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Senate Liberals Push Status Quo Student Loan Bubble Ever Bigger

Tyler Durden's picture




 

When every indicator of stress is screaming 'bubble' in the student loan debacle, it would make perfect sense for the government to ignore it and maintain the status quo. As the WSJ reports, the never-ending federal effort to "make college affordable" simply provides the resources to sustain higher prices - especially as an increasing amount of the rising subsidies are pocketed by universities. This policy disaster which results in rising costs, taxpayer losses and over-strapped borrowers is now manifest. So naturally this week Senate liberals will bring to the floor a plan to ensure that the policy continues unchanged (and the CBO-estimated $95 billion losses) - and dismisses a coalition plan that ties student loan rates to 10Y Treasuries, providing some marginal encouragement to students to decide whether their chosen course of study is worth the money.

 

Via WSJ,

Government researchers continue to show that federal student loans are hazardous to both students and taxpayers. But Senate liberals don't seem to care, as long as the money keeps flowing to their constituents in the nonprofit academic world.

 

As the Senate prepares for Wednesday voting on student-loan subsidies, a coalition that includes congressional Republicans, President Obama and moderate Democrats favors reform that ties the rates on student loans to the 10-year Treasury rate. This protects taxpayers from having to guarantee low fixed rates to students while the government's own borrowing costs rise. And it provides some marginal encouragement to students to consider whether their chosen course of study is worth the money.

 

Such taxpayer protections and borrower incentives are sorely needed. The Congressional Budget Office recently estimated taxpayer losses on student loans at $95 billion over the next decade.

 

...

 

But in recent years an historic surge in student-loan debt is changing education for many borrowers from a winning investment into a staggering burden. Such debt has nearly tripled since 2004 and now hovers around $1 trillion, with defaults rising on student loans and other types of debt held by these young borrowers.

 

Whereas credit scores used to be similar for young people with or without student-loan debt, New York Fed economists find a divergence after 2008. "By 2012, the average score for twenty-five-year-old nonborrowers is 15 points above that for student borrowers, and the average score for thirty-year-old nonborrowers is 24 points above that for student borrowers," they note in a recent report.

 

...

 

annual Pell grant spending of $34 billion has roughly doubled in the Obama era, or that Uncle Sugar now originates more than $100 billion in annual loans.

 

...

 

As ever, increasing government education funding to students is pocketed by universities in the form of tuition increases. The never-ending federal effort to "make college affordable" simply provides the resources to sustain higher prices.

 

A policy disaster that results in rising costs, taxpayer losses and overstrapped borrowers is now manifest. So naturally this week Senate liberals will bring to the floor a plan to ensure that the policy continues unchanged. Rates on subsidized Stafford loans would stay frozen at the 3.4% rate that prevailed before a July 1 expiration, with new taxes to sustain them.

 

Liberals would be happy to accept an even lower rate, or expanded loan forgiveness that shifts more of the losses to taxpayers, or more grant money instead of loans. Anything that doesn't exert downward pressure on the cost of college is apparently on the table.

 

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Wed, 07/10/2013 - 19:39 | 3739567 prains
prains's picture

What is this Senate that you speak of?

Wed, 07/10/2013 - 19:42 | 3739583 JamesBond
JamesBond's picture

They misspelled it -

 

Sinate

 

Do you recognize it now?

 

jb

Wed, 07/10/2013 - 19:57 | 3739639 Almost Solvent
Almost Solvent's picture

 

Liberals would be happy to accept an even lower rate, or expanded loan forgiveness that shifts more of the losses to taxpayers, or more grant money instead of loans. Anything that doesn't exert downward pressure on the cost of college is apparently on the table.

 

 

 

 

Same as it ever was until the damn broke and all those IOUs drowned the villagers.

