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The Next Subprime Crisis Is Here: Over $120 Billion In Federal Student Loans In Default

Tyler Durden's picture


Whereas earlier today we presented one of the most exhaustive presentations on the state of the student debt bubble, one question that has always evaded greater scrutiny has been the very critical default rate for student borrowers: a number which few if any lenders and colleges openly disclose for fears the general public would comprehend not only the true extent of the student loan bubble, but that it has now burst. This is a question that we specifically posed a month ago when we asked "As HELOC delinquency rates hit a record, are student loans next?" Ironically in that same earlier post we showed a chart of default rates for federal loan borrowers that while rising was still not too troubling: as it turns out the reason why its was low is it was made using fudged data that drastically misrepresented the seriousness of the situation, dramatically undercutting the amount of bad debt in the system.

Luckily, this is a question that has now been answered, courtesy of the Department of Education, which today for the first time ever released official three-year, or much more thorough than the heretofore standard two-year benchmark, federal student loan cohort default rates. The number, for all colleges, stood at a stunning 13.4% for the 2009 cohort. The number is stunning because it is nearly 50% greater than the old benchmark, which tracked a two year default cohort, and which was a "mere" 8.8% for the 2009 year. Broken down by type of education, and using the new improved, and much more realistic benchmark, for-profit institutions had the highest average three-year default rates at 22.7 percent, with public institutions following at 11 percent and private non-profit institutions at 7.5 percent. In other words, more than one in five federal student loans used to fund private for-profit education, is now in default and will likely never be repaid!

And while it is impossible using historical data to extrapolate with precision what the current consolidated federal student loan default rate is, we do know that there is now $914 billion in federal student loans (which also was mysteriously revised over 50% higher by the Fed just a month ago). Using simple inference, all else equal (and all else has certainly deteriorated), there is now at least $122 billion in federal student loan defaults. And surging every day.

Ladies and gentlemen: meet the new subprime.

Another that quietly reported today on the change in the Department of Education's default tracking methodology was Bloomberg in "Student-Loan Default Rates Soar as Federal Scrutiny Grows." Needless to say, it was not impressed, because the new data indicated that there had been a concerted push by all sides to misrepresent the severity of the student debt problem, by over 50%. The "why" is quite simple:

The Education Department has revamped the way it reports student-loan defaults, which the government said had reached the highest level in 14 years. Previously, the agency reported the rate only for the first two years payments are required. Congress demanded a more comprehensive measure because of concern that colleges counsel students to defer payments to make default rates appear low.


“Default rates are the tip of the iceberg of borrower distress,” said Pauline Abernathy, vice president of The Institute for College Access & Success, a nonprofit based in Oakland, California.


On the stump, President Obama has touted an executive order that eases the process for applying for a loan program that lets students make lower payments tied to their income -- easing their burden and making it less likely they will default.


Under the new three-year measure, colleges with default rates of 30 percent or more for three consecutive years risk losing eligibility for federal financial aid. Schools can also be barred from the program if the rate balloons to 40 percent in a single year. The sanctions don’t take effect until results are released in 2014.

There it is again: a mega-government which gives amply with one hand, and yet with the other skews the incentives in the system to represent reality as far better than it truly is. One way to underwhelm reality and to soothe the blow of the true extent of the popped student loan bubble was using a shorter data cohort.

Some for-profit colleges encourage students to defer
payments in their early years, in an effort to keep down default rates that could jeopardize their federal funding, according to a report by the Senate Committee on Health, Education, Labor and Pensions released in July.


The report accused for-profits of using the tactic to manipulate their default rates. It singled out the role of SLM Corp. (SLM), the largest U.S. student-loan company commonly known as Sallie Mae. A subsidiary, General Revenue Corp. counsels for- profit colleges on keeping down default rates. University of Phoenix, owned by Apollo Group Inc. (APOL), is a customer, according to the Congressional report

Whether or not the reason for the government to demand more accurate data was to scapegoat the private sector yet again, what it did instead if expose just how deep the student loan hole already is. Because now that we know the revised default data, we can put it together with the recently revised as of a month ago revised total student loan notional number. Recall from the Fed:

The revisions to the data are fairly substantial: as of our August report, 2011Q2 student loan balances were reported at $550 billion. We now estimate that student loans outstanding in that quarter (2011Q2) amounted to $845 billion, $290 billion or 53.7% higher than we reported earlier. These previously excluded loans were also missing from the total debt outstanding; as a result, our estimate of total debt outstanding in 2011Q2 is also revised upward by $290 billion (2.5%).

This is what student debt looked like a month ago when we first reported the data:

One can see why everyone in the Federal administration has been so reticent about disclosing the true state of the Federally-funded student loan bubble. Because if one simply assumes the rising default rate has kept constant across all recent cohorts since the updated 2009 number, it would mean broadly speaking, that of the $914 billion in Federal Student Loans at least 13.4% will end up in default. Over $120 billion.

Of course all else is never equal: Federally funded student loans are now increasing at a rate of over $60 billion per quarter. This means that in just about 18 months, the total size of the Federal student loan market will hit $1.3 trillion. Why is that number important? Because that is how big the subprime market was at its peak in late 2007, when everything went to hell and the last credit bubble popped. From Responsible Lending:

As can be seen on the table above, 20% of all subprime mortgages was then expected to default (the ultimate number ended up being far higher). Note that as mentioned above, already over 22% of for-profit student loans are in default.

In other words, the Federal student loan bubble has not only popped, but has all the carbon copy makings of the next subprime crisis. Only when it pops it won't be New Century and Countrywide Financial on the hook: it will be all of America's taxpayers. Remember: these are Federal loans.

And the biggest problem: unlike housing where there is always at least some recovery of collateral, as the house remains, with student debt there is no recoverable asset as the asset is a human being. Granted said human effectively becomes a debt slave courtesy of the non-discharge nature of the student loan, which can not be wiped out even with a personal bankruptcy, but assuming the taxpayer can recover any money using discounted garnished wage flows of what are effectively perpetual(ly discouraged) debt slaves of the system, is simply idiotic.

We give Bernanke at most 2 years before everyone is aware of the true extent of not only the student debt bubble, but that it has already popped, at which point student loans will be the next "asset" to be monetized by the Federal Reserve.


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Fri, 09/28/2012 - 21:28 | 2840711 nmewn
nmewn's picture

Yes, you owe your labor to the company store.

Change...its not just for breakfast or individually positive anymore.


Fri, 09/28/2012 - 21:42 | 2840747 kaiserhoff
kaiserhoff's picture

Brother, can you spare a (pre-1962) dime????

Fri, 09/28/2012 - 21:46 | 2840764 nmewn
nmewn's picture

Plus a 800k of them...and Change ;-)

Fri, 09/28/2012 - 22:44 | 2840911 A Nanny Moose
A Nanny Moose's picture

What's wrong with '63 and '64?

Fri, 09/28/2012 - 21:18 | 2840676 Mr.Bigfoot
Mr.Bigfoot's picture

Is there a triple levered inverse ETF for this? Anyone?

Fri, 09/28/2012 - 21:34 | 2840725 Doomer
Doomer's picture


Fri, 09/28/2012 - 21:18 | 2840679 dick cheneys ghost
dick cheneys ghost's picture

Time to go LONG the underground economy.............its where all the action is, because if wall st and the whores in wash dc dont play by the rules, why should anyone else?


fuck em i say, cause this is true, if you havent tried life in the underground economy, well you are missing out on the best that life has to offer and quite frankly, we are all going to end up there anyway, once this whole shithole implodes.............might as well get a head start

Fri, 09/28/2012 - 21:56 | 2840797 cynicalskeptic
cynicalskeptic's picture

Government may not be good at collecting taxes from corporations and billionaire- drug dealers can launder hundreds of millions with no problems -   but they go after flea market sellers and damn near every other 'little guy'...  it's getting harder and harder to run under the gov's radar....  

We're seeing a massive 'redistribution' of wealth from the general population to government - and from government to the wealthy....    forget the propaganda about 'welfare' and food stamps - the poor pay a disproportionate share of their income in sales taxes and other gov taxes and fees     look at the trillions going to banks and Wall Sgtreet - the massive government spending via no-bid contracts and directed spending.... 

Fri, 09/28/2012 - 21:19 | 2840680 holdbuysell
holdbuysell's picture

Krugman's gravy train in academia is nearing its end.

Fri, 09/28/2012 - 22:09 | 2840840 nmewn
nmewn's picture

And guess who has the alley covered ;-)

Sat, 09/29/2012 - 01:51 | 2841151 matrix2012
matrix2012's picture

@ BigDuke6 thx for the yt vid

what did i sense...

the same countrymen were seen fighting each other intensely... while the diabolical puppet masters watching comfortably in preying smile

i think the folks should prepare better if they go for the next demo...otherwise they're just the easy meat for the fierce batons.

Fri, 09/28/2012 - 21:21 | 2840683 SILVERGEDDON

120 billion. A fart in a windstorm.

