Higher Debt: Is the student loan industry headed for a meltdown?

If, at the barely-legal age of 19, I had called my local bank and asked for $25,000 in order to study English at a third-tier private university; called again six months later and asked to borrow just enough to get my 1986 Audi GT Coupe out of the shop; then called one last time–really, the last time–a few months after that because a woman I did not know very well had asked me to spend a week with her in Paris, my account manager would have laughed me off the phone.

Because in considering whether to lend a 19-year-old many tens of thousands of dollars for his “education,” she would’ve had to inquire about my employment status (professional student), checked the number of times I’d overdrawn from my checking account (many), and taken stock of my collateral (none).

After establishing that I was unfit to borrow gas money, much less the annual salary of an entry-level white collar worker, my account manager would’ve thanked me for calling and encouraged me to come back when I was an adult.

But the institutions in charge of doling out tens and hundreds of thousands of dollars in student loans to unemployed high-school graduates don’t work like your average local bank. Private lenders like Wells Fargo don’t have to worry about a borrower defaulting or declaring bankruptcy, because student loan debt–like circumcision–is a lifelong commitment. The government doesn’t have to worry about default rates either, because money is no object when it comes to educating America’s youth, or making those youth return to Caesar what is Caesar’s.

With no disincentives for lenders, and no escape for the debtor but death (or for fewer and fewer borrowers, successful repayment), America’s collective student loan debt has grown to $829 billion, surpassing Americans’ credit card debt for the first time.

As a result, more Americans than ever before are going to college, and more colleges than ever before have rock-climbing walls, turn-down service, and heated pools.

The catch? America’s most sacrosanct bubble is damn near ready to burst. The experts are hardly of a mind on the details, but most of them can agree on one thing: It’s no longer a question of “if,” but “when” the prevalence of easy credit will bring higher education to its knees.

Here are three visions of American higher education after the bubble bursts.

Next: The cautious realist