 

Wed, 07/10/2013 - 20:05 | 3739664 knukles
knukles's picture

Affordable non-dischargable fraudulent conveyance

Wed, 07/10/2013 - 22:39 | 3740153 francis_sawyer
francis_sawyer's picture

MOAR 'Girls Gone Wild in Cancun' & beer pong...

~~~

Do it for THE KIDS!

Thu, 07/11/2013 - 02:25 | 3740586 EVQ
EVQ's picture

helpful infographic about the student loan bubble: http://www.healthcareadministration.com/college/

Wed, 07/10/2013 - 19:58 | 3739644 XitSam
XitSam's picture

No.

Obama rules by decree. No law he can't ignore. No Constitution he can't trample.

Wed, 07/10/2013 - 19:47 | 3739607 Dareconomics
Dareconomics's picture

Government hot money inflates bubbles wherever it flows.  The stock market, healthcare, housing and student loans all exhibit unsustainable inflation from the effects of subsidies.

http://dareconomics.wordpress.com/2013/07/10/around-the-globe-07-10-2013/

Thu, 07/11/2013 - 00:30 | 3740445 Dingleberry
Dingleberry's picture

Liberal politicians wanting to send mo' money to liberal indoctrination centers (aka colleges). 

Surprised?

Thu, 07/11/2013 - 01:54 | 3740557 Dr. Sandi
Dr. Sandi's picture

Another bullshit headline.

THERE ARE NO LIBERALS IN THE SENATE.

There are a bunch of hackneyed senatorial windbags in the Democratic party. But these are not Liberals or even liberals.

I know Liberal vs Conservative sells more pixels, but if I want this kind of GOOD versus EVIL bullshit, I can turn to Focksnooze or SeeAnEnemy. We really don't need to suck the tiny dicks of the divisive assholes at this site.

Try a little harder, Tyler. I KNOW you can do it.

Wed, 07/10/2013 - 19:42 | 3739581 kaiserhoff
kaiserhoff's picture

Student loans are only a trillion dollars, Tyler.

It's not like you're talking real money;)

Wed, 07/10/2013 - 19:42 | 3739584 SmittyinLA
SmittyinLA's picture

My idiot loser neighbor just bought into this BS, Fullsail edu Graphic Arts certificate $57,000.* 

*You get a free Apple laptop too!

 

@ what interest rade dude????????

 

You don't know? 

You borrowed $57,000 and don't even know at what rate. 

Wed, 07/10/2013 - 22:43 | 3740169 francis_sawyer
francis_sawyer's picture

Well... All I can say is 'somebody' has to design those websites for the new wave of start-ups selling their 'CUPCAKES' over the internet... It's gonna turn the economy right around...

~~~

NEVER.GO.FULL.RETARD.

Wed, 07/10/2013 - 19:44 | 3739585 Temporalist
Temporalist's picture

This is interesting:

Oklahoma City hospital posts surgery prices online; creates bidding war

"Click here to see the online prices at Surgery Center of Oklahoma.

The prices are all-inclusive quotes and they are guaranteed.

“When we first started we thought we were about half the price of the hospitals,” Dr. Lantier remembers. “Then we found out we’re less than half price. Then we find out we’re a sixth to an eighth of what their prices are. I can’t believe the average person can afford health care at these prices.”

 

Surgery Center of Oklahoma does accept private insurance, but the center does not accept Medicaid or Medicare.

Dr. Smith said federal Medicare regulation would not allow for their online price menu.

They have avoided government regulation and control in that area by choosing not to accept Medicaid or Medicare payments."

http://kfor.com/2013/07/08/okc-hospital-posting-surgery-prices-online/

Wed, 07/10/2013 - 19:46 | 3739598 prains
prains's picture

Will they supersize?

Wed, 07/10/2013 - 19:54 | 3739631 kaiserhoff
kaiserhoff's picture

Only boobs, lips, and butts.

They are still working on the feminist dream..., addadicktome.

Wed, 07/10/2013 - 19:59 | 3739646 Almost Solvent
Almost Solvent's picture

It's OKC - have to lock in those prices before the next operation twist

Wed, 07/10/2013 - 20:16 | 3739701 darteaus
darteaus's picture

'nado.