Every President through modern history has spent money like their hair was on fire. No exceptions. And, Congress approved an endless litany of unbalanced deficit spending budgets year after year. They didn't mind creating slavery for the tax payer, and printing free money compliments of the Fed for their banker / Wall Street buddies to bail them out of the mess created by the miracles of deregulation. lobbying, and corruption. All accomplished regardless of which party or President was in charge. They are all cut from the same block of cheese, and they are all culpable.

 I just hope we survive the end result of having criminals running the country for decades. Put your money in something tangible, because the dollar is going to continue to tank, resulting in way more inflation. And, banks may not survive the firestorm of margin lending, credit default swaps, and derivatives created that exceed 250 quadrillion dollars in total  - more money than the gross domestic product of the entire planet for decades. Then, for all you number crunchers out there, some sobering statistics below.  

The Federal Reserve is neither Federal nor a "Reserve". This private bank run by the "Bank of England" has been stripping the US of its assets since the days of Andrew Jackson.  If the $16,000,000,000,000.00 given away secretly, since 2007, to the member banks isn't reason enough to overhaul our entire government financial system then our country is doomed to financial failure. You won't read this in the mainstream media....but it may emerge in the coming elections. Read about this first ever audit of the Fed and understand why we are in such trouble. 

Tuesday, September 27, 2011 First Ever GAO Audit Of The Federal Reserve (You can click on the site and read the report).

The first ever GAO audit of the Federal Reserve was carried out in the past few months due to the Ron Paul, Alan Grayson Amendment to the Dodd-Frank bill, which passed last year. Jim DeMint, a Republican Senator, and Bernie Sanders, an independent Senator, led the charge for a Federal Reserve audit in the Senate, but watered down the original language of the house bill (HR1207), so that a complete audit would not be carried out. Ben Bernanke, Alan Greenspan, and various other bankers vehemently opposed the audit and lied to Congress about the effects an audit would have on markets. Nevertheless, the results of the first audit in the Federal Reserve nearly 100 year history were posted on Senator Sanderâs webpage earlier this morning.   (Summarized below) What was revealed in the audit was startling:

$16,000,000,000,000.00 (TRILLION) had been secretly given out to US banks and corporations and foreign banks everywhere from France to Scotland. From the period between December 2007 and June 2010, the Federal Reserve had secretly bailed out many of the worldâs banks, corporations, and governments. The Federal Reserve likes to refer to these secret bailouts as an all-inclusive loan program, but virtually none of the money has been returned and it was loaned out at 0% interest. Why the Federal Reserve had never been public about this or even informed the United States Congress about the $16 trillion dollar bailout is obvious the American public would have been outraged to find out that the Federal Reserve bailed out foreign banks while Americans were struggling to find jobs. To place $16 trillion into perspective, remember that GDP of the United States is only $14.12 trillion. The entire national debt of the United States government spanning its 200+ year history is only $14.5 trillion.

The budget that is being debated so heavily in Congress and the Senate is only $3.5 trillion. Take all of the outrage and debate over the $1.5 trillion deficit into consideration, and swallow this Red pill: There was no debate about whether $16,000,000,000,000 would be given to failing banks and failing corporations around the world. In late 2008, the TARP Bailout bill was passed and loans of $800 billion were given to failing banks and companies. That was a blatant lie considering the fact that Goldman Sachs alone received 814 billion dollars. As is turns out, the Federal Reserve donated $2.5 trillion to Citigroup, while Morgan Stanley received $2.04 trillion. The Royal Bank of Scotland and Deutsche Bank, a German bank, split about a trillion and numerous other banks received hefty chunks of the $16 trillion. ****  

When you have conservative Republican stalwarts like Jim DeMint(R-SC) and Ron Paul(R-TX) as well as self-identified Democratic socialists like Bernie Sanders all fighting against the Federal Reserve, you know that it is no longer an issue of Right versus Left. When you have every single member of the Republican Party in Congress and progressive Congressmen like Dennis Kucinich sponsoring a bill to audit the Federal Reserve, you realize that the Federal Reserve is an entity onto itself, which has no oversight and no accountability.  

Americans should be swelled with anger and outrage at the abysmal state of affairs when an unelected group of bankers can create money out of thin air and give it out to megabanks and super-corporations like Halloween candy.  

The list of institutions which received the most money from the Federal Reserve can be found on page 131 of the GAO Audit and are as follows:

Citigroup: $2.5 trillion($2,500,000,000,000) Morgan Stanley: $2.04 trillion ($2,040,000,000,000) Merrill Lynch: $1.949 trillion ($1,949,000,000,000) Bank of America: $1.344 trillion ($1,344,000,000,000) Barclays PLC (United Kingdom): $868 billion* ($868,000,000,000) Bear Sterns: $853 billion ($853,000,000,000) Goldman Sachs: $814 billion ($814,000,000,000) Royal Bank of Scotland (UK): $541 billion ($541,000,000,000) JP Morgan Chase: $391 billion ($391,000,000,000) Deutsche Bank (Germany): $354 billion ($354,000,000,000) UBS (Switzerland): $287 billion ($287,000,000,000) Credit Suisse (Switzerland): $262 billion ($262,000,000,000) Lehman Brothers: $183 billion ($183,000,000,000) Bank of Scotland (United Kingdom): $181 billion ($181,000,000,000) BNP Paribas (France): $175 billion ($175,000,000,000)  



Fri, 09/28/2012 - 21:49 | 2840773 Dr. Engali
Dr. Engali's picture

It may be a fart in the wind but somewhere in all these farts that one dollar in missed payments will push us over the edge.

Sat, 09/29/2012 - 10:29 | 2841419 centerline
centerline's picture

Exactly Doc.  It is all about the flow.  The stock (level) is just measure of the damage that will be incurred when the flow is impaired.

Shit, it might as well be $160T or $1600T if the rate is 0% and the cash doesn't slam velocity.  But, at some point it will get dragged into the light.  Rest assured it won't be idle forever.  It will eventually find it's way to deposit bases.  Chance are this will happen when the trigger point in the flow is reached.  The whole circular firing squad of counterparty exposure will light up overnight.

So, the more they pump the system, the more likely we see a hyper - flationary outcome.

Fri, 09/28/2012 - 23:07 | 2840949 BigDuke6
BigDuke6's picture


The purpose of almost all saving is retirement.

Nobody has had to worry too much about retirement over the past 30 years because governments were rich, splashing borrowed money about, and the markets were delivering handsome returns, both on everyone’s main asset – their house – and whatever they might have stashed in a pension fund.

As a result, savings rates collapsed and consumption grew every year, supporting global output and employment.

You work for 40 or 50 years, raise a family or not, then run out of steam and have to stop working and then you have to live on a combination what you’ve managed to save and what the state or your employer will give you. And it used to be that you died pretty fast after that so it wasn’t too expensive. But now that’s changed.

All good, except what are we going to be living on when we’re 90? 

The 20th century was a golden age for old age pensions. They started in 1889 in Germany, although it kicked in at age 70, when average life expectancy then was 45, so it wasn’t an expensive scheme.


Everything went along fine until the 1980s.People wanted free health systems and free education, and at the same time, as a result of the Thatcher/Reagan supply-side, neoliberal economic revolution, taxes were cut. The result of that was a steady, 30-year rise in debt.

And we, the people, will pay for the lot.

Your rogues gallery up there wont.

Sat, 09/29/2012 - 06:09 | 2841246 Urban Redneck
Urban Redneck's picture

Andrew Jackson & Calvin Coolidge would beg to differ-

"Every President through modern history has spent money like their hair was on fire. No exceptions."

You could slice "modern" history at the internal combustion engine (or the establishment of the Federal Reserve) to exclude Jackson, but to exclude Coolidge you would really have to narrow the focus to the contemporary idiocrats.

Sat, 09/29/2012 - 13:45 | 2841730 WillyGroper
WillyGroper's picture

Systematic rape by instrumentation with a mace and military precision.

Fri, 09/28/2012 - 21:26 | 2840702 benbushiii
benbushiii's picture

There is another side to this story.  The debts incurred by the Student Loans perpetuate a bloated / inflated education system.  Over paid professors with tenure that cannot be fired.  Inflated retirement plans paid for on the debt serf students who have bought into the concept that they must have the higher education in order to reach their dreams.  Another way of creating a spread similar to mortgages to prey on the innocent.  Education costs keep rising as real estate did since levered $s are chasing a myth.  The reason they are non-dischargable in BK is there is no underlying asset as in a real estate loan, just a pound of flesh.

Fri, 09/28/2012 - 21:28 | 2840713 Tyler Durden
Tyler Durden's picture

All that was presented in the earlier article. Now that we have the actual cumulative loss data (severity is irrelevant as losses will be ~100% essentially always), the true picture of the student bubble is complete.

Fri, 09/28/2012 - 21:34 | 2840728 fonzannoon
fonzannoon's picture

At what point during this bubble popping process do the banks put the gun to their heads and scream "I'm gonna do it!"?

