labor, and Pensions Committee, oversaw the hearing.

In an interview with NPR's Morning Edition, Harkin pointed out the disparities between students from high-income and low-income families. A high-income, low-performance student has an 80 percent chance of going to college; while low-income, high-performing students with a B or better average have about a 20 percent chance. Students who graduate from college with large debt loads cannot afford to buy a new house or make significant investments.

Harkin also said that many for-profit schools were pursuing the poorest students to get the maximum Pell Grants and loans. Many students did not getting a good education and often dropped out and defaulted on their loans. Even so, the for-profit colleges got to keep the money. Harkin said there is a bubble in student loans, similar to that in the housing market.









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