Thu, 07/11/2013 - 01:55 | 3740559 Dr. Sandi
Dr. Sandi's picture

Hey kaiser, suck THIS!

Wed, 07/10/2013 - 22:18 | 3740068 JohnG
JohnG's picture

 

 

This will continue.  Hospitals are going PRIVATE to get away from Obamacare mandates. 

The payout on Medicare (minimal) and Medicaid (which many doctors are not accepting new patients) is so low that hospitals and doctors cannot remain solvent.

Good.  Pay cash.  Don't lean on the taxpayer.

 

Wed, 07/10/2013 - 22:51 | 3740208 WillyGroper
WillyGroper's picture

Very interesting! I checked rotator cuff/labrum. Here's what's screwed. 

$21K billed. Ins. paid $6K - right along with their stated prices. 

This is going to upset someones apple cart. Drs. are dropping medicare/aid in droves. Many have set up these surgery centers to bypass the hospital cut & red tape.

Wed, 07/10/2013 - 19:52 | 3739588 One And Only
One And Only's picture

Yes.

All recent bubbles have come from the government in concert with the Federal Reserve.

Housing, Cost of Healthcare, Cost of College have ALL been government induced.

What is the goal? To make as many things as unaffordable as possible as to ensure that the only means of obtaining such services/houses (whatever) is with government assistance. With such a system if you want anything in life you better vote/support the candidate promising to assist you as you are now incapable of doing it yourself. They know how you feel politically...they spy on your every electronic communication. Oh you want that heart transplant? We see you are an opponent of the establishment based on your communications with family and friends...denied. Welcome to Amerika - That's the future cuz.

Wed, 07/10/2013 - 19:43 | 3739592 surf0766
surf0766's picture

They are marxist progressives.. Not liberals...

Thu, 07/11/2013 - 00:31 | 3740449 Dingleberry
Dingleberry's picture

then why do the liberals all act like marxists?

Thu, 07/11/2013 - 01:47 | 3740549 StychoKiller
StychoKiller's picture

It's NOT their munny they're spending...

Thu, 07/11/2013 - 01:56 | 3740560 Dr. Sandi
Dr. Sandi's picture

I dunno. Why to all clowns using the name Dingleberry come off sounding like morons?

Maybe it's the use of the word ALL.

Wed, 07/10/2013 - 19:48 | 3739608 NOTW777
NOTW777's picture

they spend money for votes whether its brainwashed students or illegals - its not their money

Wed, 07/10/2013 - 22:58 | 3740228 Jim B
Jim B's picture

Agreed, It is after all, just paper or electronic ones and zeros!

Wed, 07/10/2013 - 19:52 | 3739627 57-71
57-71's picture

As far as the article goes on student debt, I really doubt that all the loans to push this debt from 200b to 900b in less than 10 years is entirely for educational uses. Who is cashing in on this scam, and what are they doing with the cash? Whos will pay the defaults?(Rhetorical)

Wed, 07/10/2013 - 19:53 | 3739630 carlnpa
carlnpa's picture

This whole student loan mess resolves itself by allowing student loans to be dismissed in bankruptcy.

To those that say the kids shouldn't have borrowed so much a big fuck you in advance.

The system encouraged, aided and abetted the over borrowing and outrageous increase in tuitions.

The constitution specifically guarantees the right to bankruptcy.  Limiting that right is a travesty.

Wed, 07/10/2013 - 20:07 | 3739654 Almost Solvent
Almost Solvent's picture

BK is for losers and those who have no honor.

 

Pay the bankers their money or rot in hell foreva. (It's in the biBle!)

 

/s

Wed, 07/10/2013 - 20:13 | 3739673 One And Only
One And Only's picture

The constitution specifically guarantees the right to bankruptcy.  Limiting that right is a travesty.

Uh huh. It also says in the constitution that it is your obligation to pay for my college tuition right?

After I decide to drop out after my junior year studying art should I send the bill directly to you or should it be reflected in your taxes, which do you prefer?

Fuck off.