Fri, 09/28/2012 - 22:02 | 2840824 The Shootist
The Shootist's picture

Don't tell that to my communist H.R. professor at state. He's convinced that big goverment is the only thing saving the masses from greedy millionaires. He's cushy, and will get violent if you tell him his occupation is worthless.

Fri, 09/28/2012 - 22:47 | 2840914 A Nanny Moose
A Nanny Moose's picture

It's been a while since I've walked the overpriced halls of the degree factories, but....H.R.?

Fri, 09/28/2012 - 23:49 | 2841016 ebworthen
ebworthen's picture

I would guess Human Resources, you know, giving people as little money and benefits as possible while increasing corporate profits.

Sat, 09/29/2012 - 13:33 | 2841705 _ConanTheLibert...
_ConanTheLibertarian_'s picture


Fri, 09/28/2012 - 22:23 | 2840877 Sabibaby
Sabibaby's picture

Remeber Henry Paulson and his "Martial Law!" "Tanks on America's streets" comments to CONgress?

Fri, 09/28/2012 - 22:25 | 2840878 LMAOLORI
Fri, 09/28/2012 - 22:41 | 2840903 fonzannoon
fonzannoon's picture

i read that. that guy got shredded in the comments section by a bunch of dipshits

Sat, 09/29/2012 - 03:37 | 2841204 matrix2012
matrix2012's picture

The article "JPMorgan Loss Could Be Next 'Shock' Event" is indeed interesting to read, but it seems that the author, ChartProphet, stang many sh!tholes there by exposing the JPM deep holes that he got so many negative remarks there :-)>

Just see his opening salvo! LoL

"The JP Morgan (JPM) trading blunder could result in a $100 billion loss, a contagion of its massive portfolio, and even the wipeout of its entire asset base. Even worse, these extremely risky and potentially-illegal actions on behalf of the CIO office and the "London Whale" could be the unexpected "shock" that breaks the market, derails the Fed's huge monetary stimulus, and sends us back into a global recession."

What a man ChartProphet is :D


Fri, 09/28/2012 - 21:51 | 2840781 kaiserhoff
kaiserhoff's picture

 (severity is irrelevant as losses will be ~100% essentially always), the true picture of the student bubble is complete.


What part of that is English???????????????????

Fri, 09/28/2012 - 22:00 | 2840804 Dr. Engali
Dr. Engali's picture

What part of what is English and why so many question marks when one will do? Don't bust somebody's chops about grammar when yours insn't so good yourself.

Fri, 09/28/2012 - 22:02 | 2840819 kaiserhoff
kaiserhoff's picture

I was searching for meaning among the agit-prop.

Do you have a clue what she is saying?

Fri, 09/28/2012 - 22:14 | 2840853 Betting the Dar...
Betting the Dark Side's picture

Take a credit class before you open your trap on a credit topic, mo ron.


Fri, 09/28/2012 - 22:20 | 2840867 kaiserhoff
kaiserhoff's picture

Pardon me for breathing.  I didn't know this was dyke censorship night on ZH.

Good luck with that.


Sat, 09/29/2012 - 02:10 | 2840997 Dr. Engali
Dr. Engali's picture

You're not getting hammered because of your question. You're getting hammered because of your approach. If you had asked a legitimate question , looking for understanding, then you would have gotten help. Instead you attacked the statement , that's why you are getting hammered.

Sat, 09/29/2012 - 00:54 | 2841108 nbsharma
nbsharma's picture

Kaiserhoff: I say this rarely, but you are a moron. Look at the series of analysis that ZH has put together you idiot.

Sat, 09/29/2012 - 10:36 | 2841429 kaiserhoff
kaiserhoff's picture

OK, I see where she is coming from.  Clearly, all the money spent on ilene's education was wasted.

Sat, 09/29/2012 - 13:35 | 2841712 _ConanTheLibert...
_ConanTheLibertarian_'s picture

Even I understood in one go and I'm slow at it...

Sat, 09/29/2012 - 09:24 | 2841353 Bam_Man
Bam_Man's picture

"Better to remain silent and be thought a fool than to open one's mouth and remove all doubt."

Sat, 09/29/2012 - 00:52 | 2841101 LarryDavis
LarryDavis's picture

Let's not forget the nexus between hedge funds (dart throwers with compliance officers and penchants for call girls) and endowments (not dick size). Not sure how much money endowments are in the scheme of things but I can tell you some of those Ivy schools have a ton of fucking money. Colleges (and even some elite high schools) are basically bag men for these fucking hedge funds and no one really talks about how dirty and ridiculous it is. Schools love to hide behind this veil of performic an important civic duty/not for profit (I went to some ostensibly good schools and didn't learn a fucking thing). Forgive my simpleton's reasoning, but if you aren't "for profit" then why are you gambling in financial markets? Can I start a charity teaching girls to deepthroat, raise some money, enter blackjack tourneys then pay myself (and the faculty) with those winnings? If I come up short can I enlist 18 year olds with no credit to take out 100-200k to pay me for some instruction? Is it a wise idea to give 18 year olds (whom society does not even trust enough to purchase alcohol legally-don't get me started on how fucking stupid our country's drug and alcohol polcies are)30-40k a clip when they haven't even received a modicum of basic personal finance skills? 

Sat, 09/29/2012 - 09:57 | 2841393 dwdollar
dwdollar's picture

I don't think this bubble is close to popping. ALL loans could be in default and it just wouldn't matter. Uncle Scam will keep giving money out until he can't anymore. This is now an example of another parasitic bubble (along with healthcare, SS, SNAP, etc.) which will grow and grow until the USD supporting it pops. The reality is this $20 billion a month has become mostly a stimulus to keep the "education" sector alive. It has little or nothing to do with real education. A backdoor QEx...

Sat, 09/29/2012 - 10:32 | 2841424 centerline
centerline's picture

I've been watching this student loan bubble space in horror for years.  Thank you for the hard work Tyler(s).

Fri, 09/28/2012 - 22:06 | 2840831 nmewn
nmewn's picture

"The reason they are non-dischargable in BK is there is no underlying asset as in a real estate loan, just a pound of flesh."

Au contraire mon a mie...laws and contracts are made to be broken. Unfortunately, for the young naive students led down this primrose path, they contracted with those who actually make the

How "inspiring" do you think its gonna be for the "aspiring" medical student (just graduated) to discharge "his debt to society" in service to the state while his former vision of suppoting "ÖbamaCare" is dashed on the rocks of O'Barry's unstated dreary reality?

See Castro...I'm sure it'll be much different this time ;-)

Fri, 09/28/2012 - 22:49 | 2840917 A Nanny Moose
A Nanny Moose's picture

A pound of brain. Assets only zombies could love.

Sat, 09/29/2012 - 07:17 | 2841278 Miss Expectations
Miss Expectations's picture

See this about Ben Bernanke's son:

Who ever imagined that Ben Bernanke would become a poster child for the student loan debt problem in America?  Recently Bernanke told Congress that his son will graduate from medical school with about $400,000 of student loan debt.

Sat, 09/29/2012 - 07:52 | 2841294 Redhotfill
Redhotfill's picture

Or as some would say about a year's salary for most US doctors.  Hardly a stretch to repay.  If he goes into private practice he will make about $400-500 hr.  Unlike most countries you need a Dr.'s PERMISSION Slip called a prescription to buy antibiotics in the US.  Usually requires an "office" visit for about $125 that lasts 10 min or less.  Dr.'s have as good a lobby as Golden Sacks does.

Sat, 09/29/2012 - 10:04 | 2841399 BidnessMan
BidnessMan's picture

Yep - why I go to Ecuador for any medical care I need. First rate doctors and facilities in Quito. Buy any drug you want except narcotics at any drug store at half US prices. If I want to buy generic Viagra, why should I need a permission slip from a doc? Last time I was there got two neck x-rays for an old football injury. $70 cash total. Visit with Orthopedic surgeon - $55 cash. He recommended an MRI. Got done same day for $180 cash. Would have been another zero at least in the US. And nothing goes into any US medical database. Short the US health care ponzi and big pharma - set for a huge fall.

Fri, 09/28/2012 - 23:12 | 2840956 disabledvet
disabledvet's picture

hence "perfect environment for bubble creation." and yes...fer sure the Tylers Durden are correct in pointing out "we have another debt bomb going off." but Universities can go bankrupt...just as hospitals can...and are doing. "the great unwind" proceeds apace. with no return to sound money bankruptcies will be considered normative going forward...although i did take note the motivation for the college vote has dropped off precipitously in this election as well. simply put incomes are stagnant...benefits for all intents and purposes are non-existent. there is no more economizing to be done. prices must FALL.

Sat, 09/29/2012 - 10:39 | 2841433 centerline
centerline's picture

I have been amazed it got this far.  Goes to show how desperate people are to hang onto the "norms" of decades past.  When that changes, it will happen fast though.

Fri, 09/28/2012 - 21:31 | 2840709 swissaustrian
swissaustrian's picture

 "We believe the effect of the troubles in the student loan sector on the broader credit market will be limited and we do not expect significant spillovers from the student loan market to the rest of the economy or to the financial system,"

Ben Bernanke, circa March 2014.

