So, too, argue the folks at Screw College Loans, who are trying to raise private money for the cause.
Here's the case: Students who made the decision three or four years ago to borrow $20,000+, including a rising proportion of private student loans, for college were borrowing under artificially free-flowing lending conditions. Loans were marketed aggressively, directly to students (pdf) , just like mortgages. There was a booming secondary market in student loans, which were bundled into securities just like mortgages; and loan consolidation was over marketed too, as aggressively as refinancing/home equity loans.
The federal government encouraged all of this by providing capital and subsidies to the lenders who did it in the name of increasing access to college. The sense of an irresponsible free-for-all was bolstered by the fact that Sallie Mae--the student loan equivalent to Fannie Mae and Freddie Mac--actually became a completely private corporation in 2004 in order to expand even more into private student loans and collections.
Above all, students and families assumed that the return on the degree would continue to increase. The experts all said so. The College Board releases a report titled "Education Pays" every year. Again, just like housing prices.
However, the median income of households headed by a person with a bachelor's degree has actually dropped slightly, in constant dollars, since 2000.
2007 $77,605So, students borrowed too much money, on expectations of high return that were not met by reality.
2000 80,208 Source: Census Bureau
Does this add up to exploitation worthy of a bailout?