Wed, 07/10/2013 - 20:24 | 3739728 Buckaroo Banzai
Buckaroo Banzai's picture

Don't be an ass. Who says student loans should be back stopped by the taxpayer? End govt guarantees, and allow -- nay, encourage-- students to declare bankruptcy, and the market equilibrium will be restored right where it should be: NO LOANS EXTENDED TO STUDENTS. Cash on the barrel head, due three days before the semester begins, OR YOU DON'T GET ENROLLED.

Wed, 07/10/2013 - 20:52 | 3739772 One And Only
One And Only's picture

Who says student loans should be back stopped by the taxpayer?

Does the government provide student loans? Yes. Does that make the taxpayer a creditor? Yes. In bankruptcy do creditors (in the case of student loans being dischargeable in bankruptcy) take a 100% loss? Yes. Did the ass fuck above suggest that student loans should be dischargeable in bankruptcy? Yes.

Roughly $864 billion is outstanding federal student loan debt while the remaining $150 billion is in private student loans(Source: Consumer Finance Protection Bureau).

That's 86.4% of all outstanding student debt (and people wonder why college is sooooo expensive)?

http://www.asa.org/policy/resources/stats/

Another interesting fact. Fuck off.

Wed, 07/10/2013 - 21:00 | 3739840 carlnpa
carlnpa's picture

One - You are quite the piece of work.

To ignorant to realize the government has no business in the student loan business.

That outrageous tuitions, distorted lending and all are a result of government intervention.

Fuck you you ignorant piece of government loving shit.

Wed, 07/10/2013 - 21:11 | 3739868 One And Only
One And Only's picture

Hey carlnpa.

I'm intelligent enough to realize that you used 'to' in a grammatically incorrect fashion (take care to not insult the intelligence of others while also mispelling words in the same line of digital ink) but also that you completely misinterpreted the essence of what I was speaking on.

Either that or you're a troll or being /sarc. Eitherway, fuck off.

Wed, 07/10/2013 - 21:25 | 3739914 carlnpa
carlnpa's picture

The bankruptcy non dismissal of student loans distorts the lending process.

This also distorts the future borrowing patterns of the students that will have profound negative effect on our economy.

This generation will be unable to buy a car or a house due to excessive student loan debt.

We paid trillions to the bankers and didn’t blink, the kids should have at least chance.

 

Wed, 07/10/2013 - 23:07 | 3740246 One And Only
One And Only's picture

Everything above your last sentence god and I know already.

BUT at this point it's too late. Almost 90% of student loans are provided by the government (which has made 'paying your way through college') an impossibility. The cost of education is sooooo high BECAUSE the government has injected 900 BILLION into the collegiate educational system. But now there is no option, you either have a wealthy family who can pay, or you get a government loan. For most people they will need a government loan - and that will push the cost higher.

To your last sentence....

Because the government has essentially pushed as many people as possible into higher education there is a shortage of skilled tradesman. I know many electricians, plumbers, HVAC techs that make orders of magnitude more money that many college graduates. That is because there is a shortage of those skills....a shortage created by the government through misallocation of resources (which is what the government is best at). The youth don't deserve a chance, they have an opportunity, an opportunity to get a job doing real work for real money (getting into a trade), and as an American that is all you should be afforded...an opportunity.

Thu, 07/11/2013 - 00:00 | 3740390 WillyGroper
WillyGroper's picture

So because you did not use your loan money for a skilled trade in a vo-tech where you COULD have paid it back, the taxpayer is responsible for YOUR decision. Sounds more like buyers remorse to me. You didn't do your homework. Law?

Betcha don't hose yourself like that again.

Thu, 07/11/2013 - 00:18 | 3740425 One And Only
One And Only's picture

Betcha you should re-read what I wrote.

Be particularly analytical. I never stated that I had taken out a loan for education did I? I didn't state that because...I never did.

So wherever you were going with that you can... fuck off and hose yourself.

Wed, 07/10/2013 - 22:21 | 3740078 JohnG
JohnG's picture

 

 

In some cases (few and hard to prove) SL debt is dischargable.

