http://www.zerohedge.com/
Bernanke just said he thinks the student loan aggregate (over trillion $ in debt) is not enough to effect the underlying economy.
Shades of 2007 a la subprime comment.
"Like an army falling, one by one by one" - Linkin Park
How can the bubble pop when it can't be discharged from bankruptcy? Also, if it does pop, who's most affected? It seems like just state and federal governments would be on the hook for the money as opposed to when the housing market popped, many industries that relied on housing, collapsed.
id like o pop mine...i may have to go to CHINA to use my degree.
disgusting
FLIP THOSE FLAGS, THE NATION IS IN DISTRESS!
why I should worship the state (who apparently is the only party that can possess guns without question).
The state's only purpose is to kill and control. Why do you worship it? - Sola_Fide
Baptiste said.
At which point will Americans realize that creating an unaccountable institution that is able to pass its liability on to tax-payers is immoral and attracts sociopaths?
Just because it cannot be discharged it does not mean many of the people will simply not be able to pay.
Also; think about all that money that flows from the loans. That's a significant portion of the economy. Not on the scale of the housing market, but when you add up all the debt bubbles that are blown right now, 1 Trillion is still a big chunk.
Originally Posted by tsai3904
"Like an army falling, one by one by one" - Linkin Park
Many of these will have no ability to pay. The govt , or just the largest debt collection agency will just expand to try and collect no health coverage fines , student loans.
Wouldn't the bubble popping be the demand for "education" dropping such that tuition prices drop sharply? In particular, if the Fed were committed to sound(er) money, the demand for loans could dry up.
As to non-dischargable loans, I wonder if reversing that is one way they keep the bubble inflated? If you can easily discharge the loan - or they increase the ways it can be "forgiven" - then the demand for essentially free money might remain high.
Seems to be what some of the silver/gold pundits discuss. The Fed/establishment is on a path they can't get off without a lot of pain. If there's one thing we know about academia, even the mildest discomfort causes the most extreme hissy fit imaginable. We can be assured that any failure to maintain their ever increasing and inflated saleries will not be any fault of their own.
I've heard this argument, and I disagree. If loans were dischargable, lenders would have to significantly tighten requirements for borrowers in order to avoid getting shafted. This incentive system will make the "higher ed" loan industry work rationally as other loan industries do.
Would you loan $10,000+ to some 18-20 something kid to get a degree in women's studies or whatever with no plans on how to get a job with the degree? Not unless the borrower could somehow prove that loaning for that degree would be a rational investment with fair returns.
this.
"Like an army falling, one by one by one" - Linkin Park
Non performing loans - people not paying. That's the concern.
"Like an army falling, one by one by one" - Linkin Park
I thought the industry was all but nationalized:
http://www.direct.ed.gov/
A rational lender would practice that diligence. Isn't the lender now the same government people who think - not so much that education should be free - that they ought to control every aspect of it?
I may be wrong, but I view it as they are unable to make higher education free, so they are making the loans free which has the benefit of controlling both the school and the student.
That's true.
"Like an army falling, one by one by one" - Linkin Park
How does that pop the student loan bubble? What would a pop look like anyways? Tuition rates falling dramatically? Kids deciding against going to college?
The FedGov does make a lot of loans and, as I have read, makes most of the loans in the business. There are "private" lenders like Sallie Mae, though. (I'm currently paying down my loans from Mohela-formerly Direct Loans, which collects for the DoEd; and Sallie Mae.)
ETA: I agree with the rest of your post, btw.
A social revolution in the sense of one's obligation to student loans?
Widespread F***IT.
'We endorse the idea of voluntarism; self-responsibility: Family, friends, and churches to solve problems, rather than saying that some monolithic government is going to make you take care of yourself and be a better person. It's a preposterous notion: It never worked, it never will. The government can't make you a better person; it can't make you follow good habits.' - Ron Paul 1988
Awareness is the Root of Liberation Revolution is Action upon Revelation
'Resistance and Disobedience in Economic Activity is the Most Moral Human Action Possible' - SEK3
Flectere si nequeo superos, Acheronta movebo.
...the familiar ritual of institutional self-absolution...
...for protecting them, by mock trial, from punishment...
It's not possible to predict exactly, especially considering we're talking about a gov't mangled "market"...but your "effects" are certainly possible as a result of debt saturation (student unwilling to take on more and then other prospective students learning the lesson) and rates increasing to compensate for the now clear risk of lending to a saturated market of subprime borrowers.
In the end, if the amount of aggregate student debt begins to decline, then tuitions are likely to fall as it would curb the artificial demand that we now see.
Tuitions have skyrocketd ENTIRELY because of the gov't student loan programs.
