While an education bubble exists, it won't explode until a few of these things occur first:
1. Bankruptcy laws change for student loans. If students can discharge their loans through bankruptcy, lenders will be reluctant to lend money to students for school. At this present time, students have no bankruptcy options for their loans (except in heteroclite circumstances), so lenders see little incentive to stop lending.
2. The perception of education changes. Echo Boomers were inculcated with "get a degree" messages from everywhere. As Echo Boomers mature and make less money than they expected, they will communicate their disappointment with education to the next generation. Unless Echo Boomers look back on education with rose color glasses, the next generation will hold a different outlook on education than their parents.
3. A major recession returns to the United States. If a major recession returned to the United States, and students were unable to pay back their loans (ie: the principal balances kept growing), this event could trigger a collapse in the education bubble. Lenders would fail to receive their money they lent and would struggle with educational institutions over funds.
The problem with this point: the Federal Reserve might bail out these lenders, continuing the cycle of borrowing money for school (like we see for housing). In this case, this sets the stage for an even larger collapse (like we're seeing with housing).
4. Students become overwhelmed by negative news. The education bubble could pop tomorrow if students suddenly became depressed about their prospects and stopped attending school. Ironically, in this case only, students might receive much better prices later if every student in higher education boycotted educational institutions (won't happen). However, if students stop believing that their education is serving them, what's the incentive for continuing to pay?
If any of this occurs soon, the major problem is the actual student loans. Many homeowners "strategically defaulted" when they realized their house was wasting their money. Why wouldn't students just drop out of society if their student loans were high enough? Of course, if these things occur, tax payers will be on the line, just like they were during the housing bubble.