Fri, 09/28/2012 - 21:33 | 2840712 Northeaster
Northeaster's picture

I don't recall what the regulation was, but the "for-profits" made a huge push in CONgress through lobbying efforts to not become regulated in this regard.

Money talked...this is what we get, a generation of kids with questionable educations, massive debt, and no jobs and these "institutions" laughing all the way to the bank, literally. 

I don't know anyone professionally with a degree from The University of Phoenix.

Alternatively, go to a state school where Spanish teachers (Hernandez) retire with $100k-plus pensions:

Fri, 09/28/2012 - 21:29 | 2840715 Mr.Bigfoot
Mr.Bigfoot's picture

I have a brother in law who has flunked out of college twice, continued with the student loans in community college and now he's back at the same state school as a fifth year sophomore. This is certainly money well spent. I know for a fact he's much better at packing bongs and has set records on his X box video games over the last 5 years.

Fri, 09/28/2012 - 21:48 | 2840774 AUD
AUD's picture

he's much better at packing bongs and has set records on his X box video games over the last 5 years

Isn't that what university is for? For me it was more packing bongs & surfing, waves, not internet but we were just lucky I guess.

Those were the days. Quality education collateralising quality debt!

Sat, 09/29/2012 - 06:58 | 2841262 Urban Redneck
Urban Redneck's picture

I majored in beer and pussy, but the school wouldn't put on their worthless piece of paper, so they put International Business.  The paper (and the whole college experience) was absolutely worthless in terms of preparation for what one actually encounters when doing business internationally.

But now apparently you can get same piece of paper w/o demonstrating even basic proficiency in comprehension, reason or problem solving, much less the navigation of misleading balance sheets, avoiding corrupt politicians, and the lethality of crossing the path of big money.

I feel sorry for these fools who sold their souls and indentured their bodies for a piece of paper not even worth 30 pieces of silver, but at the same time, there is basically no job that I would hire them for- they lack the actual skills for a skilled postion, and they tend to have an attitude and work ethic unsuited for unskilled positions.   

Fri, 09/28/2012 - 22:46 | 2840912 ebworthen
ebworthen's picture

When the bankers are sucking big bonuses after being bailed out, and politicians getting money under the table and Cadillac health plans and pensions - seems like your brother in law has learned something - and can you blame him?

Fri, 09/28/2012 - 21:34 | 2840727 mayavision2012
mayavision2012's picture

"for-profit institutions had the highest average three-year default rates at 22.7 percent"

Please pardon my naievty here, but are our taxes actually subsidizing FOR-PROFIT PRIVATE schools?  And from that statement above, it would appear that the most defaulting of student loans is coming from wealthier kids?


Fri, 09/28/2012 - 21:56 | 2840799 jerry_theking_lawler
jerry_theking_lawler's picture

I may be wrong but these would be DeVry, Virginia College, etc.......

Fri, 09/28/2012 - 21:37 | 2840732 razorthin
razorthin's picture

"Never a borrower nor a lender be"

What a fukking pearl of wisdom.  On the surface it looks like a chicken-egg conundrum.  But look closer.  Did the first borrower say, "Gee Mr. banker man, I really really want this very expensive item which is multiples of my annual salary.  How about you invent a scheme where you take peoples' deposits and loan out 90% if that deposit as "new money" you can 'give' me, for which I'll gladly pay you interest."

Thought not.

Sat, 09/29/2012 - 07:00 | 2841265 Poor Grogman
Poor Grogman's picture

Not only that but it also advises against putting money in the bank, think about it...

Sat, 09/29/2012 - 08:06 | 2841303 razorthin
razorthin's picture

With the Fed, deposits are not needed.  It's magic.

Fri, 09/28/2012 - 21:38 | 2840735 The big unzip
The big unzip's picture

Just had some type of explosion at a refinry in oklahoma.  Ness crews are in route to the scene

Sat, 09/29/2012 - 04:56 | 2841228 Adahy
Adahy's picture

Doesn't sound like the safest place.

From newsOK:"

Between 2006 and 2010, five fires erupted at the refinery.

In May 2006, the refinery's explosions and fires forced about 150 residents to evacuate. About a week later, a fire-related acid leak spurred more evacuations.

In April 2007, the refinery was struck by lightning, causing a fire that burned for several days.

In February 2008, a furnace caught fire. In December 2010, a gas release in one of the refinery's processing units caused an explosion."

Fri, 09/28/2012 - 21:42 | 2840744 BigInJapan
BigInJapan's picture

They'll be able to work off those loans in the wars.

Fri, 09/28/2012 - 21:44 | 2840757 fonzannoon
fonzannoon's picture

bingo biginjapan. You missed a payment? Oh, thats is a solution....

Fri, 09/28/2012 - 21:43 | 2840749 mtomato2
mtomato2's picture

To me, the biggest problem this is going to create isn't the money bubble, but the graduate bubble.

Who is going to hire these poor schmucks?  The demand for goods and services isn't going to return to the "good ole days..."  at least, not soon enough to employ the next several generations of graduates.  So they all go on unemployment, goosing the deficit even higher (!) and in the meantime producing nothing and defauting on a gargantuan debt.  Each one a debt bigger than my entire mortgage. 

So instead of sitting on an 8-month (low end) supply of houses, as we are now (in the wake of the housing bubble,) we are going to be sitting on a 6-10 YEAR supply of laborforce-ready delinquents.  Who need food, shelter, clothing,...



...titty bar folding cash...

Fri, 09/28/2012 - 21:42 | 2840751 Sabibaby
Sabibaby's picture

So you're saying I should take out a student loan before they stop being provided?

I feel so stupid for missing the housing bubble and living rent free for a year or so. I really don't want to miss out on the next thing...

Fri, 09/28/2012 - 21:45 | 2840753 Earl of Chiswick
Earl of Chiswick's picture

one of the many tragedies of the housing subprime was the resulting unemployment of the hardworking trades of the housing industry


One of the many benefits of the education subprime will hopefully be  the putting out to barren pasture of the tenured asshole elites who suck off the naive students who subscribe to the higher education lie

Fri, 09/28/2012 - 21:44 | 2840755 nah
nah's picture

we could send them to FEMA camp next summer

Fri, 09/28/2012 - 21:45 | 2840759 q99x2
q99x2's picture

Now wait a minute before you go claiming the kids with the highest sex drive can't party.

The real estate bubble was created by the FED banksters so the US could buy Chinese junk and thereby make the banks TBTF and the Corporations financially larger than national economies and the politicians happily bribed. The FED went on to create the student bubble to ease the impact from the fallout of the housing bubble to give them enough time to build up the DHS (SS) military TSA and 3,500 surveillance corporations in preparation for the next time the banksters from the TBTF go into the President's office to tell him he has to impliment Marshall Law and where to sign on the dotted line to thereby take over the United States for the Queen of the No World Order. The US military can't even take over a couple of hopped up pull tops how the hell do they think they can take over the US when half of the military are prepared to go after Banksters in the first place.

I think they better find another way to get the Obamaphones out--quick.

The Federal Government would do a lot better to Arrest the FED for treason, kick the bankster out or put them into prisons and revoke the globalists citizenships. America doesn't need anything from them anymore. We can rebuild a beautiful country without the parasitic M'Fers.

Fri, 09/28/2012 - 21:47 | 2840768 sangell
sangell's picture

If Obama had a son he would be that strutting hubshi twisting and flexing his huge rubbery lips as he applied for a new student loan at the INNER CITY SCHOOL OF ADVANCED APE STUDIES.

Fri, 09/28/2012 - 21:50 | 2840776 tmosley
tmosley's picture

I wonder if they count the $0 payments from loans consolodated into income-based loans as defaults?

Probably not.  Lots of people going on disability--probably all of them qualify for that program.

Fri, 09/28/2012 - 21:55 | 2840796 Cman5000
Cman5000's picture

 Man and Woman Sells their soul to the devil. All ends in tears, these arrangements usually do...

Fri, 09/28/2012 - 21:57 | 2840802 Zadok
Zadok's picture

Isaiah 10:13,14

Who is doing the talking?

Who is he talking about?

Fri, 09/28/2012 - 21:57 | 2840805 max2205
max2205's picture

Pretty sure they will change these discharge rules

"And the biggest problem: unlike housing where there is always at least some recovery of collateral, as the house remains, with student debt there is no recoverable asset as the asset is a human being. Granted said human effectively becomes a debt slave courtesy of the non-discharge nature of the student loan, which can not be wiped out even with a personal bankruptcy, but assuming the taxpayer can recover any money using discounted garnished wage flows of what are effectively perpetual(ly discouraged) debt slaves of the system, is simply idiotic."

Fri, 09/28/2012 - 22:01 | 2840822 Zadok
Zadok's picture

Looks to me like the debt serf system is functioning spectacularly! I am not holding my breath for the masters to ease up on the pressure.

