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Sure, and if the government starts actually disqualifying people based on credit worthiness, Al Sharpton will be standing in front of the building screaming "racist".
It really is a goddamn shame that there is such a high percentage of people too stupid to do math and figure out what they can and cannot afford, but that does not mean that the government should be doing it for them.
It makes me angry to see such a flurry of activity through the media and web on this topic yet no one sees the real problem. Whenever the government shoves their willy into something trying to improve the situation, the action has an inadvertent and unadmitted -- equal and opposite reaction.
They tried to solve the problem of uncreditworthy bastards everywhere not being able to get the funds to get educated. Egalitarianism = everyone should have the same chance. So they started these loans which are enforced beyond bankruptcy = low risk for the lender. The result is that everybody is lining up at the gates of colleges with fists full of money that they wouldn't have access to in a market without govt. intervention. Consequently the schools begin competing against each other to try to get as much of they can of this money -- and so they spend, spend, spend building fancier buildings, more lavish campuses, special dietary options cafeterias, computers and every sort of convenience that aren't 100% necessary but which is necessary to look as good as the next school... *folks there is no free lunch, you are paying for all that shit!!!*
I went 1 year to a public university in Japan, I think ranked 16th in the whole nation... and the place was falling apart. Foreign students bitched about the lamentable state, but I secretly admired it. Do you know what they charged me for a year of tuition? Something like $2000. They offered all the educational value needed but none of the superfluous fancy shit that does nothing for me but increase my debt. In America we are fucked until we realize that this is what we need. Crappier colleges that 100% fulfill their true purpose and nothing more.
If Student Loan debt collapses similar to the way Mortgage Loans collapsed a few years ago, what impact will that have on the economy as a whole?
I'm not really sure how it can collapse. These loans are written in such a way that not even bankruptcy can kill them. If you decide to stop paying then they will garnish your wages. The government backed loans need to stop before community college ends up costing $25,000/yr.
After ~5 years of paying, I finally got back down to the principle amounts....I really wonder if I'll ever finish paying! And they want kids to go into math and science...
I'm not really sure how it can collapse. These loans are written in such a way that not even bankruptcy can kill them. If you decide to stop paying then they will garnish your wages. The government backed loans need to stop before community college ends up costing $25,000/yr.
Gov't should slice 'em up in tranches and sell 'em as SLBS (Student Loan Backed Securities), CDO's and Credit Default Swaps.
Wipe out the debt in the no time selling them on the speculative market to Jamie Dimon, Goldman-Sachs and Morgan F'kng Stanley.
It makes me angry to see such a flurry of activity through the media and web on this topic yet no one sees the real problem. Whenever the government shoves their willy into something trying to improve the situation, the action has an inadvertent and unadmitted -- equal and opposite reaction.
They tried to solve the problem of uncreditworthy bastards everywhere not being able to get the funds to get educated. Egalitarianism = everyone should have the same chance. So they started these loans which are enforced beyond bankruptcy = low risk for the lender. The result is that everybody is lining up at the gates of colleges with fists full of money that they wouldn't have access to in a market without govt. intervention. Consequently the schools begin competing against each other to try to get as much of they can of this money -- and so they spend, spend, spend building fancier buildings, more lavish campuses, special dietary options cafeterias, computers and every sort of convenience that aren't 100% necessary but which is necessary to look as good as the next school... *folks there is no free lunch, you are paying for all that shit!!!*
I went 1 year to a public university in Japan, I think ranked 16th in the whole nation... and the place was falling apart. Foreign students bitched about the lamentable state, but I secretly admired it. Do you know what they charged me for a year of tuition? Something like $2000. They offered all the educational value needed but none of the superfluous fancy shit that does nothing for me but increase my debt. In America we are fucked until we realize that this is what we need. Crappier colleges that 100% fulfill their true purpose and nothing more.
I agree with most of this. Thankful every day that I put myself through college without any loans. EDIT: Also thankful that I went to school for something useful.
I owe about 21k for 4 years of school which isn't bad compared to everyone else. Thankfully, I had several small scholarships from organizations.
I'm lucky my parents helped pay for undergrad, and well i payed last year with money i made through assistantships. Biggest factor that helped my parents and I, FAFSA haha. Covered most of the cost for tuition for me.
The largest bank in the United States will stop making student loans in a few weeks.
JPMorgan Chase has sent a memorandum to colleges notifying them that the bank will stop making new student loans in October, according to Reuters.
The official reason is quite bland.
"We just don't see this as a market that we can significantly grow," Thasunda Duckett tells Reuters. Duckett is the chief executive for auto and student loans at Chase, which means she's basically delivering the news that a large part of her business is getting closed down.
