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How To Profit From The Impending Bursting Of The Education Bubble, pt 1 - A Bubble Bigger Than Subprime

Reggie Middleton's picture




 

 

One of the most popular (although I feel not popular enough, considering the importance of the subject matter) articles of BoomBustBlog 2012 was my pieces on the near uselessness of the US education system - How Inferior American Education Caused The Credit/Real Estate/Sovereign Debt Bubbles and Why It's Preventing True Recovery. The accompanying graphic easily encapsulates a material portion of the piece, basically illustrating how the public school system serves as a mass indoctrination machine which has close to nothing in common with true education, knowledge dissemination, creativity or value creation. 

The post secondary and private school systems are simply continuations of the same, but worse yet, charge exorbitant fees for said injustice. Many poor victim either saves up a half lifetime of savings or worse yet goes into insolvency skirting debt to purchase a so-called education (which as described above is nothing of the sort) that is represented buy a piece of paper known as a diploma that is literally not worth the paper it is written on. 

For those who think that I'm exaggerating, assume a $40k per year tuition for a 4 year business management degree, purchased with money borrowed at 6% (from our dear government guaranteed lenders (SLM, et. al.), deferred for and average of 2 years. An oversimplified straight calculation puts you roughly $178,000 in debt upon graduation for a piece of paper that would fetch you roughly $43,000 per year. Reference ehow.com:

In July 2009, people who hold a bachelor's of science (BS) in business management averaged $39,551 during their first year of employment and $43,022 for the first one to four years. A professional with a BS in business management typically averaged $78,669 once they reached 20 years of employment.
Read more: Average Salaries for a Bachelor's Business Degree | eHow.com http://www.ehow.com/facts_5240719_average-salaries-bachelor_s-business-degree.html#ixzz2Gw6sriN5

If I'm not mistaken, wages have dropped on a inflation adjusted basis since then, but I digress. Using the figures above you would have just about broken even over an 8 year period, save a few common sense facts.

  • Taxes: Yes, you'd have to subtract local, state and federal taxes from said monies... At roughly 35% (bound to go up after we finish this cliff nonsense), we're now talking $27,964 average over four years. That puts you in the hole to the tune of roughly $12,035 per year you spent on that degree.
  • Debt service: Oh, yeah! Since you borrowed the money you'd probably would have to pay it back, but since you also have to work and pay rent (you can forget a mortgage at these income levels) you'd be paying back the minimum levels and scraping to do so. You'd better hope and pray you don't live in Manhattan or downtown Brooklyn too!
  • Oppurtunity costs: Yes, you could have used those four years and $176,000 to do something else maybe a tad bit more productive.

So, on the fifth year following your freshman orientation, assuming you studies well, you would have laid out $176,000 facing annual debt service of about $12,000 or so - offset by a net income stream of roughly $28,000. The $16,000 per year positive cash flow (assuming you didn't need food, shelter, clothing, transportation or anything else) would give you about 12 years or so to pay off the debt and break even. I'm not even goint to run the math on the ROI, so let's just pick something outrageously generous like 8% (remember, this is over a 16 year period).

To wit, let's compare some other basic investments  - that is assuming someone besides your school and your lender actually consider your academic mis-education an actual investment.

The NASDAQ composite returned 98% over the last for years. Dumping the money in the NAZ comp would have brought you close to doubling it - although you would not have had access to all of the funds at once for a lump sum investment, a roughly 50% gain looks likely. Now, you would have gained 4 years of simplistic (as in index watching) experience as compared to your competitor's fancy schmancy 4 year degree, yet you would had nearly a quarter million in cash, as well as roughly $70,000 in equity while he would have had $173,000 in debt, interest payments due immediately and the hope of finding a job with which his trusty diploma would surely help him, right? If you had a small financial business, who would you hire? The fool or the entrepreneurial investor???

Suppose you Interned for free with Apple, Google or Facebook while simply leaving the monies in the bank at .25% interest? You would have had a superior education and only been in the hole for $16,000, as well as having $160,000 in cash to play with. How about starting your own business? Invested in commercial real estae? Scalping Greek bonds post bailout? You see, there are so very few who compare getting a diploma or getting a loan for a diploma with other investments because they are brainwashed to believe this is the way to get ahead in life. It is not! It's the way to get educator entities and banks ahead in life, as you become a debt slave. 

