<p>[Student</a> Loans, the Next Big Threat to the U.S. Economy? - Businessweek](<a href=“Businessweek - Bloomberg”>Businessweek - Bloomberg)</p>
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<p>Interesting…</p>
<p>Yeah, but they could write down vast amounts of student debt and it wouldn’t have an impact on the economy. Why? One huge difference is there’s no underlying collateral whose value has risen - or fallen. No bubble in home price equivalent, except to the extent people argue that student loans themselves are a bubble (which is a very incomplete and facile metaphor). The problem with the housing bubble is the underlying value of the houses/land dropped substantially. And that then overhung the economy, essentially erasing all the jobs in the sectors related to residential housing for a few years. </p>
<p>But student loans? Write them down and the losers are the funders. That would have some costs but nothing like what spread through the economy because of housing. And they could choose to write them down by some hundreds of billions without systemic issues at all. </p>
<p>The threat is sort of the opposite of housing: that too much student debt will cause people to be unable to spend, to buy houses and cars, to get married, to have kids and that will all be a drag on the economy. The answer to that issue is fairly obvious: write it off or change the bankruptcy laws to enable these loans to be scrubbed. The laws were changed to prevent that - in the idea lenders would be more willing to lend if they had a debtor on the hook forever - but that can be changed if necessary.</p>