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  1. #1
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    The Student Loan Bubble

    I understand that student loans (SLs) exist and they help many. And I don't demonize the institutions that give SLs.

    But massive increases over the last 20+ years, and last ten years, in particular have really gotten out of hand.

    Is a Bachelor degree in the US today, a scam?

    You decide.
    ow the Banking Industry has Created a Bubble in the Student Loan Market and Inflated Prices in Education by 500 Percent since the 1980s. The $500 Billion Student Loan Market.


    The dream of going to college is deeply ingrained in our society. Education is usually a political win in any campaign and few will ever argue with this topic when it is brought up. As with many things in our current financial system creating a market where banks can enter into the fold has hyper inflated the price of higher education. Think of housing, autos, and every other banking activity and prices are likely to bubble up and burst if they are allowed to finance the activity. Yet educational costs remain high and defaults in the $500+ billion student loan market are now showing cracks like many areas of our economy. Is there a bubble in higher education?
    First, I started to question the massive surge in college cost when I saw a report from one of the too big to fail banks, Wells Fargo, showing that by 2027 the cost to attend a private four-year college will cost nearly $400,000:


    Source: Wells Fargo
    Now the above embedded inflation assumes that we will have inflation at a consistent pace. As we have seen in the last year, it is possible to have periods of deflation in massive bubbles. Home prices have fallen and so have wages so it would be interesting to see how college costs can rise all the while people having less money to finance their education.
    Now some would argue that everything goes up in price so the rise in college prices is merely a reflection of this. This is not true. The premium to go to college is outstripping virtually every other category of consumer prices:

    Since the early 1980s college tuition and fees have surged nearly 500 percent while the median family income has gone up by approximately 150 percent. Now anyone that has experience with the current college system understands how expensive things have gotten. One of the primary push to higher prices is the involvement of securitization and the banking industry pushing out loans.

    The student loan market is enormous. With over $500 billion in loans this is a large market that few even consider. The biggest chunk of this market is the FFEL program which is the Federal Family Education Loan Program. In the past, there was little to fear from this market since student loan defaults were relatively tiny. Yet just like Fannie Mae and Freddie Mac propping up the entire housing market in the U.S., the FFEL program props up the entire student loan market. This program provides lenders a guarantee from the U.S. government of 97% and a fix yield on the student loan. No wonder why this is such an enormous money pit for banks. Of course, you see above that the corporatocracy is also involved in this market. But just like the housing market, Wall Street and the government have worked together to inflated the cost of education just like it did with housing.

    Link & Entire: How the Banking Industry has Created a Bubble in the Student Loan Market and Inflated Prices in Education by 500 Percent since the 1980s. The $500 Billion Student Loan Market. | Finance my Money
    ............

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    And how many of those students repay their loans? What's with all the American parents who save for their kids' college education? This stuff has been going on for eons. Kid takes a sociology course and expects to get a job when he graduates? I have a degree in sociology; would you like fries with that?

  3. #3
    I don't know barbaro's Avatar
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    Quote Originally Posted by Jet Gorgon View Post
    And how many of those students repay their loans? What's with all the American parents who save for their kids' college education? This stuff has been going on for eons. Kid takes a sociology course and expects to get a job when he graduates? I have a degree in sociology; would you like fries with that?
    No, this has not been going on for "eons." Read my post comments.

    This start in 1999.

    Gov gives out SLs --> schools raise tuition --> gov increases debt loan ceiling to pay for higher tuition --> schools raise tuition.

    In a period of about 6 year, average tuition increased 100%+ from 1999.

    Yes, a degree in "sociology" and many of these subjects may not lead to gainful employment, especially in the new economic model.

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    Talent rules over education. Some undergrads are no doubt talented and they just might get something useful out of attendance but you have to wonder if lack of talent = a lust for university enrollment. Even if the student is covered with the GI Bill, he will still face 4-5 years out of the work force. Of course that force is but a slight breeze with an occasional chance of sprinkle these days.

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    Remember the good old days when one took two or three part-time jobs to help subsidize Daddy's check book? But then, one's beloved and cherished university didn't cost a king's ransom. In some civilised cultures, a college/university education is nominal to free - providing you keep up. The consciousness of taking a loan for most everything, disturbs me.....consumption, consumption, consumption - just for the sake of it.

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    Quote Originally Posted by Camel Toe View Post
    Talent rules over education. Some undergrads are no doubt talented and they just might get something useful out of attendance but you have to wonder if lack of talent = a lust for university enrollment. Even if the student is covered with the GI Bill, he will still face 4-5 years out of the work force. Of course that force is but a slight breeze with an occasional chance of sprinkle these days.
    In the US, there has been a massive push to get everyone a BA/BS, basically.