What makes this truly ironic is that anyone who truly received a real business admin, management or finance education would be able to run these rudimentary calculations and thought processes themselves which would result in the invalidation of the actual degree to which they are seeking, alas... I digress...

Why the student loan bubble is worse than the subprime bubble 

Zerohedge has run an interesting series of the student loan bubble in the recent past, hence I will not rehash what has already been done in such exquisite detail. For those who have not been following, this is the case in a nutshell...

Student loan delinquencies break the 20% mark as total student debt tops a trillion dollars, rivaling and likely surpassing the subprime debt debacle.

This is how the Fed described this "anomaly": 

Outstanding student loan debt now stands at $956 billion, an increase of $42 billion since last quarter.  However, of the $42 billion, $23 billion is new debt while the remaining $19 billion is attributed to previously defaulted student loans that have been updated on credit reports this quarter. As a result, the percent of student loan balances 90+ days delinquent increased to 11 percent this quarter.

oh and this from footnote 2: 

As explained in a Liberty Street Economics blog post, these delinquency rates for student loans are likely to understate actual delinquency rates because almost half of these loans are currently in deferment, in grace periods or in forbearance and therefore temporarily not in the repayment cycle. This implies that among loans in the repayment cycle delinquency rates are roughly twice as high.

And more from ZH:Over $120B in student loans currently in default. For private private  institutions lead the way with a 22% default rate.

Today's public school system diploma, post secondary diploma, and for the most part, many if not most graduate degrees and PhDs are a waste of good ink and (relatively) valuable paper. This paper is quite similar to the MBS and sovereign debt paper which I have written so presciently and accurately on over the last 6 years (see Asset securitization crisis and Pan-European Sovereign Debt Crisis). The crises from these essentially depreciating assets stemmed from the piling of excessive debt on top of assets with fictional value. Trust me, I can see these things clearly, as can anyone who takes an objective view. When have we had instances similar to this Student Loan Bubble (or Stubble)? When I made a small fortune shorting...

I can go on for a while (particularly on RE and sovereign debt), but I feel you've got the point. The pattern is inevitable. There is a  true business opportunity here, for many college graduates couldn't earn their way out of a wet paper bag, and many of those that could are squandered by toiling away in a system of derivatives of derivatives based upon synthetic products (think of mortgage CDO cubed traders) which are merely shadows of social constructs, versus the inception, design, production and sales of real, value creating, tangible (as well as intangible) assets, products and services.

My next article on this topic will show how I am positioning myself and others to capitalize on this education bubble burst on both the short side and the long side. In the mean time and in between time, subscribers can glean my view of one of the big private post secondary educators who is  having a problem with volatile earnings that are probably going to get worse.

file iconEducation Co. 1-3-2013

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Fri, 01/04/2013 - 16:05 | 3123490 mrdenis
mrdenis's picture

this should fix it foy ya" ...http://patnoble2012.org/

Fri, 01/04/2013 - 09:45 | 3121642 j0nx
j0nx's picture

All of this is moot. The simple fact is that without a college degree you can't even be seen at an interview yet alone get a job. College is like food and gas. It's a requirement which is why it will continue to rise in cost. Saying college is in a bubble is like saying food is in a bubble. No shit but that ain't gonna change because it's required to survive in this world. You can't even get a blue collar job in the trades any more due to all the illegal fucking Mexicans the government allows to roam freely around our streets. You'd think the deck was almost purposefully stacked against our own youth...oh wait.

Fri, 01/04/2013 - 07:11 | 3121416 Mr. Hudson
Mr. Hudson's picture

There is no "student loan bubble". Bubbles "pop" when the borrowers go bankrupt, and people can't go bankrupt on their student loans, so what happens? Prison, most likely, for those who don't keep up their payments.

Fri, 01/04/2013 - 04:53 | 3121338 mkkby
mkkby's picture

Funny, but I don't see one single person saying what kids should do instead of college.  Start their own business and compete with large companies, that can borrow for free and write their own laws?  Fuck yeah -- I think 90% of small businesses fail.

