The Next Domino to Fall? A Closer Look at the Student Debt Crisis

Today, more than 18 million Americans are enrolled in U.S. colleges and universities, many of which charge upwards of $40,000 annually for the privilege of attending. Since 1982 tuition costs have jumped 400% -- a particularly staggering leap when you consider that medical care has only risen 200% in the same time period.

Students have been willing to pay the hefty price tag operating under the assumption that degrees offer alumni good, well-paying jobs. But in reality, starting salaries for recent grads were down across the board in 2010. And that's for those of them lucky enough to find employment. 

According to a recent survey by Twentysomething Inc., 85% of college seniors' post-grad plans involved moving back home with their parents. Which means that paying off those loans is no easy feat. Americans now owe over $875 billion in student loans -- more than they owe on that credit cards. And that debt rises at a rate of about $2,853.88 per second.

Without the means to pay them off, an increasing number of Americans are defaulting on their student loans. And that's bad news for higher education stocks that have soared in recent years. According to Steven Eisman, hedge fund manager/housing crash prognosticator, this industry is very likely the next bubble to pop.

FrontPoint Partners' Eisman draws parallels between the student loan scenario and the housing market circa 2006, when defaults rose and prices began to fall: "It's just like subprime, which grew at any cost and kept weakening its underwriting standards to grow."

As a preventative measure, the Obama administration has proposed regulation to limit student debt at for-profit schools, requiring them to prove their grads earn enough to pay off the loans they accrue. If they fail to meet these standards, they lose federal financial aid -- and that's about 75% of their revenue. Under these tightened rules, higher education stocks like ITT Educational Services and Corinthian Colleges could see drops up to 50%, according to Eisman. (Click here to access free, interactive tools to analyze education stocks.)

For higher education stocks, it appears to be a lose-lose situation -- with or without regulation, they're facing major obstacles. Here is a list of seven stocks to watch as the student debt crisis unfolds. The list has been sorted by market cap.