    Getting a Bachelor's degree is like getting a driver's license in the US, these days.

    I witnessed it first hand, when I was at state Uni.

    Yes, there are smart and talented people, and a lot of average and mediocre students as well.

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    One day I was between classes thinking how much the gig sucked and that I'd have to work about 70 years to get a return on my investment.

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    ^ Especially today. Self-education is powerful with the internet.

    However, the "piece of paper" allows doors to open.

    Different today, though.

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    Delinquency rates rising.

    Overdue Student Loans Reach ‘Unsustainable’ 15%, Fair Isaac Says
    By Elizabeth Dexheimer - Jan 30, 2013

    Delinquency rates on student loans made in the past two years stand at 15 percent in the U.S. as recent graduates struggle to find jobs, Fair Isaac Corp. (FICO) said.

    The rate for 2010 through 2012 compares with 12.4 percent for loans made from 2005 to 2007, Fair Isaac’s FICO Labs said in a statement today, citing data from October. Average student- loan debt last year rose to $27,253 from $17,233 in 2005, and almost 60 percent of bank managers surveyed in December expect delinquencies to worsen in six months, FICO said.

    “This situation is simply unsustainable and we’re already suffering the consequences,”
    Andrew Jennings, chief analytics officer of Fair Issac, said in the statement. “When wage growth is slow and jobs are not as plentiful as they once were, it is impossible for individuals to continue taking out ever-larger student loans without greatly increasing the risk of default.”
    Entire: Overdue Student Loans Reach

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    Quote Originally Posted by barbaro View Post
    I understand that student loans (SLs) exist and they help many. And I don't demonize the institutions that give SLs.

    But massive increases over the last 20+ years, and last ten years, in particular have really gotten out of hand.
    The FFEL Program (from your chart) is the main culprit of this mess. With FFEL, private lenders make the loans and the federal government guarantees them. It's the type of corporate socialism that's bankrupting the USA, i.e. the banks make all the profit and the taxpayer gets left holding the bag on the defaults. If the banks assumed the risks, they might ask more questions if an 18 year-old kid with a C minus grade average in high school and no assets wants $20,000 to get a history degree from an online school. On the other hand, good students working toward engineering and nursing degrees would still get their loans. If the banks assumed the risks and tightened loan practices, maybe young people would be encouraged to get more useful college degrees. If a shiftless, pot-smoking teenager wants to learn about history or sociology, he should go out and buy some books and read them in a coffee shop instead of wasting my hard-earned tax dollars. Debts from a useless college degree will follow him through retirement, where even social security checks are now subject to up to 15% garnishment.

  11. #11
    I don't know barbaro's Avatar
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    SL debt became larger than total credit card debt. And these numbers on delinquencies are bad.

    This is another very serious issue.

    February 28, 2013
    Student-Loan Delinquencies Among the Young Soar


    By RUTH SIMON and RACHEL LOUISE ENSIGN The number of young borrowers who have fallen behind on their student loan payments has soared over the past four years, the Federal Reserve Bank of New York said in a report released Thursday.

    According to the report, 35% of people under 30 who have student loans were at least 90 days late on their payments at the end of last year, up from 26% in 2008 and 21% at the end of 2004.

    The new figures, which exclude borrowers who are still in school or aren't yet required to make payments, show that young Americans are having a tougher time repaying college loans as debt loads increase and job prospects remain shaky.

    With total student-loan debt approaching the trillion-dollar mark, WSJ's Jason Bellini deconstructs how we got here and what it all means.

    Amplifying the burden: a growing number of young adults have become student borrowers. All told, 43% of 25-year-olds had student debt in the fourth quarter of 2012, up from about 33% in the fourth quarter of 2008.
    Entire: Student-Loan Delinquencies Among the Young Soar - WSJ.com

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    Great series of post Barboro - All part of the same system of enslaving people as deeply and quickly as possible. They really want to give people no choice and the cruellest thing is that they catch everyone with their hope - hope for a better life / education / owning a house / starting a business.... it goes on. Hope, dashed, entrapped. Get up early, go to work with media plugged in through a phone / pad / pod. Work all day until late in the evening for ever decreasing pay packet compared to inflation and increasing taxation. Go home plugged into the media. Sit in front of the TV eating mass produced foods. Go to bed. Repeat 5 times a week.

    I mentioned in another thread that the banks could not profit from education, but actually clearly they do. They also manipulate it through foundations to change history and learning

    Transcript of Norman Dodd Interview

  13. #13
    I don't know barbaro's Avatar
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    Quote Originally Posted by pseudolus View Post
    Great series of post Barboro - All part of the same system of enslaving people as deeply and quickly as possible. They really want to give people no choice and the cruellest thing is that they catch everyone with their hope - hope for a better life / education / owning a house / starting a business.... it goes on. Hope, dashed, entrapped. Get up early, go to work with media plugged in through a phone / pad / pod. Work all day until late in the evening for ever decreasing pay packet compared to inflation and increasing taxation. Go home plugged into the media. Sit in front of the TV eating mass produced foods. Go told. Repeat 5 times a week.
    pseudolus,

    Spot-on.

