Wednesday, April 10, 2013

Robert Oak — The Student Loan Money Machine

Going to college these days amounts to sinking oneself into a lifetime of massive debt. A new studentadvocacy report spells out some damning facts. Did you know the federal government is slated to make a whopping $34 billion in 2014 off of student loans? Meanwhile other reports are showing student debt is keeping people from obtaining credit, buying a home and moving on with their lives.
According to the New York Fed, student loan debt has tripled over the last eight years to a whopping $966 billion in by the end of 2012. That is a 70% increase in borrowers and a 70% increase in debt held by each. Student loan debt is now the largest consumer debt, second only to residential mortgages and one of the reasons is student debt is not discharged through bankruptcy.
The Economic Populist
The Student Loan Money Machine
Robert Oak

9 comments:

Roger Erickson said...

Since the currency issuer doesn't need the fiat, the interest paid by students for learning from older citizens is a very significant tax on learning.

Translation: national assisted suicide.

This is mindless class & clan warfare. A classic case of overtaxing and underfunding perceived competitors.

Why? Pure ignorance.

Hoarding and suppression amounts to stealing potential national wealth. The return-on-coordination always dwarfs all other returns, so forgoing that return is plain stupid.

"The pie will remain small, or even shrink, BUT IT'S ALL MINE!!!"

Anyone that dumb can't be that smart. So it's up to us to outsmart these 1% idiots.

The Rombach Report said...

The next Big Short could very well be the collapse of the $1 trillion student loan bubble. Students are burdened with 3 and 4 times the debt they carried 10 to 20 years ago and when they graduate there are not enough jobs available, so the model is clearly broken and consequently tuitions will have to come down. Too bad you can't buy put options on individual colleges and universities.

Young parents with young children should look into higher education possibilities that are now emerging on the internet. I heard Steve Forbes comment that the same knowledge and information one acquires with a typical college education can be had for about $1,000 a year on the internet, Keep an eye on the rise of Virtual U.

dave said...

since money is a creature of the state, and "we the people" make up said state, we are really getting fucked big time. george carlin was so right when he said that it is a big club and we aint in it. it really is astounding to think about how badly we are getting the shaft.

Unknown said...

Ronald Reagan's Educational legacy. That is all it is!

Tom Hickey said...

Right. Says it all.

Matt Franko said...

Ed,
You can't short the government ....

Rsp

Matt Franko said...

Here's a link on this issue...

http://www.securitizationintelligence.com/Article/3106685/The-Road-Ahead-For-Student-Loan-ABS.html#.UWX_hBzFWqc

rsp,

The Rombach Report said...

"Ed,
You can't short the government ...."


Sure you can. Just sell Tsy bonds or buy US sovereign CDS. For that matter, buy gold and/or sell the dollar.

Matt Franko said...

No Ed what I meant is that for student loans, the govt has provided them direct since 2010 you can see some if this in the link in my comment above...

So there are no private securitzations going on according to that article.

If the private securitization fails, then there is a "domino effect" a la bear stears/lehman 2008, as the non-govt sector liability/surplus cohorts rely on the intra non-govt sector flows, but that will not be the case with student loans this time as if the kids stop paying, the result is the equivalnt of a tax enforecment rather than a private securitization failure...

also, wrt home loans, they are all under the GSEs now which are also govt sector entities.

So home loans and student loans are all government loans now... all the banks are left with is autos.... the banks have blew it and lost all of their business and the govt has taken over...

All the banks are looking at are perhaps some origination fees and then everything sits with the govt.

Total non-govt system credit is still $trillions less than in 2008 and is flat to falling every month...

We are entering into an era where govt is the major lender not banks... should lead to more system stability imo....

rsp,