College is god damned expensive and probably doesn't pay off in this economy unless you get the right degree.  But kids have no other fucking choice unless they want to do dirty, hard work.  Nothing wrong with that, but you grow old fast.  Not a lot of great choices here.  All I know is this is a bailout nation, and kids who can't pay their student debt are likely to be the next ones in line.  Being prudent is just being a sucker.  I say take on all the debt you can and then worry about weasling out of it.

Fri, 01/04/2013 - 03:42 | 3121289 amanfromMars
amanfromMars's picture

The global money system is catastrophically vulnerable to freely shared information on its vulnerabilities. And they can only be well countered and mitigated by fantastic positive action and constructive creative drive making greater use of fiat assets with smarter spends both lavish and luscious in execution/executive operation.

Or you could just stay locked in the vaults with all of that petrified money which isn't moving through the system. Now who's responsible for that fork in the road ... and to what end?

Are banks no longer able to give without a machine algorithm vetting the process and producing a virtual paper trail of HyperRadioProActive Cyber Activity. That is a Machine Weakness which allows for Discovery and Recovery of Sequestered and Pirated and Misappropriated Assets and Services.

 

Fri, 01/04/2013 - 02:26 | 3121241 billsykes
billsykes's picture

the pe firms that flipped these diploma mills out have already made their return.

nyse is the new pink sheets. short ramin noodles.

Fri, 01/04/2013 - 01:40 | 3121202 tony bonn
tony bonn's picture

"...that is represented buy a piece of paper known as a diploma that is literally not worth the paper it is written on. ..."

reggie you have just redeemed yourself in spades from that crappityass drivel you wrote about on economics several weeks ago....this article is golden and is about 1/3 of my thesis against the racket of higher education whose vendors and advocates should be prosecuted under rico....

education's only purpose is to produce useful compliant idiots who are fed onto a conveyor belt to a corporate behemoth to become nazis.....i will sleep well tonight knowing that you, smartknowledgu and yours truly have seen the light....

yes there are portions of education which are quite impressive and benefit a few...but anyone who goes to school to get a business degree has a giant fucktard written on his forehead....although i do understand the pressure of education goons who do their best to make you feel inadequate, stupid, and lost without a degree....

of my college education, i use about 5-8% on a daily basis but just like pink slime, it is stuffed into the sausage and sold as filet mignon....

Fri, 01/04/2013 - 01:03 | 3121167 CheapBastard
CheapBastard's picture

Good work Reggie. I'm looking forward to yoru next article on the subject.

Thu, 01/03/2013 - 23:23 | 3121033 ebworthen
ebworthen's picture

The Ponzi must be fed.

Mo-money, mo-money, mo-money.

The dream factory and related industries must be fed.

The dream of an illusory tomorrow is the only way to maintain the fantasies of today.

Thu, 01/03/2013 - 23:27 | 3121032 Mediocritas
Mediocritas's picture

Universities are dying a slow death. 

Excepting hands-on experience (physical manipulation of lab equipment for example), universities are not able to offer ANY paid-for content that is not already freely accessible on the internet. Even if they can, decent content quickly makes it up onto the web a short time later, it just takes a little effort to look.

Courses are massively overpriced and drawn-out over years because dragging it out means pulling in more tuition fees. It's a total rip-off because any person with sufficient motivation (and that's the key to learning) can teach themselves off the net in a fraction of the time with only minimal guidance (if needed at all).

The only thing that's keeping universities going is prestige and status. People still think having a degree from a top-tier university is something to be admired, even when it means being totally incompetent. Youngsters still yearn for the social life on campus without sparing a thought towards a future of debt.

The universities will dig in and fight this one out for years, all the way to the bitter end, but the web will ultimately win as youngsters wise up. As that happens, employers will also evolve to value competence over "education".

Expect it to be a long fight because universities are sitting on truly massive hoards of wealth in the form of things like real estate and art works. Perhaps some form of them will always be around because all the really rich kids still want to party with the other rich kids while justifying it to their parents, and they DO love to have titles.

Thu, 01/03/2013 - 22:48 | 3120948 Freddie
Freddie's picture

My next article on this topic will show how I am positioning myself and others to capitalize on this education bubble burst on both the short side and the long side.

