Colleges and universities are due for a meltdown when potential students decide they can't pay back astronomical loans, and desert the traditional higher-education system, according to Mark Cuban, the billionaire owner of the HDNet cable-television channel.
According to the Federal Reserve Bank of New York, the amount owed on loans for tuition and other educational expenses stands at $867 billion. That exceeds the comparable totals for credit card debt ($734 billion) and auto loans ($704 billion).
More than $1 trillion in loans are outstanding, according to the Consumer Financial Protection Bureau.
Borrowing to pay for higher education is “the collegiate equivalent of flipping houses,” Mr. Cuban wrote last week on his blog. “You borrow as much money as you can for the best school you can get into and afford, and then you "flip' that education for the great job you are going to get when you graduate.”
ENOUGH, ALREADY
At some point, potential students will realize that they can't flip their thousands of dollars in loans for a job in four years, wrote Mr. Cuban, who owns the Dallas Mavericks basketball team.
He predicted that “new, high-end, unaccredited, branded schools” will be started to supply education — especially in the tech world — that will translate into jobs after graduation.
He did not have kind words for for-profit education companies that rely on easy-to-get, high-interest-rate student loans, including the University of Phoenix, run by Apollo Group Inc., and the namesake schools of Strayer Education Inc.
Mr. Cuban received a bachelor's degree in business administration from Indiana University's Kelley School of Business in 1981.
He went there because it had the lowest tuition among the top 10 business schools at the time, according to a story on Kelley's website.
