Could Education Have a Negative Impact on the Economy?

If you thought the housing bubble was bad, maybe you should check out the education bubble.

From The Atlantic:

How does the housing bubble debt compare? If you add together mortgages and revolving home equity, then from the first quarter of 1999 to when housing-related debt peaked in the third quarter of 2008, the sum increased from $3.28 trillion to $9.98 trillion. Over this period, housing-related debt had increased threefold. Meanwhile, over the entire period shown on the chart, the balance of student loans grew by more than 6x. The growth of student loans has been twice as steep -- and it's showing no signs of slowing.

Remember, many of these loans are federally-subsidized. Education is supposed to have a positive economic impact, so encouraging students to borrow money for school is a good thing, right?

Probably not. Like the article says, many schools have dramatically raised their tuition over the last few years knowing that the tuition will be paid by student loans. It's a great place to easily increase revenue, especially as many states are being forced to cut education appropriations.

College graduates with a four-year degree leave with an average of $24K in student loan debt, most of which was used to simply pay tuition. Those with Master's and Doctoral degrees leave with even more, such as those in medicine who leave with an average of over $157K in student loan debt.

So what happens when millions of graduates default on their excessive student loans because they can't find a job that covers their payment and living expenses? What about the discretionary income, currently being diverted to make those high student loan payments, that could be contributing to recovery from our current economic woes? Is Uncle Sam to raise taxes to cover the mass of defaults that are likely to be coming, or should Uncle Sam just borrow more money to cover these debts?

But the ultimate question is this: Is forcing those who seek an education, which should contribute to economic growth, to shoulder a burden of obligations that inhibits their ability to contribute positively to economic growth, in fact, causing the economy to grow slower than necessary or expected?