Student Loans Crisis Looming, According to Leading Financial

According to Michael Lombardi, lead contributor to Profit Confidential, besides the municipal and state debt and the credit crisis, there is another credit crisis looming that could spell disaster for the U.S. economy: the student loan credit crisis.

In the article “Student Loans Now Growing at Faster Rate than Mortgage Debt During U.S. Real Estate Boom Years,” Lombardi states that earlier this year, student debt crossed the $1.0-trillion mark—more than consumer spending on credit cards.

“The average loan for students has skyrocketed 55% to $24,301 since 2005,” says Lombardi.

Lombardi reports that in 2001, there were 794,000 households that owed at least $50,000 in student loans: “Today, that number has ballooned to over three million households,” he notes.

Lombardi believes that the New York Federal Reserve Bank is concerned about this potential credit crisis because the rate of growth in mortgages during the crisis did not accelerate as fast as student debt is growing right now.

“In other words, the spectacular housing bubble that caused the economic slowdown we are still in did not grow as fast as student debt is growing today,” Lombardi explains.

Lombardi says that add to this mixture the fact that student tuition costs have more than doubled since 1985 and this creates a heavy burden.

“To complete the recipe for this disastrous credit crisis, add in the weak job market with the fact that incomes are not keeping up with inflation—never mind tuition costs—and the credit crisis is complete,” says Lombardi.

Profit Confidential, which has been published for over a decade now, has been widely recognized as predicting five major economic events over the past 10 years. In 2002, Profit Confidential started advising its readers to buy gold-related investments when gold traded under $300 an ounce. In 2006, it “begged” its readers to get out of the housing market...before it plunged.

Profit Confidential was among the first (back in late 2006) to predict that the U.S. economy would be in a recession by late 2007. The daily e-letter correctly predicted the crash in the stock market of 2008 and early 2009. And Profit Confidential turned bullish on stocks in March of 2009 and rode the bear market rally from a Dow Jones Industrial Average of 6,440 on March 9, 2009, to 12,876 on May 2, 2011, a gain of 99%.

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Profit Confidential is Lombardi Publishing Corporation’s free daily investment e-letter. Written by financial gurus with over 100 years of combined investing experience, Profit Confidential analyzes and comments on the actions of the stock market, precious metals, interest rates, real estate, and the economy. Lombardi Publishing Corporation, founded in 1986, now with over one million customers in 141 countries, is one of the largest consumer information publishers in the world. For more on Lombardi, and to get the popular Profit Confidential e-letter sent to you daily, visit www.profitconfidential.com.

Michael Lombardi, MBA, the lead Profit Confidential editorial contributor, has just released his most recent update of Critical Warning Number Six, a breakthrough video with Lombardi’s current predictions for the U.S. economy, stock market, U.S. dollar, euro, interest rates and inflation. To see the video, visit http://www.profitconfidential.com/critical-warning-number-six.