The move is eerily reminiscent of the subprime shutdown that happened in 2007. Each time a bank shuttered its subprime unit, the news was presented in much the same way that JPMorgan is spinning the end of its student lending.
JPMorgan will not be accepting new private student loan applications, reports CNBC's Kayla Tausche. The decision applies to borrowers for next year.
"It's no longer sustainable and not the right place to allocate capital in the future," HSBC Holdings Group Chief Executive Michael Geoghegan said in a statement the day HSBC shut down its subprime unit in 2007.
"Lehman Brothers announced today that market conditions have necessitated a substantial reduction in its resources and capacity in the subprime space," the press release issued in August 2007 said.
There is over $1 trillion in outstanding student loans, making it the second largest source of household debt after mortgages. Just 10 years ago, student loans stood at $240 billion. About $150 billion of the total is comprised of private student loans made by banks and other financial institutions, according to a report issued by the Consumer Finance Protection Bureau last year.
What do you guys think about the student loan bubble? Ready to burst? And is it even feasible for some lowly grad student like myself (with remedial knowledge of finance) to short SLABS? Or is it better to short the bank's stock itself?
I'm not actually considering doing any of this, but am curious to see what all of you think. I've only recently gotten into reading about this stuff (always thought it would be dry, but it's quite fascinating!).
Government backed student loans are a bad idea, all they did was allow the colleges to inflate their tuition. If the government decided to stop backing loans then no bank would offer them. The result would be lower tuition and many colleges would probably end up folding. That is where the bubble lies. Institutions would be forced to close and the economy that supports them would suffer. The banks would be fine as all the stupid students with the 50k debts can't get away from them. Government backed student loans survive a bankruptcy. You would have to flee the country or go off the grid to get away from a student loan.
The banks would be fine as all the stupid students with the 50k debts can't get away from them. Government backed student loans survive a bankruptcy. You would have to flee the country or go off the grid to get away from a student loan.
I agree that banks are not going to be ruined by this, and yet, it sounds like JPMorgan Chase is running scared from the student loan business. They must have a reason, either people are not paying, regardless of the fact you can't get away from the loan, or they seriously think the government is going to stop backing the loans without warning.
JPMorgan Chase knows these loans are pretty bogus in the first place. There is no way that a large percentage of these people will ever pay off these loans. I know that, so they must know it as well. So what has changed?
Unless there is another possibility I am not considering, it looks like it's clear that banks (or at least one bank) think they are not going to get paid back for these loans.Otherwise, why stop making them?
Add one more strain to the finances of U.S. universities: a decline in enrollment.
Last week the U.S. Census reported college enrollment declined for the first time in six years in the fall of 2012. That, in turn, threatens higher education revenue, said Moody's Investors Service in a special report on Monday.
Already, "precipitous enrollment declines for fall 2013" have hurt the credit quality of two private colleges—Loyola University in Louisiana and Central College in Iowa—and a public one, St. Mary's College in Maryland.
"Enrollment declines in higher education are credit negative because they heighten competitive pressure for all universities. This limits opportunity to grow tuition revenue, now the primary revenue for the majority of public and private universities," said Moody's.
Enrollment challenges will persist for several years, and those institutions likely to suffer the biggest squeeze have lower credit ratings, are especially dependent on tuition for revenue, or lack a strong brand name or market position, Moody's added.
Public universities and colleges have fought a losing financial battle since the start of the 2007-09 recession. States have slashed higher education spending, costs have risen, and students are becoming more reluctant to borrow.
According to the liberal-leaning Center on Budget and Policy Priorities, state governments now spend 28 percent less per student than they did in 2008. Meanwhile parents and political leaders are pushing to make both private and public colleges more affordable in the face of ever-rising tuition.
Graduate enrollment has declined for the past two years as high unemployment creates doubts about the value of paying for another degree, but the fall of 2012 also saw a dip in the number of undergraduates.
Moody's said graduate programs typically generate more revenue per student than undergraduate ones. It added that the lower demand for graduate education will likely continue for some time, given that applications for law, education and business schools have all declined dramatically.
The price for higher education is far too high when compared to the job salaries for many fields.
Students will take a lifetime to pay off college.
Get government out of the business of college loans.
Public universities and colleges will have to come back down to earth and pay their staff less than the outrageous benefit packages they are paying them now.
Private universities and colleges will need to do what they can to adjust.
Point being colleges and universities have been riding the government money (via college student loans) gravy train for far too long now. It's outrageous, and the students are the one's who get screwed on this.
10-08-2012, 08:04 AM