Sat, 09/29/2012 - 07:24 | 2841282 Catullus
Catullus's picture

They won't discharge anything.  When the student loan market becomes owned by the Treasury, the government will NEVER forgive the debt.  It's going to amount to a tax surcharge on these people.  Just an entire generation of people lugging around an extra monthly payment to the government.

Fri, 09/28/2012 - 22:06 | 2840808 Ineverslice
Ineverslice's picture

Aaah...fema camps...

Complete with wireless Obamanet. I get it now.

Carry on.      Edit:  +1 nah, lol

Fri, 09/28/2012 - 21:59 | 2840810 The Shootist
The Shootist's picture

It's alright, it's for the children. You see, the young sheeple must be sent to the socialist fiefdoms for their state indoctrination. Go to school, become indebted, learn pointless classes, mindlessly vote democrat.

Fri, 09/28/2012 - 21:59 | 2840812 Rattling Bones
Rattling Bones's picture

The government backs the crazy money schools charge, the schools use that money to give the teachers crazy pay and benefits to keep the teachers teaching the students that this debt we are saddling them with isn't crazy.

Fri, 09/28/2012 - 22:11 | 2840847 yellowsub
yellowsub's picture

For a moment, I thought you were referring to the teacher's union. 

Public education costs are out of control like any gov't union.

Fri, 09/28/2012 - 22:01 | 2840820 BigDeuceLittleToilet
BigDeuceLittleToilet's picture

Bullish. Got to be.

Fri, 09/28/2012 - 22:02 | 2840823 booboo
booboo's picture

Don't cry for these young debt monkeys, the government will have an offer they won't be able to refuse. Working as stasi informants won't be such a bad gig once they get used to the stench of pig shit.

Fri, 09/28/2012 - 22:11 | 2840846 Cabreado
Cabreado's picture

"...there is no recoverable asset as the asset is a human being."

And about those human beings...

I think it would be very difficult to come up with a more perfect example of how this society is cannibalising itself.

Fri, 09/28/2012 - 22:12 | 2840849 tony bonn
tony bonn's picture

there really is nothing to worry about....ben has our backs....besides,who would want a student load anyway? you can't eat it, you can't fire bullets with it, and it doesn't earn interest.....

Fri, 09/28/2012 - 22:17 | 2840850 SheepleLOVEched...
SheepleLOVEcheddarbaybiscuits's picture

all these obama ads saying how their "solution" is lowering college tuition and providing a future for bright minds makes me FUCKING SICK to my stomach! The worst decision I have made this point in my life was going to college on student loans....lesson learned.

I had to call sallie may yesterday about one of my loans:

1. the loan rep could barely speak english and had no clue as to what she was doing

2. the bitch had to nerve to try and convince me how sallie mae is ready to finance my post grad education with a loan

I fucking hung up on her

Fri, 09/28/2012 - 22:16 | 2840857 Arnold Ziffel
Arnold Ziffel's picture

Why pay back your loan (or doctor bill, or mortgage, or credit card, etc) when you can grab another iPhone?

Don't be an old Fuddy Duddy, grab the iPhone and forget the debt. Let Unlce Sam foot the bill.

This is 2012 -- the Year of the Ponzi.


(and you thought it was the Year of the Dragon...he he he)

Fri, 09/28/2012 - 22:16 | 2840858 americanspirit
americanspirit's picture

What nobody ( at least those in 'official' positions) appear to understand is that students who take out loans don't feel any obligation to repay them. Why should they - they know that the whole thing is a con.  In fact, 'fuck you' is the general opinion toward these 'obligations'. Those making the loans, and those seeking to profit from them, are from another generation and are operating on past-tense assumptions. Today's 'students' understand that they probably have zero future income earning power, and the loans they take out to go to school are simply a way to spend a few pleasant years before they join the ranks of those living in desparation in cardboard boxes under the interstate overpasses with their college diplomas displayed on the crumbling walls of their lives. Anyone who thinks that young people today are conned into believing that a college education means anything at all for their future is an idiot, and they deserve to have their 'investments' turn to ashes. (Yes Mitt, I'm talking to you and your skumbag wife, among others.)

Fri, 09/28/2012 - 22:27 | 2840868 SheepleLOVEched...
SheepleLOVEcheddarbaybiscuits's picture

youre an imbecile......I pay my loans asshole. IF you DONT have a college education or some technical skill then you are proper fucked......a college education you are just fucked, a post grad degree a little less fucked, a doctorate youre ok

Fri, 09/28/2012 - 22:50 | 2840920 ebworthen
ebworthen's picture

lol...that's a maybe...and only in a cohesive society, not a collapsing ponzi.

Sat, 09/29/2012 - 09:50 | 2841388 BidnessMan
BidnessMan's picture

Well it depends. If your degree is in Cosmetology, philosophy, sociology, women's studies, and similar BS majors, you are screwed. But you did it to yourself. In today's economy you are worthless. Shows you are stupid, and you can't fix stupid. Any resumes I get with these types of degrees go directly in the trash. If you borrowed a bunch of money for a useless degree, you are double stupid.

Why would I hire a double stupid person?

Fri, 09/28/2012 - 22:28 | 2840884 RSBriggs
RSBriggs's picture

-1 obvious liberal troll.  How much they pay you per hour to stink up the place?

Fri, 09/28/2012 - 22:52 | 2840922 ebworthen
ebworthen's picture

Politics and the false dichotomy of "liberal" and "conservative" keeps the ponzi going, capiche?

Fri, 09/28/2012 - 22:44 | 2840907 ebworthen
ebworthen's picture

You have a point.

After bailing out Wall Street, GM, AIG, Banks, etc. - it is hard to argue that students or anyone else should pay back their loans.

Sat, 09/29/2012 - 00:41 | 2841097 Oldwood
Oldwood's picture

Some people,when given a tool will build a house while others may play with it or toss it aside. lets just hope they don't smash us over the head with it the way Obama has.

Fri, 09/28/2012 - 22:22 | 2840874 lolmao500
lolmao500's picture

What about you give them 0.25% INTEREST on those loans just like the scumbags too big to fail banks?

Fri, 09/28/2012 - 22:26 | 2840882 zerotohero
zerotohero's picture

We are all part of an elaborate plan created many centuries ago - it has become so ingained in us to attend "higher" education an be a part of the "plan" in order to control us and contribute to the "plan". They want you in the "plan" so that you contribute to their (TPTB) ability to both control us and increase their power and wealth. Break the chain - dismantle the system - do not attend their institutions of control - be free - be you - be what ever you want to be and then you will have TPTB completely powerless.

Fri, 09/28/2012 - 22:32 | 2840892 Peter Pan
Peter Pan's picture

The sub prime education loans are nothing compared to the sub prime expenditure on waging wars of no benefit to the American people.

Either a war is fully funded without requiring deficit spending or else those that vote for it or benefit from it should fund it.

The government has let this edcation bubble thrive and survive so as to keep the unemployment numbers down as well as to lump the cost of people who would otherwise be unemployed on to them and their parents.

Fri, 09/28/2012 - 22:36 | 2840896 justsayin2u
justsayin2u's picture

Nothing a couple of monthe of QE cant handle.  Bernankistien loves garbage.  Bring it on boys.

Fri, 09/28/2012 - 22:36 | 2840897 sansnobel
sansnobel's picture

Isn't that what the Central bank of the USSA is for?  I thought they finally changed the definition of the Federal reserve to read "The place where all bad debts go to die"

Fri, 09/28/2012 - 22:49 | 2840905 ebworthen
ebworthen's picture

Kind of funny, if you think about it.

When do the hangings of the kleptocrats and oligarchs start?

Fri, 09/28/2012 - 22:58 | 2840934 El Hosel
El Hosel's picture

120 Billion ?.... That is "New Normal" chump change. Move along, nothing to see here.

Fri, 09/28/2012 - 23:04 | 2840944 patb
patb's picture

it's probably far worse because the system allows 5 year deferrals if you are unemployed.

My Former Sister  in Law is 49 and still has unpaid student loans, 

she's going to retire in 6 years and i expect she will lose most of her retirement salary to

loan service



Fri, 09/28/2012 - 23:05 | 2840945 disabledvet
disabledvet's picture

looks okay from this end:
i must say those numbers look paltry given the need. "tune in, turn on, drop out" is becoming the norm. in a world where everything is monetized what has value anymore? or should i say "what has value that anyone can afford"? i would argue pretty much nothing.

Fri, 09/28/2012 - 23:13 | 2840958 dow2000
dow2000's picture

Yeah but only if you've got a really dark tan.

Fri, 09/28/2012 - 23:22 | 2840969 Seasmoke
Seasmoke's picture

boy if you were born in the 80s or 90s you have been duped

Fri, 09/28/2012 - 23:21 | 2840970 Tum
Tum's picture

No worries. Just print the $120 billion. Problem solved. The Chairman would agree.

Sat, 09/29/2012 - 06:00 | 2841239 matrix2012
matrix2012's picture

Wow what a pleasant surprise!!! :-)>

Benjamin Shalom Bernanke is quite friendly and accessible,

he's using FACEBOOK to popularize his deep thoughts!!!