So how do you make money on the long side?

Ruger, Smith & Wesson and Olin (Winchester ammo & copper alloys), Hillenbrand (HI) makes caskets which will be needed for Harvard grad prop trader zombies plus other zombies when the SHTF?

Ammo, lead, PMags, ARs, rice, bullion, beans, beer, burbon, Bibles and bitches - Bitchez!  

Thu, 01/03/2013 - 21:47 | 3120796 q99x2
q99x2's picture

How darest thou. I just submitted my renewed FASFA today. Its on like Donkey Kong. For some reason I keep getting older but the young women in class keep looking young as ever. I require them to have ID.

Thu, 01/03/2013 - 21:28 | 3120756 Notarocketscientist
Notarocketscientist's picture

Surely the financial industry should be dispatching its lobbyist to explain to washington that student loan programs should be terminated and instead loans of say 200k should be made to every person when they turn 18... said loans to be invested in designated funds (operated by those who of course donated the most to the party in power).

This would of course drive the stock market through the roof - everybody could live off dividends and nobody would have to work.

Holy shit batman - this is ALMOST as good as money printing!

Thu, 01/03/2013 - 21:59 | 3120825 slyhill
slyhill's picture

I love the "Weeds" (HBO) tie-in.

Thu, 01/03/2013 - 20:58 | 3120661 I am Jobe
I am Jobe's picture

Long on Hookers and Short on Degrees. Yeah baby, expensive hookers with worthless degrees.

Thu, 01/03/2013 - 20:28 | 3120550 rsnoble
rsnoble's picture

Oh bullshit gov't officials just said recently that "it will be at least 20 years before student loans are in a bubble".

I'm being sarcastic of course, but they did say that. Don't recall where I read it, it was more of a high speed read and quick smirk while I was skimming for something worthwhile to read.

Thu, 01/03/2013 - 19:49 | 3120443 Printfaster
Printfaster's picture

I convinced my son to take an ecomomics major in college.

He took one year of it and quit because of the student loans.

He must have had my Econ 1 TA.   He greeted me in my first day of college with:  "There is only one thing you need to know:  The smartest one is not the one who dies leaving a million dollars [for Gen Yers, read $1 billion], it is the one who dies owing a million dollars."  I should have quit then.

Thu, 01/03/2013 - 22:10 | 3120829 slyhill
slyhill's picture

Fuck I hate that. I am a fucking sucker for living within my means. I have fantasized about cashing out. I don't know if I can do it.

Thu, 01/03/2013 - 19:50 | 3120452 BlueCheeseBandit
BlueCheeseBandit's picture

Sounds like your son was actually learning economics. Pretty rare these days.

Thu, 01/03/2013 - 19:36 | 3120415 BigDuke6
BigDuke6's picture

i guess i can say i've gone far in education with a couple of postgrad degrees - i can also say my university days were close to the best of my life and i wouldn't swap them

but times are changing.... drugs are changing .... people are changing.... in a thousand years there wont be any people ... just wankers.  :p

And i give this advice as someone who is not a dumbfuck - judged by the ladders we use to judge a life...

i've had several mentors who happened to be jewish and i would say its always worth watching what the jewish kid is up to.  those not connected enough for banking.

20 to 30 years ago it was medicine.

10-15 years ago they moved to internet start-ups.

now, i dunno, but i'd be getting my kid to check if those decisions were coming up.

 

Thu, 01/03/2013 - 20:51 | 3120586 Boxed Merlot
Boxed Merlot's picture

watching what the jewish kid is up to...

 

I dunno, not sure about the bernanke, but Daniel had a wierd diet, benefitted from some divinely provided lion training and prayed for dream interpretation.  He also had some pretty devoted friends and learned how to write.  Oh yeah, he knew the "powers that be" were temporary. 

Mene mene tekel parsin.

Thu, 01/03/2013 - 19:22 | 3120384 Major Miner
Major Miner's picture

I'm sure glad I got my degree in the 80s.  I hope this bubble pops before 2018 when my daughter starts college.

Thu, 01/03/2013 - 18:59 | 3120325 Salon
Salon's picture

Most of you guys would be better off not going to college and learn a trade not easily off shored.

Then eventually build your own business.

