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Federal School Loans - The Next Bubble
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mark-in-dallas
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Post: #1
Federal School Loans - The Next Bubble
09-30-2012 8:22 AM

This video is about 2 years old, but the guy nailed it, and we're likely to see the next credit bubble burst.

<a href="http://www.youtube.com/v/3nftatpEpMo&amp;rel=0&amp;fs=1" target="_blank">http://www.youtube.com/v/3nftatpEpMo&amp;rel=0&amp;fs=1</a>

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

Whereas earlier today we presented one of the most exhaustive presentations on the state of the student debt bubble, one question that has always evaded greater scrutiny has been the very critical default rate for student borrowers: a number which few if any lenders and colleges openly disclose for fears the general public would comprehend not only the true extent of the student loan bubble, but that it has now burst. This is a question that we specifically posed a month ago when we asked "As HELOC delinquency rates hit a record, are student loans next?" Ironically in that same earlier post we showed a chart of default rates for federal loan borrowers that while rising was still not too troubling: as it turns out the reason why its was low is it was made using fudged data that drastically misrepresented the seriousness of the situation, dramatically undercutting the amount of bad debt in the system.

Luckily, this is a question that has now been answered, courtesy of the Department of Education, which today for the first time ever released official three-year, or much more thorough than the heretofore standard two-year benchmark, federal student loan cohort default rates. The number, for all colleges, stood at a stunning 13.4% for the 2009 cohort. The number is stunning because it is nearly 50% greater than the old benchmark, which tracked a two year default cohort, and which was a "mere" 8.8% for the 2009 year. Broken down by type of education, and using the new improved, and much more realistic benchmark, for-profit institutions had the highest average three-year default rates at 22.7 percent, with public institutions following at 11 percent and private non-profit institutions at 7.5 percent. In other words, more than one in five federal student loans used to fund private for-profit education, is now in default and will likely never be repaid!

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.

Ladies and gentlemen: meet the new subprime.
One can see why everyone in the Federal administration has been so reticent about disclosing the true state of the Federally-funded student loan bubble. Because if one simply assumes the rising default rate has kept constant across all recent cohorts since the updated 2009 number, it would mean broadly speaking, that of the $914 billion in Federal Student Loans at least 13.4% will end up in default. Over $120 billion.

Of course all else is never equal: Federally funded student loans are now increasing at a rate of over $60 billion per quarter. This means that in just about 18 months, the total size of the Federal student loan market will hit $1.3 trillion. Why is that number important? Because that is how big the subprime market was at its peak in late 2007, when everything went to hell and the last credit bubble popped.

...

In other words, the Federal student loan bubble has not only popped, but has all the carbon copy makings of the next subprime crisis. Only when it pops it won't be New Century and Countrywide Financial on the hook: it will be all of America's taxpayers. Remember: these are Federal loans.

And the biggest problem: unlike housing where there is always at least some recovery of collateral, as the house remains, with student debt there is no recoverable asset as the asset is a human being. Granted said human effectively becomes a debt slave courtesy of the non-discharge nature of the student loan, which can not be wiped out even with a personal bankruptcy, but assuming the taxpayer can recover any money using discounted garnished wage flows of what are effectively perpetual(ly discouraged) debt slaves of the system, is simply idiotic.

The older I get the less threatening a life sentence sounds

Sympathy for the Devil only results in victimized angels.
09-30-2012 8:22 AM
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AlternativeGirl
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RE: Federal School Loans - The Next Bubble
09-30-2012 10:10 AM

I'm glad you posted this. This is a very serious issue, and I am so frustrated to see news stations glossing over it!

I saw a very good documentary last year about how these lenders are taking such horrible advantage of students. I tried to google it, but so much comes up when you google "student debt".

It is amazing that the topic gets pushed under the rug... or maybe I should be long past being amazed by propaganda and its destructive, malicious qualities....

I'll see if I can not ask my friend who told me about the documentary for info on it so I can post it here. She's up to her ears in debt. Its scandalous how they take advantage of these kids.

I've been going to school since 2003 (part time mostly 'til this semester), and have never had to take out a single loan. (no credit card debit either Big Grin ) I plan on e-publishing a book on it after I graduate with two degrees next spring.

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09-30-2012 10:10 AM
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mark-in-dallas
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Post: #3
RE: Federal School Loans - The Next Bubble
09-30-2012 10:21 AM

This ones pretty good:

<a href="http://www.youtube.com/v/A75KERKwEQM&amp;rel=0&amp;fs=1" target="_blank">http://www.youtube.com/v/A75KERKwEQM&amp;rel=0&amp;fs=1</a>

The older I get the less threatening a life sentence sounds

Sympathy for the Devil only results in victimized angels.
09-30-2012 10:21 AM
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AlternativeGirl
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RE: Federal School Loans - The Next Bubble
09-30-2012 11:03 AM

That might be it! Thanks for posting. When I'm all worn out from cleaning and homework and work tonight it'll be nice to unwind and educate myself better by watching this. Thanks, Mark Smile

Life's a garden; dig it

my journal:

http://pherotruth.com/Thread-Fun-Times-and-Pheromones
09-30-2012 11:03 AM
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mark-in-dallas
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Post: #5
RE: Federal School Loans - The Next Bubble
09-30-2012 11:09 AM

Not a problem! Smile

The older I get the less threatening a life sentence sounds

Sympathy for the Devil only results in victimized angels.
09-30-2012 11:09 AM
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zerosix85
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RE: Federal School Loans - The Next Bubble
09-30-2012 11:55 AM

Sallie Mae is the Loan Shark. Had I know better, I wouldn't have taken out private student loan like I did.

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09-30-2012 11:55 AM
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wiserd
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RE: Federal School Loans - The Next Bubble
09-30-2012 4:51 PM

Lenders deserve part of the blame. But colleges have also blatantly mis-represented themselves and their value proposition as well, and profited handsomely from their part in selling overpriced goods to impressionable kids. Education doesn't have to mean attending formal college classes. The skills I use to make a living aren't connected to my degree. (I am glad I have it, but not for economic reasons.) [Image: index.php?db=comics&id=2729#comic]

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(This post was last modified: 09-30-2012 4:54 PM by wiserd.)
09-30-2012 4:51 PM
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solidprice
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RE: Federal School Loans - The Next Bubble
10-03-2012 1:50 PM

I may be a simple man and may not understand the nitty gritty of
What i read,but mark i had a really bad feeling of what i just read.
Is my gut right on ths one? Cause i know most schools are lol costly now.
Not gonna get into THAT debt hole... School loans scare the hell outta me more than if i bought house and/or car!Mda
School loans sholdnt do that!Sorry

Forgive any typos in advance i type most of my posts on a touch phone.
Pheromones not important! your game, mindset, and applyed knowledge is!
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10-03-2012 1:50 PM
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mark-in-dallas
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Post: #9
RE: Federal School Loans - The Next Bubble
10-16-2012 9:42 PM

(10-03-2012 1:50 PM)solidprice Wrote:  Not gonna get into THAT debt hole... School loans scare the hell outta me more than if i bought house and/or car!Mda
School loans sholdnt do that!Sorry

And they damn well should, cause a default on a school loan NEVER goes away! And that degree guarantees you not a fucking thing!

The older I get the less threatening a life sentence sounds

Sympathy for the Devil only results in victimized angels.
10-16-2012 9:42 PM
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