Usually some disability does it. 

Incarceration too......

Wed, 07/10/2013 - 19:59 | 3739650 nmewn
nmewn's picture

"The Affordable Care Act is set to cost students enrolled in the government’s loan program $8.7 billion in extra interest over the next decade, according to a report published by the non-partisan Congressional Budget Office (CBO).

If savings were kept inside the loan program, instead of transferred to Obamacare, as some Republican senators are suggesting, they could allow the Department of Education to lower student interest rates to 5.3 percent from 6.3 percent, according to the CBO."

http://www.campusreform.org/blog/?ID=4817

But of course, it had to be passed first, in order to find out whats in it.

Suckers.

Wed, 07/10/2013 - 20:01 | 3739655 ebworthen
ebworthen's picture

Nothing less than backdoor funding of the state university and college system as well as the Ivy League creeping kudzu via the taxpayer.

How else do you maintain a ready supply of mandarins to the crony capitalist/government cabal while simultaneously paying off the intelligentsia to keep the dream factories proselytizing and churning out acolytes of the church of the holy sepulcher of Keynesian central planning & propaganda?

Wed, 07/10/2013 - 20:15 | 3739697 darteaus
darteaus's picture

Brilliant imagery.  You must have gone to college...

Wed, 07/10/2013 - 20:15 | 3739698 q99x2
q99x2's picture

Thank God. I have a future.

A PhD and retirement at 70.. A yep. That's for me. I'll never have to work a day in my life. I love this fucking government. Everyone and everything is...well--FREE.

Wed, 07/10/2013 - 20:17 | 3739705 darteaus
darteaus's picture

Uh, it's not the government that will pay.

Thu, 07/11/2013 - 02:00 | 3740563 Dr. Sandi
Dr. Sandi's picture

So they weren't kidding us in school?

It IS a free* country.

 

*Some conditions apply. Batteries not included.

Wed, 07/10/2013 - 20:27 | 3739734 Crtrvlt
Crtrvlt's picture

Ok then tie all corporate welfare and wall st bailout loans via qe, fed discount window, fed funds rate etc (though somewhat circular) to the 10 yr treasury as well.

Wed, 07/10/2013 - 20:53 | 3739821 MrBoompi
MrBoompi's picture

Liberals are forcing students to borrow money? Lmao. I have no love lost for Democrats, but blaming them for the rise in tuition rates, the inability to collect enough tax revenue to afford to cover some of the cost of college, or the student loan bubble is really fucking stupid. This trip into the toilet started with Reagan and the conservatives and its only gotten worse from there. Be honest about it.

Wed, 07/10/2013 - 22:31 | 3740117 wisehiney
wisehiney's picture

Follow the money. Who profits? Instead of "over-strapped borrowers", it would be nice to "overstrap" the commies on our campuses.

Wed, 07/10/2013 - 22:47 | 3740191 Totentänzerlied
Totentänzerlied's picture

//sarc

Wed, 07/10/2013 - 22:54 | 3740213 Jim B
Jim B's picture

The Federal government is the biggest reason college costs are out of control! Get over it!

Thu, 07/11/2013 - 00:36 | 3740460 Dingleberry
Dingleberry's picture

Yeah, those LIBERAL RUN SCHOOLS are doing everything humanly possible to keep tuition down for the huddled young masses, yearning for an education.

Free flowing cash from the gobmint had NOTHING to do with it.

"It's for the children"....no doubt.

You be honest about it.

If you are even able.

 

Wed, 07/10/2013 - 20:54 | 3739824 max2205
max2205's picture

Next up...double soc sec payments...utopia....

Wed, 07/10/2013 - 20:59 | 3739838 LiquidityandLunacy
LiquidityandLunacy's picture

I just hope it all gets forgiven

That way my generation will learn and know responsibility and wont do it again

Wed, 07/10/2013 - 21:00 | 3739841 world_debt_slave
world_debt_slave's picture

that is all they know, how to blow bubbles and when it pops blame someone else

Wed, 07/10/2013 - 21:05 | 3739855 Burticus
Burticus's picture

"Liberal" is another propaganda word misused by the cheerleading parrots in the lamescream corporate media cartel to confuse and distract the sheeple.