Thats the way to get rich.

Read The Millionaire Next Door

Thu, 01/03/2013 - 23:21 | 3121031 Freddie
Freddie's picture

Dude - I hear you but a lot of that Millionaire Next Door BS died in 2008 post the muslim.  People voted for it and vote for it everytime they turn on their TV or watch Hollywood's shit.  Are you one of them?

The new Millionaire Next Door is a cop, fireman or some other unionized govt worker.   Millionaire Next Door small and small medium sized business owners are dropping out of business like flies.

Thu, 01/03/2013 - 20:44 | 3120610 Pareto
Pareto's picture

Or fuck....just learn how to help people solve problems.  The mantra for too long has been "go to school so you can get a good job., implying that the end game was simply to "get a good job".  Thats not a formula for success.  Just showing up on the job thinking, "well I got a good education, so, where's all the good money?", doesn't cut it.  Teachers ought to be flogged for instilling this kind of thinking.  Instead the mantra ought to be "get a good education so you can help people solve problems."  There's a huge difference between the two perspectives!  So, instead of showing up for work with a hand out, you show up asking, "what can I do to help?"

I've said it before, I'll say it again. For our organization, its totally about attitude.  We can teach what they don't know.  But, we cannot teach them attitude.  Also, forget about a starting salary of $100K, when you have not even demonstrated worth to our bottom line.  I don't care if you are MIT, Harvard, Ph.D, you are paid according to your marginal productivity.....which is why i am more likely to lean towards the so-called 2nd or 3rd tier institution graduates.  They don't have the "i'm all that" fucking attitude.

Finally, I think a smart and disciplined guy/gal out of high school can get their entire degree (outside of practicuum) right off the Internet.  Fuck the government institutions; they've watered down their material anyhow.  They should go after it affordably and I would argue, more productively, and all the while asking themselves, "is this shit going to help me make somebody else's life better off?"  Worried about not being recognized without a name behind the name?  Bring in your work.  Demonstrate your abilities.  Its that easy.  I want to see initiative (and so does every other employer i talk to).

Man.  I could go on, because this shit gets me riled up, but, I don't want to sound preachy.  Final word:  Get the education that you need and what the market needs you to have, and NOT what the government thinks you ought to have.  That shit, you will inevitably find, is a collossal waste of your time.  I wish graduates all the best.

Fri, 01/04/2013 - 02:41 | 3121256 FreeMktFisherMN
FreeMktFisherMN's picture

Right on man. I'm 21, and there is a glaring dearth of critical thinkers/problem solvers in my age class. I see how these college students (I go to a 'good' school) take the prof's word as unchallengable verity because, after all, he has all those 'accolades' and Phds and whatnot, and so they just regurgitate and don't think for themselves. I'm thankful that I investigated things for myself, starting with realizing that something was amiss with getting zero interest for my savings at the TBTF bank, then studying PMs knowing my grandpa was invested in them, and then silver doctors, then eventually onto ZH!

If I were an employer I'd be looking for potential employees who have a mind/individual spirit, and therefore college grads would be a red flag, as most don't think for themselves. And even those who are 'successful' in more and more cases it's because they go to the power, which is government. This is not the innovativeness and ingenuity that, in the fertile fields of laissez faire, led to ind'l revolutions and prosperity in this country. Now it is how to game things and use the fiat currency system and financialize everything. That's what most 'finance' is nowadays: usury. 

I myself as a junior am doing, for credits, instead of classes an internship at a prop trading firm in Chicago and probably see myself doing a 'go Galt' type thing like that as opposed to working at a TBTF institution as an 'analyst' useful idiot. At least as a trader you stay on top of things and there is no counterparty risk in the sense that you're independent. Ultimately I want to add value to peoples' lives and be productive, and trading profits (with always a good portion set aside as phyz PMs on dips like tonight) could raise the capital needed for future investments.

I see how we've gone over the real cliff already, and while things stay irrational for a lot longer than many would have you believe, I'm thankful that I know how this will end. In the meantime, gotta do something I can live with. Trading commodities and VIX stuff and stocks that say actually add value/aren't corrupt like GE and FB would be something perhaps. 

