Student funding expert unveils factors fueling the potential burst of the student loan bubble

Inflated demand for higher education, fuelled by easy money, has led to prices far beyond the fundamentals, with many students graduating with debts far exceeding their future earning potential. This alarming trend has raised concerns about the sustainability of the higher education system and the financial well-being of the nation's youth.

To address this growing issue, the One Big Beautiful Bill Act, set to take effect in July 2026, aims to bring some much-needed reform. The Act will cap lifetime federal borrowing at $257,500, eliminate the Grad PLUS loan program, and impose limits on Parent PLUS loans. These measures are intended to curb the escalating student debt crisis.

However, the Repayment Assistance Plan (RAP) offers limited relief in the face of stagnant wages and inflated tuition. The plan stretches forgiveness to 30 years, but for many, it may still prove insufficient in managing their debt burdens.

The student loan crisis disproportionately affects first-generation students, minorities, and low-income families, who graduate into stagnant wages and a mountain of unpayable loans. These vulnerable groups are at risk of being trapped in a cycle of debt that could hinder their financial stability for decades.

The parallels between the mortgage crisis and the current higher education crisis are striking. Just as subprime mortgages nearly collapsed the U.S. economy in 2008, the student loan pipeline has created $1.8 trillion of student debt with little connection to labor market outcomes. The U.S. Department of Education predicts that the number of borrowers defaulting on their federal student loans could rise to 10 million by year's end.

If the government stops deferring reality, it will resort to extreme measures such as wage garnishment, seized tax refunds, and even stripped retirement benefits from defaulted borrowers. This grim scenario underscores the urgency for reform.

The federal government has handed out student loans with virtually no underwriting, no assessment of ability to repay, and no accountability from schools. This lax approach has contributed to the escalating crisis. It's time to let schools be held accountable for the return on investment (ROI) of their degrees.

In the private market, money has memory, and prices are grounded in economic reality, not fantasy. Let's apply this principle to higher education. Let students evaluate a college degree by asking if it's worth the cost.

The experts handpicked by the Kiplinger Building Wealth program, soon to be renamed Adviser Intel, include professional wealth managers, fiduciary financial planners, CPAs, and lawyers with certifications like CFP®, ChFC®, IAR, AIF®, and CDFA®. These experts can provide valuable guidance for students navigating the complex world of higher education financing.

We have a fighting chance to act before America's next debt bomb explodes. Let policymakers provide legal clarity for income-contingent private loans, and let's work towards a future where higher education is accessible and affordable for all.

Student funding expert unveils factors fueling the potential burst of the student loan bubble