Mark Cuban explains the current student loan crisis in less than 90 seconds

I don’t watch the NBA, but this is enough to make me a fan of the Dallas Mavericks. Their semi-obnoxious owner nailed the problem with $1 trillion in college debt that is crushing Millennials — and the adverse effects its having not just on them but everyone.

Politicians love to sell themselves as problem solvers who provide hope and success to people. And a college education was the perfect thing to sell to voters. After all, a college education is super-expensive but it’s really an investment because your income will go up.

What a perfect opportunity for a politician to play the role of savior! Let’s provide loans to students in these cases. After all, it’s spending that will eventually pay for itself in future years when they pay higher taxes. Why it’s just so perfect. What could go wrong?

But we also experienced this with the housing market in the last decade didn’t we? We removed barriers to entry and made it so easy to qualify for low-interest nothing-down-loans. Pretty soon there was so much money which wanted to be invested in housing (a danger sign!) that anyone and everyone could get a housing loan.

I remember this vividly in 2004, about eight months after I received a housing loan (I was single at the time, just four years out of college). I recall thinking: “Given my income to debt ratio, no bank should have lent me this loan.” And I thought, “An economy where banks think they can make money lending to people who are this leveraged, is a sure sign of a bubble.”

So I did the sensible thing and sold what I couldn’t afford. And I made an insane profit from it, which I ironically used to pay down college debt. But others felt the sting when the bubble popped.

I fear that Mark Cuban is right and that the education bubble is set to burst.

But let’s not forget that there were people who warned us all ahead of time not to remove basic restraints on housing and student loans. And each time these people were mercilessly attacked as greedy people who don’t want others to have the chance to better themselves (college) or experience the American Dream (housing).

And we see what happens when we remove the normal checks and balances. We end up hurting the very people we try to help.

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Categories:Economy Education Uncategorized

One thought on “Mark Cuban explains the current student loan crisis in less than 90 seconds

  1. Chris says:

    If I were to repeat the mistakes I made with the housing bubble, I would tell my kids to hold off college until the prices drop. After several years of waiting while prices only continue to rise, I would tell them to go ahead since you can’t wait forever. Then as soon as they graduate, the price and value of the education would plummet.

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