Now we know that at least he's trying very hard to communicate

his deep thoughts with the curious public!!! I just clicked  LIKE


btw, how's FACE going on lately? :-) 

Fri, 09/28/2012 - 23:44 | 2840977 Banksters
Banksters's picture

Fuck the banks and Fuck the govt. I paid my loans off, thanks to the Nasdaq bubble! If I knew what I know now, I wouldn't have given them shit.

Fri, 09/28/2012 - 23:30 | 2840978 Banksters
Banksters's picture

Meanwhile, the govt has spent about 4-5 trillion on endless war. Fuck them.

Fri, 09/28/2012 - 23:28 | 2840979 Glasnost
Glasnost's picture

So...where can I get the ABX for this?

Fri, 09/28/2012 - 23:41 | 2840991 FreeMktFisherMN
FreeMktFisherMN's picture

I'm a junior economics major undergrad at one of the better rated schools in the country, and I can attest to the indoctrination going on. Have had some 'prominent' Keynesian profs throughout my time here, including one big time statist macroeconomics prof who ranted on how it was those evil loan sharks who tricked people into NINJA loans and how all that is needed is more regulation and higher taxes on the rich. I reminded him (or at least brought to his attention that some people still think in terms of voluntaryism and the laissez faire environment that made America so prosperous) in an email after the class was over that it was  the government that pushed for the lack of legitimate lending standards and that it was interventionism with Fed monetising everything and artificially suppressing rates and Fannie and Freddie that allowed the bubble to blow up by literally coercing lenders to lend. All I got in return was, pretty much, 'wow, you're to the right of Mitt Romney.'  Be still my heart! I had also criticized the FDIC and how in the whole course that covered broad trends he didn't mention commodities skyrocketing, like gold and silver, in tune perfectly with his belief in the govt's CPI statistic, which of course I found out he helped change as part of the Boskin Commission and in implementing hedonics, which as far as I know means tricking people into thinking that the quality is the same when really inflation is to be gauged by the change in price of the same product, not some generic or third-party. At the very least he knows that there is at least one student he has had who, despite his socialist propaganda, is aware of things like the Rothschilds, how perverted a man Keynes was and what his ultimate goal was, and how the establishment parties both don't tell the truth and still spend into oblivion. At least he knows some students still think for themselves. This instead of the majority who just regurgitate-no matter how immoral/anti-American/anti-Constitutional-what this prof who 'has all these degrees and is TBTF and surely must be smart in planning economies' (/sarc) says to get pavlovian-style a good grade and who dream of fulfilling this system of knowing how things work in this rigged corporatist economy and how to make money off of it and perpetuate it, but are oblivious to/ can't/refuse to think critically about what has been done to capitalism, as they aspire to work in i-banking for JPM, GS, etc. It's like that quote about how men won't think about/rail against something if their jobs depend on their not knowing about it. At least that prof knows from my email that one student knows about and values the Austrian school.



In addition to the mis-allocation of capital and talent thanks to the government's un-Constitutional efforts to make college affordable, one cannot put a price on the fact that kids are being inculcated with anti-American propaganda. What is taught is statism/consolidating power/redistributing wealth, whether the people promulgating it are useful fools who, in their momentous fervor for whatever nonsensical liberal cause has come up, are oblivious to the consequences say carbon taxes lead to (totalitarianism), or in some cases they actually want this Marxist vision of equality in misery to come to fruition.






In other business classes I took, the Federal Reserve only got mentioned on the subject of TIPS and also the Fisher equation for interest 'accounting for' inflation. No criticism or skepticism about the CPI. Nothing to see here, move along. 


I am blessed not to have to take on debt, and it seems that, all the same, having a degree is better than not having one, but what I really want to do is be kind of an entrepreneur, self-employed. I want to help the middle class and others learn about the realities of inflation and recognize that it is the private Federal Reserve that enables the wreckless spending by pols who don't want to make the hard choices. I would like to do so in part by being a precious metals shop owner because I can explain, having studied the markets and particularly commodities for awhile and following them especially as I now have skin in the game with quite a bit of physical Ag and some Au, as well as USLV (risky, I know) and pretty soon some PSLV, too. Sales is tough  but I think it'd be great to explain to people these things and not be selling snake oil. I would tell them as I tell friends/family now that it is important to save, but it is important to save in real money. Count wealth in ounces. America is not TBTF. Obviously being a precious metals business owner requires a lot of capital, but that'd be a great job.


Otherwise, heck, I liked what I did this past summer, just going on craigslist each day and finding random yard work and painting jobs, and getting paid cash afterward. Got to spread the word about capitalism along the way, too, sometimes, when the person would ask my school/major, using that as a segue! I have thought about starting a bit of a more legitimate business (with business cards and everything) in hiring kids who can't find jobs and getting 'royalities' for matching able-bodied teens/young men with random jobs like I did (chainsawed tree branch that was eyesore after struck with lightning, laid sod, mowed, etc.) that pay relatively well oftentimes because they are on the spot and there is the convenience factor with people needing things done that day, etc. 







Sat, 09/29/2012 - 00:40 | 2841096 FreeMktFisherMN
FreeMktFisherMN's picture

Edit: Wow that post was kind of all over the place.  I suppose it could be condensed as follows:

I'm long PMs, and the ability to find niches/be flexible enough to work in self-employed fashion that isn't reliant on a constant, consistent counterparty.


Sat, 09/29/2012 - 02:07 | 2841161 Tegrat
Tegrat's picture

Hey congrats on all that. I am a guy that scraped by with my own funds (I paid my own tuition stocking shelves at a local grocery store). When I got out of college with a BS in CompSci I owed about $800.oo. Since then I have worked as a Software Engineer starting with public and ending in the private sector. I am now AVP at a global bank (in fixed income). I don't know of anyone in the bank  screwing people over, we just wait for "customers" to enter orders. We give em a price and they choose us or another dealer. I spend my spare time writing a strategy trading bot (not HFT) for a swing once in awhile.  (I was a section 475 mark-to-market trader  (IRS form 3115)  before I everr worked for any bank) and this is all I care about as it will break me free from the "man" as a computer guy seeing the foreigners take over. I am making 6 digits but I am not a 1% guy. I just write software for the bank during most days and for myself when I get a chance.

I believe wealth is like the sunshine. You can go stand in it yourself or spend your energy hating those who go/try/fail/almost succeed/fail/fail/fail - finally succeed or fail without affecting anyone elses access to the same sunshine.

I bought some properties, one near where I went to college and am making my gold/silver/food/gas money and most importantly - beer money from that and other investment. I never got a dime from anyone else and my parents were borderline poverty.



Sat, 09/29/2012 - 05:50 | 2841240 bunnyswanson
bunnyswanson's picture

It's not about you.  It's about the blue collar worker.  The middle class.  The tens of millions of jobs that left this land paid a family's bills and now it is gone.


I attempted a refi when my house ballooned in value to over 150,000 more than it was orginally.  Twice.  Both times, the terms presented to me as my only option were an ARM and a 2nd creative number that gave me the option of "having spare money to invest in the stock market." 

Fixed or nothing, I said.  One man through his pen across the goddam desk and refused to acknowledge me, he dismissed me by turning in his fucking chair and facing across the parking lot outside his pebble teck gloriously decorated office.  The 2nd mtg broker and real estate agent set me up and kept in in a conference for an hour while I repeated said, fixed....fixed....fixed...  It was an attempt to bulldoze me but heh I watch Suze Ormon now and then.


Don't give me that bullshit that the credit extension which put tens of thousands of extra dollars per person into the economy was just a happenstance by reckless shoppers.  This was a transfer of wealth and nothing less.  The money trail is clearly evident.  They are the happy people.

Americans are faced with media jamming consumerism down there throat even on the evening fucking news.  Oh, it's a circus alright, but it's the distraction that counts.   Once Americans are no longer able to consume, due to a failure of their currency to compete on the world stage, the banks and the rest of the pompous assholes who do nothing but sit and make decisions will say good riddance and you'll be looking for a stable country to move to. 

Sat, 09/29/2012 - 13:39 | 2841719 snblitz
snblitz's picture

I did the same thing.  fixed..fixed...fixed...

When all was done and I was on the hook for the mortgage it was variable.

I swear the papers I signed said fixed.

Fri, 09/28/2012 - 23:48 | 2841014 AgShaman
AgShaman's picture got this, right?

Just pick up the tab on this one

Dedicate it to your re-selection campaign

Fri, 09/28/2012 - 23:49 | 2841019 Banksters
Banksters's picture

One last thing: Fuck obama and mitt. This. Exercise in phoney choices is worse than watching Jersey Shore.

Sat, 09/29/2012 - 09:31 | 2841362 matrix2012
matrix2012's picture


Here, a unified choice for the enthusiastic Amerikan public

Baritt Obomney for President - The Elite Choice in 2012


a perfect blending of Red team and Blue team, now it's called a VIOLET TEAM


Sat, 09/29/2012 - 13:41 | 2841723 snblitz
snblitz's picture

I am writing in Ron Paul for President.

