Student Loans

In effect, students get A Mortgage with Every College Graduation (Dr. Housing Bubble, via Jed H.) with one key difference: there is no way to get out from underneath the student loans. This is the perfection of indentured servitude. How many students pay off their $100,000 loans in a mere seven years? Modern banks and corporate "higher education" diploma mills have improved the old system of indentured servitude, extending the servitude from seven years to decades. The key dynamic here is the transference of risk from the lenders, who stand to reap immense profits from these loans, to the students. This transference is enforced of course not by the banks but by their partner, the Savior State, which obliterated the right to bankruptcy for students while guaranteeing profits to the banks via Sallie Mae, another guarantor of private profits backstopped by taxpayers. The feedback between risk and return has been severed. Lenders can extend massive loans to marginal students attending for-profit colleges, knowing their losses will be backstopped while the gains are theirs to keep, and the debt-serf students are indentured for life.

Superficially, it was all smiles following the announcement of the September consumer credit number which rose by $7.4 billion on a seasonally adjusted basis, on expectations of $5.2 billion (and down from the revised $9.7 billion borrowed in August). However a quick look under the surface reveals the same old trickery we have grown to know and love: revolving credit declined by $627 million, while the entire growth was in Non-revolving borrowing, which rose by $8 billion. What does non-revolving credit fund? Why auto loans (read subprime GM car loans) and student loans of course, the latter being the very same loans which even the president now is saying have to be reduced. As for the former, the G.19 now no longer even bother to report such data as Loan to Value, Interest Rates, Maturity and Amount Financed: analysts are left to imagine the best possible outcome. And just to confirm where consumer credit in 2011 has come from, of the $32 billion in credit issued YTD, $89.7 billion of it comes from the US government. The only other positive source of credit in 2011, for the whopping amount of $1 billion are savings institutions. Every other traditional source of credit is now... a drain.

This it NOT what you would expect from a traditional valedictorian speech. Hopefully people, especially young people, are starting to wake up to just how corrupt and broken at its core, the US educational system is. Alas, tangentially, as the following data from Stone McCarthy indicates, there is little danger that the revelations captured in this video are anywhere near widespread, courtesy of record after record rise in the next big bubble: student loan debt, which is nothing but even more voluntary indentured servitude in hopes that the latest piece of paper certifying one is "smart" will make one's resume more attractive to potential employers. Alas, if they only knew...

Post Includes Police State Search Warrant on Student Loan “Default”

We are in real trouble here folks. I am afraid that we are beyond the point of no return…

Twofer.