Sat, 01/05/2013 - 11:47 | 3125144 Absinthe Minded
Absinthe Minded's picture

" Trading commodities and VIX stuff and stocks that say actually add value/aren't corrupt like GE and FB would be something perhaps."

Who says commodities and VIX aren't corrupt? Good luck with that. The market can stay irrational as long as BB can print. Keep stackin' PM's, if you can make a living daytrading, good for you. At least you'll have all the ZH'ers to absorb a wealth of knowledge from. Pay close attention to the posts provided by Nanex, it may make you change your mind.

Thu, 01/03/2013 - 21:57 | 3120816 Yes_Questions
Yes_Questions's picture

 

 

You hit the nail on the head with solving problems. Its not apparently taught in school either.  

 

Thu, 01/03/2013 - 22:19 | 3120867 tickhound
tickhound's picture

Good thing, no profit in it.  Things like that could crash this economy.

Thu, 01/03/2013 - 23:55 | 3121079 Vendetta
Vendetta's picture

Teaching and practicing ethics and avoidance of conflicts-of-interest would also collapse the economy.

Thu, 01/03/2013 - 18:46 | 3120267 Radical Marijuana
Radical Marijuana's picture

Ah yes, the paradoxes of "education" piling up at an exponential rate, towards some breaking point, like everything else ... while there is nothing anyone can do about it, except maybe play WITHIN THE GAME, to make more of the fundamentally INSANE MONEY!

The paradoxes of "education" are particularly acute, and poignant, since there the gap between the ideals and the reality is greater there than anywhere else, and also picking up speed, in its own abstract realm, more than anywhere else. The reasons are the same as everywhere else, just more so. Our entire civilization is based on organized lies, operating organized robberies. Education is the way that we reproduce that system. However, precisely because the system is based on the biggest bullies' bullshit social stories being triumphant, the "education" becomes more and more over-the-top, and abstracted, professional lies and immaculate hypocrisy.

I wonder about the role of the informal education regarding those realities. I tend to think that the curriculum is a cover for the extracurricular activity. The personal relationships between the student and teacher are most important, but those are also the most distorted and distressed under our current system. I am not aware of any public classes, at accredited educational systems, where social reality is remotely close to being present, as something taught openly. Somehow, there must be a covert education, which reaches a few, about more realistic aspects of what is actually happening?

Anyway, the same old basic trends have flowered in our education system, the same as in every other aspect of our current civilization. The history that made War King then morphed to make Fraud King. The Fraud Kings control the real world, through their legalized frauds, backed by legalized violence. The fantastic amounts of money that they made from doing that were channelled back into funding the educational and research activities sufficiently to be able to capture control over those. Thus, our education system is just another racket run by the Fraud Kings, to advance their agenda. As always, their agenda appears to be unstoppable, except for its own final failure from too much success.

There would have to wild and radical paradigm shifts in human sciences, to make education become less insane a system than it is to today. Furthermore, that would have to embrace the paradoxes inherent in human sciences, in order for that kind of education about social reality able to operate. However, obviously, for now, we are stuck inside the runaway social insanities of the Fraud Kings controlling our "education" systems, the same as they do almost everything else, and we are stuck inside of those insanities, which means that the only practical things we can do is try to take personal advantage from predicting the tragic trajectory of those social insanities.

Too bad, so sad, that there is nothing else better which appears possible, since any and all "success" inside of an insane system is still just more of that, still headed towards the psychotic breakdowns, which are being driven by the whole civilization being controlled by the Fraud Kings, who therefore continue to be able to control the overall "education" system to primarily brainwash people to believe in bullshit, which is actually an extremely bad thing for them to do in the longer term. However, since the Fraud Kings' systems overwhelmingly already EXIST, everyone is being forced to adapt to live inside of their frauds. The younger you are, the more you are being lied to, cheated, and robbed by the political system that you were born within.

Welcome to your "educational" institution. It is going to defraud you blind. However, if you open one eye, just a bit, you may find a way to take personal advantage of that overall runaway fraudulent system, for a while ... Of course, the interesting question these days is just how long will the triumphant Fraud Kings' systems be able to continue to function. In the past, one could take advantage of understanding and exploiting that system for most of one's life, and possibly become successful while doing that. HOWEVER, the exponential runaway triumph of frauds controlling everything, from the money system, to the educational system, means that the overall social realities automatically become more insane, and more dysfunctional. Therefore, more and more, young people are looking at the Great Bubble of Huge Lies popping within their life time, and perhaps sooner than later?