"Like an army falling, one by one by one" - Linkin Park
A few things I can think of:
1. The trashed credit of the students means less lending in other forms to those students and that will have a ripple effect throughout the economy since we all know the system requires ever-expanding lending to stay afloat. No car loans, no new credit cards, no mortgages, etc.
2. People dropping out of school means layoffs of staff or complete shutdowns of those schools. More unemployment is bad.
3. Ad revenues drop as schools cut back on advertising. No more 3am University of Phoenix Online tv ad buys or Google Ads.
Just a few ramifications off the top of my head.
"Let it not be said that we did nothing."-Ron Paul
"We have set them on the hobby-horse of an idea about the absorption of individuality by the symbolic unit of COLLECTIVISM. They have never yet and they never will have the sense to reflect that this hobby-horse is a manifest violation of the most important law of nature, which has established from the very creation of the world one unit unlike another and precisely for the purpose of instituting individuality."- A Quote From Some Old Book
I think a lot of the 'private' loans are still backed by govt.
"He's talkin' to his gut like it's a person!!" -me
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"Each of us must choose which course of action we should take: education, conventional political action, or even peaceful civil disobedience to bring about necessary changes. But let it not be said that we did nothing." - Ron Paul
"Paul said "the wave of the future" is a coalition of anti-authoritarian progressive Democrats and libertarian Republicans in Congress opposed to domestic surveillance, opposed to starting new wars and in favor of ending the so-called War on Drugs."
Just like the mortgage industry. The taxpayer is taking on the risk.
**EDIT** While private interests reap the benefits.
Last edited by Seraphim; 07-18-2013 at 03:39 PM.
"Like an army falling, one by one by one" - Linkin Park
Reminds me of this old story - wives of Wall Street bankers taking over hundreds of millions of student loans, able to keep the profit, government covers any losses.
http://www.rollingstone.com/politics...ilout-20110411
“…let us teach them that all who draw breath are of equal worth, and that those who seek to press heel upon the throat of liberty, will fall to the cry of FREEDOM!!!” – Spartacus, War of the Damned
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I just returned from the NASFAA conference in Vegas this week. This is the national annual event of financial aid administrators. I had a chance to question someone who does data research for the DOE. There is a lot of data regarding federal parent loans that is not tracked. Such as default rates and forbearances on Federal Loans. I brought up the fact that the media is not telling the entire truth about the student loan issue. The middle class and the low income earners are borrowing so much money to send their child to school that it is never reported. This is on top of the Federal Stafford loans that students borrow. Therefore, you can not understand the true nature of the problem with the possible "loan bubble". The answer that I was given was simple. The DOE is looking into it. Many folks in the session seemed shocked that the DOE was not tracking this data.
The DOE also does not track GRADuate PLUS loans defaults and forbearances. These are loans for graduate students on top of Stafford loans.
I am deeply concerned about this as I preach to students daily about personal finances and debt.
It will be interesting to see how this unfolds over the next few years.
I always assumed it would be a credit and financial crisis based on defaulted debt.
#3 is going to be very important for people to think about. a lot of schools are flush with cash and are spending heavily in marketing to get more kids in the door. the amount of money they're spending on marketing absolutely cannot be overstated.
Advertising is a very efficient market. Inventory won't go unsold if they move out. Rather, instead of a TV spot selling for $500 to a university, it might sell for just $450 to another customer.
I'm not really talking about goods. I'm seeing non-standard brick & mortar type schools (think ECPI, ITTech, etc) throwing tens of thousands of dollars a month to companies just for lists of phone numbers of people who *might* be interested in going to their school. Doesn't seem like a competitive business model at all. Once the gov't money dries up, those places will probably wished they'd be a bit more frugal.
I was commenting on the competitiveness/efficiency of advertising prices, not the college or people who funnel interested students to for-profit schools. If colleges stop spending, other advertisers will take their place, albeit at a slightly lower price.
I know I need to see more ads for knives that cut tomatoes better than the knives already in my kitchen. Vacuum cleaners too.
"Let it not be said that we did nothing."-Ron Paul
"We have set them on the hobby-horse of an idea about the absorption of individuality by the symbolic unit of COLLECTIVISM. They have never yet and they never will have the sense to reflect that this hobby-horse is a manifest violation of the most important law of nature, which has established from the very creation of the world one unit unlike another and precisely for the purpose of instituting individuality."- A Quote From Some Old Book
I think we ALL know how that translates!
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Oblig:Student loan deal passes Senate
By Jennifer Liberto @CNNMoney July 24, 2013: 6:35 PM ET
student loan senate
Students heading to college this fall will see loan rates drop under a deal the Senate approved on Wednesday, but future college students may have to pay more.
WASHINGTON (CNNMoney)
The Senate on Wednesday approved a bipartisan deal that ensures lower interest rates on loans for students heading to college this fall.
http://money.cnn.com/2013/07/24/news...student-loans/
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