Sat, 09/29/2012 - 00:00 | 2841038 valkir
valkir's picture

120 bilions only?This amount sound as small change recently,nobody is impressed.Suspect very soon,nobody will be shaken from the word-trilions.

Sat, 09/29/2012 - 10:48 | 2841453 centerline
centerline's picture

When salaries/pay is flat, we will all be shaking... especially those of you up north in the winter when you can't afford to heat your home (and have already burned everything combustible).

Sat, 09/29/2012 - 00:01 | 2841039 GrinandBearit
GrinandBearit's picture

$120 billion = peanuts.

Sat, 09/29/2012 - 00:44 | 2841100 Savyindallas
Savyindallas's picture

Yeah sure-it's only about 2 grand for EVERY american family of four (assuming every American is in a family) -this is not 2 grand student loans  -but 2 grands of defaults  - you can assume these are students unemeployed or underemployed  - get ready for Spain/Greece riots- the criminal banksters made sure student loan debt could not be extinguished in bankruptcy about a decade ago  -  they want a return to feudalism -and debtors prisons  -the rest of us want the return of the guillotine-ala the french revolution. As Marc faber recently noted - histirically when the elites get so greedy  -they invariably pay with their heads-the masses have a way of extinguishing such excesses

Sat, 09/29/2012 - 00:37 | 2841091 nbsharma
nbsharma's picture

Tyler, you are awesome.

Sat, 09/29/2012 - 01:43 | 2841132 hedgehog9999
hedgehog9999's picture

While it seems like a lot of money, it is still relatively small.

From Ben's point of view, it is only a month and a half of QE + Twist to buy that defaulted  crap and by default own their asses for the rest of their lives as Student loans are not dischargable in Bankruptcy.

Still it is just another pile of excrement into the Fed's balance sheet eventually, and we still have Municipal and State loans that will eventually blow up and where will they go? ........... into BEN's Wallet of course..........

and I think once the economy fully tanks and corporate, commercial and small business bankruptcies become an everyday story, we are going to need masks in DC from all the smell of excrement coming from the FED's vaults of garbage bonds.

Sat, 09/29/2012 - 02:09 | 2841162 Dr. Engali
Dr. Engali's picture

Can you tell me which drop in the bucket causes the water to spill over the sides?

Sat, 09/29/2012 - 10:51 | 2841459 centerline
centerline's picture

Keep preaching it.

Notice around here and everywhere else that people are becoming numb.  This is exactly the sort of desensitation that the MSM/Financial/Fed/Government complex have been trying so hard to achieve.

Scares the shit out of me - because I know that things go bump in the night when people are sleeping.

And all I hear now is zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz.


Sat, 09/29/2012 - 04:09 | 2841218 stuckonarock
stuckonarock's picture

Hey Guys!     dont get a loan!   come to the UK, we will give you a student loan to study here, and when you have your degree in your hand simply fuck off and dont pay us.



works for EU students :=)

Sat, 09/29/2012 - 04:44 | 2841226 resurger
resurger's picture


Sat, 09/29/2012 - 04:50 | 2841227 MarcusLCrassus
MarcusLCrassus's picture

No shit there will be a lot of student loan defaults.  But no one's even asked the most pertinent question: so who do you short?

Who is the next Michael Burry/John Paulson shorting on this one?

Sat, 09/29/2012 - 04:58 | 2841229 toomanyfakecons...
toomanyfakeconservatives's picture

Need I say it again? *Student Loan Suicides*

Sat, 09/29/2012 - 05:17 | 2841232 mrdenis
mrdenis's picture

Are Student Loans Immoral? grads are saddled with unpayable student loans, yet colleges still say they're a sound investment. NYU professor Andrew Ross asks if it's time to stop repaying the loans....

Sat, 09/29/2012 - 06:07 | 2841245 BattlegroundEur...
BattlegroundEurope2011's picture

Higher Education is for wait...Losers.

Sat, 09/29/2012 - 06:21 | 2841250 Munkey
Munkey's picture

Non dischargable student loans and a declining job market. Now I'm glad I just photocopied my high school diploma and attained my degree online from the Univeristy of Baku, Azerbaijan for $50.

Sat, 09/29/2012 - 07:30 | 2841263 Radical Marijuana
Radical Marijuana's picture

The first three most popular comments posted on the first page above said the relevant things:

The financial system and the Government are all one big pile of crap. ... The financial system and the Government is a magnificent criminal enterprise. ... The goal was never "education" ... it was "debt serfdom" ...

For the sake of discussion, imagine you are an intelligent individual, in your late teens and or early twenties, and you spend enough time surfing the Internet on alternative information Web sites to discover that all those three statements above are CORRECT! Suppose you are smart enough, and have enough data, to assimilate the basic social facts that the entire world economy, which has been dominated by the USA since the second world war, IS one giant Ponzi scheme, which has crossed the threshold from debt slavery into debt insanity.

E.g., you listen to something like this, & understand:

Our Economy is a Ponzi Scheme

Yet another 10 minute audio restatement of the BASICS:

economic system depends on exponentially more debt!

However, that is BOTH practically and
mathematically IMPOSSIBLE TO DO!!!

Also, suppose you know enough about history to realize that every time before, when things got this bad, that started another world war. Therefore, you make the reasonable assumption that the world as it exists now will probably be destroyed, BEFORE you have to pay your student loans back ... and what the hell, therefore, nothing matters anyway, since there is no reason to have a realistic plan for the future, because everything regarding the object social facts and human history tells you there can be no rational plan for your FUTURE!

Suppose you have come to understand that the Federal government of the USA has become the worst terrorist organization in the world, and that the people who control that government are lying about everything, since, IN FACT, the financial system and "your" government are piles of crap, and organized crime, that are deliberately destroying your future, and burdening you with runaway debt slavery, which has ALREADY, by the numbers, become DEBT INSANITY ... Given the objective social conditions around you, the ONY practical thing you could actually do it continue going to school, taking out student loans, with no reasonable expectation that you would ever be able to pay them back.

Consider another Zero Hedge post from a few days ago:

What Student Loans Are Really Spent On

That article also points out that being a post-secondary student tends also to be a status that will gain an individual access to credit cards ... even more fiat money, made of nothing, to be "loaned" to the youth of America. THE ESTABLISHED SYSTEMS ARE DESIGNED TO FACILITATE YOUTHS DIGGING THEMSELVES INTO DEBT, BUT NOTHING ELSE! Youths, IF they want to, CAN discover for themselves the facts mentioned above, namely, that their government IS the worst gang of criminals in the world, ever!

Back when I was in my late teens and early twenties, several decades ago, I was able to discover those basic social facts for myself. The ONLY difference between me now, and me several decades ago, is that I have watched everything get worse and worse, year after year, during every year of my adult life. Today, discovering the social facts is much, much easier to do, and those facts are now way, way more blatantly obvious, to anyone who looks and has eyes to see. Several decades ago, I had to think a little more abstractly about the situation, of allegedly endless exponential growth, backed by weapons of mass destruction. Today, all those things are repeatedly slapping thoughtful young people in the face, harder than ever!

The ones that are now slightly older have realized that Obama was just another professional liar, that tricked and betrayed them They also have discovered that the things that Ron Paul was saying and warning them about were all true, but that NOTHING was actually going to stop Paul's worst predictions from also coming true!

Of course, there is NOTHING that those young people can do to change the fact that the Federal government of the USA is, by far, the worst terrorist organization in the world, operating runaway organized crime on an astronomically amplified scale! If they are smart and informed enough, then they intellectually are able to understand that they appear to be doomed!

Of course, young people innately feel better, during the prime of their lives, and are naturally more optimistic and idealistic. However, there is no way to have any intellectual integrity, after looking at the evidence and the trends, and then NOT conclude that there probably will not be a future, other than economic collapse, insanely genocidal wars, and democidal martial law.

So borrow the money, and live for today, because tomorrow we die is the most realistic attitude that a youth could have in America today. In every way, the younger you are, the more you are being lied to, cheated and robbed by the political system you were born into. You were born into a pyramid scheme, that SHOULD have been illegal, but instead was legalized! You were born into it near the point where it is on the verge of collapsing, since endless exponential growth is impossible, and there MUST come a point where that pyramid scheme collapses into chaos instead.


Of course, it is perfectly appropriate, in a totally perverse way, that the single greatest "asset" on the books of the Federal Government of the USA are the student loans that it is owed, and that those loans appear to be headed into record defaults, despite the increasingly dastardly and draconian measured which were legislated to continue to try to collect on that debt. This is the classic ancient mythological tragedy of eating your own young! This is fulfilment of the ways that those whom the gods would destroy, they first drive mad!

Sat, 09/29/2012 - 10:24 | 2841411 matrix2012
matrix2012's picture

Thanks RM for summarizing the many aspects into a clearcut and useful reading, it surely serves some value to remind those naive youth about the current precarious time... regardless whatever the future may be...