Thu, 01/03/2013 - 19:24 | 3120390 BigDuke6
BigDuke6's picture

Get a job , hippy!

Only joking , i like your verbosity.. but seriously if you like 'Radical' M you must come to visit me in Oz.  

Truly the worlds finest IMHO.

 

Thu, 01/03/2013 - 18:25 | 3120226 Joebloinvestor
Joebloinvestor's picture

The road to DOOM is paved with bailouts and TBTF.

Expect a political party to play football with student debt next.

I would like to see all encompassing BK laws and a limit on how many times or how often.

Bring back shop classes for a start.

Thu, 01/03/2013 - 18:36 | 3120253 Snakeeyes
Snakeeyes's picture

Reggie:

1. You can't discharge student debt in bankruptcy. Unless Obama and the Kleptocrats waive it for votes.

2. At least you can buy a foreclosed home at a discount. I don't want to buy troubled student loans. Sounds like the Yakuza.

http://confoundedinterest.wordpress.com/2013/01/03/happy-new-year-mortga...

Thu, 01/03/2013 - 18:21 | 3120217 SmittyinLA
SmittyinLA's picture

I bet default rates vary depending upon degree focus

Thu, 01/03/2013 - 18:13 | 3120200 Hayek FA
Hayek FA's picture

Maobama will give me a job, I voted for him. My Arts History degree is useful it cost me 50K.

Thu, 01/03/2013 - 20:23 | 3120536 silverserfer
silverserfer's picture

well we get people who can create all those crazy graphics at the begining of sportcenter and that goddam FOX NFL robot

Thu, 01/03/2013 - 17:54 | 3120136 hawk nation
hawk nation's picture

I do believe a paradym shift will occur in education that will most likely be institutions that have small physical locations and all classes are done through the internet

Hopefully the entrepreneurs that start the schools only have successful business people teach classes on how to apply real business principals

Fuck these academics that have never worked in the private sector with no business experience

The education will cost pennies on the dollar and will be a great way to tap the intelligence of retiring people who remember what its like to compete in a true free market system

Problem is americans may have to move to countries that embrace free market capitalism

Thu, 01/03/2013 - 20:24 | 3120542 laboratorymike
laboratorymike's picture

The alternative system already exists: they are called MakerSpaces and HackerSpaces. The Speaces are currently just groups of guys who are throwing what money they have together to buy shop space and equipment, and do their own machining, etc. Do some Googling and see if you can find one near you. I am seriously considering it as a post high school education option for my kids.

 

    Also, regarding school, I am finishing up a PhD (fortunately I have a fellowship with salary+tuition!), and what angers me the most are the student fees. My wife and I each pay about $130 a month to subsidize $10,000 a pop free food parties for undergrads, $3,000 a pop parties for the LGBT club (but nothing for the ideologically non-favored), a $60,000 "leadership conference" held each year which only discusses student group leadership, etc. etc. We also had a new fee applied to raise funds for a fourth gym facility on camups, which among other things includes a 20 person hot tub and 15 foot big screen TV over the hot tub and pool.

    Our school is a national leader for student debt, and the response by the university so far has been to make it OK for students to use student loans to buy books, and to try to shame the state into paying future tution increases. The university has not changed its policy to try and push students into double majors and major changes, as these tend to get students onto lucrative 6-year tracks at the school.

 

We are totally in a bubble.

Thu, 01/03/2013 - 23:07 | 3120999 hawk nation
hawk nation's picture

This education paradyme shift is like home schooling without all the unnecessary requirements.

 

i will look up what you suggest since this could be an opportunity to invest in startup companies/education institutions with a potential payback like the dot com startups

Most universities make all their money from the endowment funds and have no incentive to get efficient

Fri, 01/04/2013 - 21:12 | 3124348 laboratorymike
laboratorymike's picture

Hacker/MakerSpaces tend to be incredibly entrepreneurial. The hot thing coming out of the Spaces right now are 3D printers, and a number of Maker shops are serving as prototyping companies. In addition, Spaces are serving as great opportunities for teaching machining, design, CAD, circuits, programming, etc. And what's awesome is that these guys will have a protfolio of actual projects instead of just a diploma.

