Saturday, September 29, 2012

Zero Hedge — The Next Subprime Crisis Is Here: Over $120 Billion In Federal Student Loans In Default

And while it is impossible using historical data to extrapolate with precision what the current consolidated federal student loan default rate is, we do know that there is now $914 billion in federal student loans (which also was mysteriously revised over 50% higher by the Fed just a month ago). Using simple inference, all else equal (and all else has certainly deteriorated), there is now at least $122 billion in federal student loan defaults. And surging every day.
Zero Hedge
The Next Subprime Crisis Is Here: Over $120 Billion In Federal Student Loans In Default
Submitted by Tyler Durden

These loans are federally guaranteed so wait for another bailout. 

These loans can not be discharged in bankruptcy, so many students are going to be living with the consequences for a long time, likely including wage garnishment if they ever do get a job.

It's a debacle that will impoverish a significant portion of the generation.

2 comments:

Dan Lynch said...

Agree that there will be many defaults on student loans but I'm not following how this will have a ripple effect in the financial industry, since the loans will ultimately be covered by Uncle Sam ?

Tom Hickey said...

@ Dan

Right. It's unclear at this point how this will shake out. Looks like the govt will just pick up the tab for it.

How this will be handled is as yet unclear, but the potential is there for another "bailout" kerfuffle, with the left making it out that it's the banks' fault along with the predatory for-profit universities and the right making it out that it's the government's and deadbeat students' fault. Anyway, more mayhem. Whatever happens it will be politicized, guaranteed.