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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El Hosel's picture

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

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

 

 

disabledvet's picture

looks okay from this end:http://www.defense.gov/releases/release.aspx?releaseid=15209
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.

dow2000's picture

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

Seasmoke's picture

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

Tum's picture

No worries. Just print the $120 billion. Problem solved. The Chairman would agree. http://www.facebook.com/DeepThoughtsByBenBernanke

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? :-) 

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.

Banksters's picture

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

Glasnost's picture

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

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. 

 

 

 

 

 

 

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.

 

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.

 

 

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. 

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.

AgShaman's picture

Obama...you got this, right?

Just pick up the tab on this one

Dedicate it to your re-selection campaign

Banksters's picture

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

matrix2012's picture

 

Here, a unified choice for the enthusiastic Amerikan public

Baritt Obomney for President - The Elite Choice in 2012

http://obomney2012.com/

 

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

 

snblitz's picture

I am writing in Ron Paul for President.

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.

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).

GrinandBearit's picture

$120 billion = peanuts.

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

nbsharma's picture

Tyler, you are awesome.

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.

Dr. Engali's picture

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

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.

 

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.

 

http://www.timeshighereducation.co.uk/story.asp?storycode=420807

 

 

works for EU students :=)

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?

toomanyfakeconservatives's picture

Need I say it again? *Student Loan Suicides*

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....http://www.thedailybeast.com/articles/2012/09/27/nyu-professor-are-student-loans-immoral.html

BattlegroundEurope2011's picture

Higher Education is for Winners...eh wait...Losers.

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.

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:

http://www.youtube.com/watch?&v=uNt46PPneOg

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:

http://www.zerohedge.com/news/2012-09-27/what-student-loans-are-really-s...

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.

THE YOUNGER YOU ARE, THE MORE LIKELY IT BECOMES THAT YOU WILL LIVE TO SEE THE SOCIAL AND POLITICAL SYSTEMS AROUND YOU DESTROY THEMSELVES, DUE TO THEIR OWN MADNESS.

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!

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...

+1

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:

___________________________________________

http://www.nytimes.com/2012/09/09/business/once-a-student-now-dogged-by-collection-agencies.html?_r=2

... 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. ...

Catullus's picture

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

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.

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.

Miss Expectations's picture

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

https://www.discover.com/student-loans/add-a-cosigner.html

  • 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.
Go Tribe's picture

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

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.

IMA5U's picture

They can all work for the government

 

Obama has his minions

topspinslicer's picture

Just another brick in the (statist economy) wall

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

 

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

I am Jobe's picture

Next Amerikan Loser Show

Whining

I don't own an IPHONE

Single Moms spreading

Amerikan Boys Pussification

College Girls Spreading

 and many more to come

 

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.

I am Jobe's picture

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