Thu, 01/03/2013 - 17:57 | 3120142 hawk nation
hawk nation's picture

Lastly obama is liable to forgive student loan debt along with underwater housing debt to prevent civil unrest unless he really wants it to impose martial law

Thu, 01/03/2013 - 17:23 | 3120042 kaiserhoff
kaiserhoff's picture

Try this, Reggie.

In theory, student loan debt is not dischargeable in bankruptcy.  In fact, states vary, and I know of a few cases where there has been relief.  Judges have some discretion, but you can't know what will happen until the end of the process.  Not much fun, huh?

Why not ignore your income tax, SS too if you are self-employed.., max out your credit cards, pay off your student loans and then file for bankruptcy?  If the gubbermint offers you a shit sandwich, prepare for them a shit omelet.

Thu, 01/03/2013 - 17:30 | 3120072 Dingleberry
Dingleberry's picture

four letters:

J-A-I-L

Don't fuck with the IRS. Even Capone learned that.

Thu, 01/03/2013 - 17:46 | 3120118 kaiserhoff
kaiserhoff's picture

OK.  What specific law does that break?  Seems to me the advice any competent attorney would give a client.

Government thugs are not the measure of all things, although I will admit, that is the trend.

Thu, 01/03/2013 - 19:07 | 3120342 Christophe2
Christophe2's picture

I think they would get you with the law that makes illegal actions whose chief purpose is to 'defraud the IRS'.  I don't know the exact statute(s), but I know the many stories where 'tax evaders' using loopholes were slammed with the rule that basically states that you can't even just transfer assets around if the sole purpose is the tax break/'evasion' - you have to have some expectation of possible financial or business benefit from the transactions.

As well, you are talking of borrowing money with the intent to not pay it back, that's fraud (I think), and encouraging people to commit fraud is probably a crime too.  In any case, they own and populate the courts and the legislators, so I would say that your approach would probably land you in big trouble.

Still, although I like the idea about borrowing cash from predatory banks to pay back your student loans (to then go bankrupt), I think that few private lenders would lend you tens of thousands of $ in cash, so in practice many people would probably only be able to go bankrupt on a fraction of their student debt (only to then risk being punished by the system for trying to evade some of its levies).

In general though, the idea of going bankrupt should be celebrated IMO, but only if you plan on never borrowing again: it basically means that you woke up about all the lies regarding our insanely abusive banking system and you cut your loses.  However, they dramatically changed the rules of bankruptcy not so long ago, all in the favor of the lenders of course, so peeps should do their research carefully to make sure they actually benefit.

Perhaps some safer ways to starve the beast:

- don't watch TV, don't be a Pavlovian consumer, learn to live a simpler, better life that is CHEAP and real

- get out of all debt (through bankruptcy if it helps), actually put some money aside (as physical gold or silver, NOT in those bogus 'retirement funds')

- if you can, work less to make less $ or quit your crappy job: starve the IRS beast by making less $ and yet having a better life thanks to the fact that you aren't a stressed-out, superficial serial-consumer anymore :)

Thu, 01/03/2013 - 22:05 | 3120838 Fish Gone Bad
Fish Gone Bad's picture

Living simply is a great plan that I wholeheartedly endorse.  Saved by Zero.

Thu, 01/03/2013 - 19:15 | 3120362 BlueCheeseBandit
BlueCheeseBandit's picture

Maybe unemployed law grads with lots of time on their hands will ask the courts two simple questions:

1) Where did the US gov find the constitutional authority to make loans?

2) If the US gov is causing these economics problems through bad policy and the federal reserve, do students have an obligation to repay? Usually parties to a contract can't claim breach if they prevent the counterparty from fulfilling his obligations

Thu, 01/03/2013 - 18:33 | 3120224 CH1
CH1's picture

What specific law does that break?

You know the answer to that Kaiser: Law don't matter. If they did, Corzine would be in prison.

The state wants your money and they employ armed men. Give it or else.

That's the way things really work. All other explanations are fairy tales.

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