    So much so, I want to cry. This is what it is.

  14. #14
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    Quote Originally Posted by pseudolus View Post

    Just out of interest, I did a quick calculation on that. 32,700 dollars paid over 23 years means that she has been paying back at a rate of approximately 120 dollars per month.

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    What kind of education does one receive with such dependent loans?

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    Government debt of $17 trillion is about $56,000 per every American alive. Private household debt is at $80,000 at present. It's called debt slavery. A way to turn rugged individualists into something different.

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    With the SL over $1 trillion and more than cc debt, this will affect the younger generation's ability to buy a house, have kids, save and invest, etc. It will affect the macro-economy.

    How the Student Loan Crisis Drags Down Home Prices

    Published: Monday, 4 Mar 2013
    By: Paul O'Donnell

    Pity the college graduate, burdened with shocking levels of student-loan debt and looking for a job in the worst employment market in two decades.

    But save a little pity for the rest of us.

    The staggering amount of outstanding student debt nearly $1 trillion owed is beginning to impede the U.S. economy as a whole, a new report from the New York Federal Reserve suggests, chiefly by robbing the housing market of its richest crop of new buyers: young college graduates.

    The statistics in the report are dismaying in themselves. With the number of borrowers approaching 40 million nationally, including more than 40 percent of 25-year-olds, the average balance on their loans has risen to $25,000. About 6.7 million of all student borrowers, or 17 percent, are delinquent on their payments three months or more.

    Entire: How the Student Loan Crisis Drags Down Home Prices

  19. #19
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    ^ Fucking hell Barbaro - you seriously being "educated" by a report from the NY Federal Reserve?

    "New York Federal Reserve suggests, chiefly by robbing the housing market of its richest crop of new buyers: young college graduates."

    Their message is "By these kids leaving Uni with debt, they are unable to get more debt which means that the banks are unable to create more money out of thin air". Lets not forget, it's a ponzi scheme, and if the banks do not get lots of new debtors every day, they can not create the money that will allow the system to keep functioning.

  20. #20
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    Quote Originally Posted by pseudolus View Post
    ^ Fucking hell Barbaro - you seriously being "educated" by a report from the NY Federal Reserve?

    "New York Federal Reserve suggests, chiefly by robbing the housing market of its richest crop of new buyers: young college graduates."

    Their message is "By these kids leaving Uni with debt, they are unable to get more debt which means that the banks are unable to create more money out of thin air". Lets not forget, it's a ponzi scheme, and if the banks do not get lots of new debtors every day, they can not create the money that will allow the system to keep functioning.
    It's about da numbas:

    The statistics in the report are dismaying in themselves. With the number of borrowers approaching 40 million nationally, including more than 40 percent of 25-year-olds, the average balance on their loans has risen to $25,000. About 6.7 million of all student borrowers, or 17 percent, are delinquent on their payments three months or more.

  21. #21
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    I got a student loan that's sitting at about $27,000 now. I pay it off at $6 a week, just to keep the interest down.
    I'll never pay it off, as I don't make $20,000/annum from my degree, as per initial loan agreement.

    I hope to die penniless owing the government as much as possible.
    “Is it not written in your Law, ‘I said, you are gods’? John 10:34.

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    Quote Originally Posted by ENT
    I'll never pay it off, as I don't make $20,000/annum from my degree, as per initial loan agreement.
    how do you live on that?

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    student loans should be exploited to their fullest extent

    then nobody should pay a penny back

    maybe the gov. would start to rethink their charging fees

  24. #24
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    ^ Agreed. That's what I'm doing.

    Quote Originally Posted by DrAndy View Post
    Quote Originally Posted by ENT
    I'll never pay it off, as I don't make $20,000/annum from my degree, as per initial loan agreement.
    how do you live on that?
    How? Frugally < very well, no problem in an alternative environment/social structure.

    NZ state pension is around that figure and quite adequate for normal living.

    Anything earned on top from my degree quals gets taxed at 20<30%, and I don't need to earn over $20, 000/annum off that either.

    Anything I earn from other sources also gets taxed at 20<30%.

    So I can have a combined net income of around $NZ 60,000 plus without having to pay back my initial student loan, as long as I pay my legitimate taxes and interest on the loan and don't earn anything over NZ$ 19,999/anum from my degree.

  25. #25
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    what do you mean "ear from my degree"? Actually earning money in a job where your degree is useful for that job?

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