Students Beware! Colleges, Tuition, Loans, and Debt - Will Education Follow the Housing Bust?

In many ways, today's college/tuition/loan situation parallels the real estate market before the bust.

With real estate, you had the government (through Fannie Mae and Freddie Mac) and Wall Street (by bundling loans into securities) removing risk from the banks and other home loan originators. This caused them to get greedy and make excessive money available to unqualified home owners. The flood of money chasing homes caused prices to go up, thus causing a cycle.

The same thing has been occurring with colleges and universities. The government guarantees loans through programs like Sallie Mae, and Wall Street has recently been bundling college loans into securities. Lenders and for-profit career colleges (i.e. beautician schools) in urban areas have been pushing loans onto unqualified students. The flood of available money has allowed even distinguished colleges to bloat their bureaucracies and raise tuition faster than the inflation rate.

Students and their parents need to protect themselves:

1. Think twice before piling on excess college loans.

2. Aggressively pursue scholarships. Many scholarships go begging, or have only a handful of applicants. Use sites like Campus Scholarship Site to track them down.

2. Expect to be heavily recruited on campus with credit card offers, and resist temptation.

3. Research state colleges and universities. Their in-state tuition is many times cheaper than private schools.

4. Take part-time employment. If your finances are really tight, onsider if full time employment / part-time school might make more sense than going into debt.