Liberal used to mean accepting others' views & choices.  The jackass sock puppets are anything but liberal, as they relentlessly use the power of the state to rob and control others.  They are simply extreme left "statists".  The elephant sock puppets, slightly to their right on the far left, pretend to fight with the jackasses, but are really holding hands with the jackasses behind the curtain, like fags.

Over time, the "liberal" propaganda word is being gradually replathed by the gubmint-media complex with the propaganda word "progrethive", which could mean anything.  Progressing towards what, tyranny under a totalitarian surveillance police state?

"Act surprised" that the BushBillBama regime has been a seamless continuum of destruction over the last 25 years.  They swap control over all three branches of gubmint, but nothing changes (except for the worst) in the land of the fee and home of the slave.

Wed, 07/10/2013 - 21:53 | 3739991 kchrisc
kchrisc's picture

As part of The Four R's first step of Rejection, anyone having student loans should just stop paying on them--just quit. Put the payments into gold, silver, and may I suggest, lead.

With deferments, etc. it will take them years to come after you and shit they all stole the money in the first place. In the longer term, the death of the dollar and US gov will probably make it irrelevant anyways.

Or put another way, if you know what we at ZH know is going to happen to the dollar and the US government, it might be foolish to keep paying and not "stacking, stocking, and loading." Plus you get to do your part in pulling some of the rug out from under these thieves, murderers and sociopaths.

 

The Four Rs
Rejection: Quit paying, quit obeying.
Revolution: It is inevitable, so prepare, as they are.
Retribution: Is there really any place for these sociopaths and criminals in a restored civil and Constitutional society?!
Restoration: Restore the Constitutional republic.

Wed, 07/10/2013 - 22:06 | 3740034 Downtoolong
Downtoolong's picture

I can hardly wait for some crafty kid to figure out they can pose as a student, borrow money from the government on the cheap, then lend it back to the government in an arb trade for a profit without ever going to school. They’ll probably be the only one to ever get a job if they pull it off…on Wall Street.  

Furthermore, I’m really surprised how Congress and Wall Street seem to be missing a huge opportunity here. In their typical approach, they would allow student loan interest rates  to rise to current market levels. Then they could create a post graduate loan program to provide money for ex-students to pay the interest on their existing student loans. Think of it like a second mortgage on all that potential equity in the future job they might get one day. I’m sure the banks would love it as long as the government backed the loans. When it comes to luring people into debt servitude, no amount of government backed risk-free lending is ever enough.

Wed, 07/10/2013 - 22:43 | 3740174 Mareka
Mareka's picture

The federal government intervening "to make college affordable"... just not for those of us who actually saved cash for 20 years to pay for it.

Gobs of cheap money available to anyone willing to scribble their name on a loan document leaves people like me paying more for everything.

Turn off the spigot already Ben... your're killin' me.

 

Thu, 07/11/2013 - 02:12 | 3740574 Spanky
Spanky's picture

+1

Amen...

Gobs of cheap money available to anyone willing to scribble their name on a loan document leaves people like me paying more for everything. -- Mareka

Thu, 07/11/2013 - 06:42 | 3740686 22winmag
22winmag's picture

Some schools (typically those unaccredited tech schools advertising on late-night TV) are actually organized crime fronts that simply scram with the loan money.

 

I've observed "schools" like this collect as much federal loan money as possible, shut down overnight, and run away with the money.

 

Many above board schools aren't much better... they knowingly accept, indenture, and graduate huge herds students who have no realistic chance of success in their chosen field.

Thu, 07/11/2013 - 07:54 | 3740819 orangegeek
orangegeek's picture

No one gets re-elected making cuts.

 

Spend like hell until it all blows up - we have been on this course since "the new deal" circa 1932.

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