Sat, 09/29/2012 - 19:07 | 2842271 Radical Marijuana
Radical Marijuana's picture

Thanks for your reply. As I said, student loans changed in the last 40 years by becominig much bigger, while everything got worse!

Another little article that illustrates what I meant by the collection of student loan debts being WAY WORSE NOW:


... Unlike private lenders, the federal government has extraordinary tools for collection that it has extended to the collection firms. ... With an outstanding balance of more than $1 trillion, student loans have become a silver lining for the debt collection industry at a time when its once-thriving business of credit card collection has diminished and the unemployment rate has made collection a challenge. ... In 2010, Congress revamped the student loan program so that federal loans were made directly by the government. Before that, most loans were made by private lenders and guaranteed by the government through so-called guarantee agencies. ... While some in the industry, ... worry about public revolt over aggressive collection tactics, there is no holding back at this point. ...

Patrick Writer of Redding, Calif., received a certificate in computer programming in 2008 from Shasta College, a community college. But he graduated in the midst of the financial crisis and has not been able to find a job as a programmer. He defaulted on $12,000 in federally backed loans in 2009. “If you can’t make your utilities and your rent, your student loan payments are almost goofy, inconsequential,” said Mr. Writer, who is 57. But Mr. Writer said he had come to realize what it meant to have a student loan that was guaranteed by the federal government. “It’s the closest thing to debtor prison that there is on this earth,” he said. ...


AS ALWAYS, although many students are drowning in unrepayable debts, and may never be able to get their head above water again, the OVERALL problems of their whole country are the SAME THING, only on an astronomically amplified scale.

There are NO theoretical solutions, other than to end the money-as-debt system. HOWEVER, THAT MUST HAVE A NEW MURDER SYSTEM TO BACK IT UP.

Any practical and realistic new monetary system MUST be based on addressing the REAL ISSUE, which is that the money system is backed by murder, and that the best organized gangs of criminals have taken control of the government! There is no magical way to WISH that would disappear, which could ever work. THAT is why nothing gets better, while everything gets worse at an exponential rate. Only a radically different, better organized crime gang, (i.e., political party and its supporters) could deal with the banksters that are in place now, and that fantasy requires that Americans become more effective citizens, who understand what really happened, and stop believing that the solutions can be done by going backwards, in any way, to some old-fashined ideologies or religions. We need to go through the looking glass of our Bizarro Mirror World, where EVERYTHING is backwards, because EVERYTHING is controlled by Huge Lies. We should stop using the same old biggest bullies' bullshit impossible ideals, and false fundamental dichotomies, to talk about what is wrong, and how to fix it. We should recognized that reality is ALWAYS organized lies and robbery, and stop allowing the best liars to so easily get away with their Huge Lies that they are the "good guys," when they are actually the worse! BUT, that does not mean we prop up another fake group of "good guys" to replace them! People have to grow up, and stop believing in any and all "big daddy" solutions, and instead realize that "big daddy" is THE PROBLEM!

Of course, I do not expect that to happen. Instead, I expect there to be genocidal wars, and democidal martial law, as the banksters carry through their agenda. But neverthessles, for the sake of discussion, the ONLY better life that young Americans MIGHT have depends on a Second American Revolution, and that has to directly address the real issues, which are the murder systems doing the death controls. There is no other way to actually resolve the issues of the money system doing debt controls. Such a Second American Revolution must primarily be intellectual. It has to be a set of paradigm shifts, to understand reality: the international banksters have enslaved Americans to debts, and the banksters were able to do that through the application of the methods of organized crime, to take control of the government. THAT is the problem, and no genuine solutions can work outside of that REALITY.

It is no longer possible to propose any sane solutions to economic problems that do not address their ecological context. There are no genuine solutions to the debt control problems, without changes to the death control problems.  THAT IS GOING TO HAPPEN, ONE WAY OR ANOTHER ... HOWEVER, WHAT THAT MOST PROBABLY MEANS IS THAT THE QUANTUM LEAP IN CHANGE IN THE DEATH CONTROLS WILL BECOME GENOCIDES AND DEMOCIDES ON AN ASTRONOMICALLY AMPLIFIED SCALE.

The only theoretical solutions are to negotiate something better, but, since those who dominate the world NOW do so on the basis of triumphant runaway HUGE LIES, fixing anything seems practically impossible. But nevertheless, I repeat the obvious, the ONLY genuine solution for the problems of young American must be a Second American Revolution, that is primarily a paradigm shift in the way we think about militarism, and the money system!

It IS theoretically possible to have a better murder system, doing better death controls, in order to have a better money system doing better debt controls. However, it appears certain that we could only actually evolve those the HARD WAY! Namely, the established systems have to continue going mad, until they mostly destroy themselves, before something new has a realistic chance to emerge. ... Of course, we may hope to facilitate and catalyse that transformation. ...

Sat, 09/29/2012 - 07:16 | 2841277 Catullus
Catullus's picture

What?! 1/5th in default?  How does this market even exist?  You might as well play craps.

Sat, 09/29/2012 - 07:29 | 2841281 Ned Zeppelin
Ned Zeppelin's picture

Thw loans were created out of thin air, and I agree, were designed to put the borrower (an easy mark given the promises of a better life) into permanent debt slavery, especially given the unconstitutional ban on the ability of the recipient of these loans to declare bankruptcy and wipe them out (even though they cost nothing to create, mere printing).  I suppose the good news is that student loans were not originated, packaged, chopped up and sliced into tranches of securitized obligations, and pawned off everywhere, and then used as collateral for further lending.    I say we sell all the defaulting ones to the Federal Reserve, and let 'em rot in the vaults, without collection efforts. It's not like the printers aren't already running.  By comparison, the banksters have gotten trillions in debt relief to save their sorry, worthless asses, after all, if we are pretending to use moral hazard as a measure of who should get relief.

Sat, 09/29/2012 - 09:07 | 2841343 SamAdams1234
SamAdams1234's picture



Sat, 09/29/2012 - 14:07 | 2841764 Haager
Haager's picture

Spot on.

Isn't there another chance to get good education for the kids? I mean, are they all about greed?

What if a student would "pay" by getting a daily slap with rotten fish, just for the pleasure of his rich mentor?

It's more or less: US of A, the land of the slaves.

Sat, 09/29/2012 - 08:27 | 2841311 Miss Expectations
Miss Expectations's picture

I wonder what percentage of the student loans have been cosigned.  It seems to be the thing to do:

  • A cosigner accepts equal responsibility for the repayment of a private student loan.
  • A cosigner may be required if the credit check determines the student does not qualify for the private student loan individually.
  • Even if the student qualifies for a private student loan without a cosigner, by choosing to add a cosigner, the student may receive a lower interest rate.
Who Can Be a Cosigner?
  • The cosigner must be a US citizen or permanent resident.
  • The cosigner must be at least 18 years old.
  • The cosigner must pass a credit check.
  • The cosigner does not need to be related to the student, but many students ask a parent to cosign their applications.
Sat, 09/29/2012 - 08:34 | 2841315 Go Tribe
Go Tribe's picture

Yawwwwwwn. Cue up QE4. Obama pays off higher education supporters.

Sat, 09/29/2012 - 08:44 | 2841321 JohnKozac
JohnKozac's picture

Isn't 'default' one of the cornerstones of "Beautiful Deleveraging."


Not to worry. Taxpyers will pay the loans it for them just as they are burdened with all the bad mortgages.

Sat, 09/29/2012 - 08:51 | 2841326 IMA5U
IMA5U's picture

They can all work for the government


Obama has his minions

Sat, 09/29/2012 - 09:21 | 2841348 topspinslicer
topspinslicer's picture

Just another brick in the (statist economy) wall

We don't need no education (not the kind they are serving up)


Sat, 09/29/2012 - 09:51 | 2841352 falak pema
falak pema's picture

the ultimate betrayal by capital of country; taking the educated young as hostage.

Anything to make a dime even if it be a crime against those who are the future of nation except that its been stolen from them; in "engineered to specification", preordained God's own work; sanctimoniously called "greenback worship". 

When private enterprise made learning an unattainable and now seemingly sterile grail.

As the future is all boxed up, whether you have a degree or not, you are are hocked to your ears at 23! 

To all intents and purposes the US in now in recession; if we forget the marginally fake stimulation of QEn.

As indicated by these durable hard goods indexes :

Rosenberg: Core CapEx Orders Signal Recession - Business Insider

Sat, 09/29/2012 - 09:25 | 2841357 I am Jobe
I am Jobe's picture

Next Amerikan Loser Show


I don't own an IPHONE

Single Moms spreading

Amerikan Boys Pussification

College Girls Spreading

 and many more to come


Sat, 09/29/2012 - 09:40 | 2841373 Lost Wages
Lost Wages's picture

I'm getting my brokers license and creating some Student Loan Backed Securities (SLBS) that I can sell to the Fed.

Sat, 09/29/2012 - 09:45 | 2841382 I am Jobe
I am Jobe's picture

Nice. Better yet if you start a University , which might be much more profitable.


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