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Next "Subprime Crisis" Expands As Student Loan Defaults Hit $146 Billion, Highest Default Rate Level Since 1995

Tyler Durden's picture


Almost exactly one year ago we wrote "The Next Subprime Crisis Is Here: Over $120 Billion In Federal Student Loans In Default" in which we took the latest (2009 three year cohort) loan default data on Federal Student Loans released by the Department of Education and applied it to the total amount of student loans outstanding, which back then was $914 billion. Yesterday, provided its annual update - this time to the 2010 three year and 2011 two year cohorts - and to nobody's major surprise, learned that things just got even worse. To wit: "The national two-year cohort default rate rose from 9.1 percent for FY 2010 to 10 percent for FY 2011. The three-year cohort default rate rose from 13.4 percent for FY 2009 to 14.7 percent for FY 2010." Putting this in context, according to Bloomberg defaults have risen to the highest level since 1995. The irony that this is happening in the aftermath of Bernanke's disastrous ZIRP policy is not lost on anyone.

Quantifying this percentage, recall the NY Fed reported in its second quarter household credit update that the amount of total outstanding student loans has now risen to $994 billion, or $80 billion more in just one year:

... one can calculate that the current amount of non-performing loans originated in 2010 is now a whopping $146 billion (the full total amount of student loans owed is $1.2 trillion when including private loans from the likes of Sallie Mae - this sum surpasses all other kinds of consumer borrowing expect for mortgages). Unfortunately, as the economic situation has only deteriorated since then especially for student-age Americans, the real blended amount of student loans in default is almost certainly substantially higher as of this moment.

The Education Department had this commentary:

The growing number of students who have defaulted on their federal student loans is troubling,” U.S. Secretary of Education Arne Duncan said. “The Department will continue to work with institutions and borrowers to ensure that student debt is affordable. We remain committed to building a shared partnership with states, local governments, institutions, and students—as well as the business, labor, and philanthropic leaders—to improve college affordability for millions of students and families.”

In other words, the response to the bursting of the student loan bubble, is to entice even more young people into the low-yield debt trap by "keeping debt affordable", which in turn will lead to college tuitions rising even higher, forcing students to take out, and default on, even more loans, and so on until this latest debt bubble can no longer be swept under the rug.

Things get even worse when broken down by for-profit institutions. "For-profit institutions continue to have the highest average two- and three-year cohort default rates at 13.6 percent and 21.8 percent, respectively. Public institutions followed at 9.6 percent for the two-year rate and 13 percent for the three-year rate. Private non-profit institutions had the lowest rates at 5.2 percent for the two-year rate and 8.2 percent for the three-year rate."

In other words, more than one in five loans used to fund a for-profit education, which would be most of those that lead to actual jobs, will never be repaid to Uncle Sam, and the ultimate payer will be you, dear taxpayer, when the student loan bailout time comes.

In the meantime,, which may or may not be down today, has announced its interim solution - pursuing sanctions against schools that have default rates of 25% or more for three consecutive years.

Certain schools are subject to sanctions for having two-year default rates of 25 percent or more for three consecutive years, or over 40 percent for one year. As a result, these schools will face the loss of eligibility in federal student aid programs unless they bring successful appeals. Please click here for more information about possible sanctions:

In other words, according to the government it is the school's fault that students are levering up en masse, when the real sanctions should be targeting the Federal Reserve and its easy money policy which while working miracles for PE firms, hedge funds and Primary Dealers in their pursuit of the Fed-funded "wealth effect" is backfiring when ordinary American students try to take advantage of zero cost money in their pursuit of the American Dream Nightmare.

Finally, as Bloomberg reports citing Rory O'Sullivan, of the Young Invincibles nonprofit group, "Our generation is behind in the economic recovery and not recovering as fast as we need to," said O’Sullivan, whose group represents the interests of people ages 18 to 34. “It’s financial disaster for borrowers. Defaults can dramatically affect their credit rating and make it harder to borrow in the future."

No need to worry though: remember that as the Fed has shown over the past five years, the only policy the US has in order to "fix" the unprecedented borrowing binge by everyone, is to force everyone into even more debt. And since monetarism is now a religion, all one needs is a little faith that all this will one day end well.

Finally, for those seeking some early humor, here is a chart straight from the St. Louis Fed showing the full history of Federal student loans.


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Tue, 10/01/2013 - 09:30 | 4009408 The Juggernaut
The Juggernaut's picture

Its a good thing that NYC doesn't allow guns otherwise the driver, Lien, would have been able to defend himself and his family.

Tue, 10/01/2013 - 09:32 | 4009413 fonzannoon
fonzannoon's picture

how about a 4 mile chase on the west side highway in broad daylight with cameras every 10 feet. Where were those high paid cops that were supposed to serve and protect?

Tue, 10/01/2013 - 09:47 | 4009434 dryam
dryam's picture

Completely off topic, but related to unsustainable exponential growth, unsustainable population growth, peak oil, the coming societal breakdown, and the inconvenient political truths with all of this.. Al Barlett passed away earlier this month at the age of 90. His You Tube videos are excellent. He was Zerohedge before ZH was a twinkle in ZH's parents' eyes. Here's one of his last long interviews....

Tue, 10/01/2013 - 10:05 | 4009549 BaBaBouy
BaBaBouy's picture

NO Worries O BLAMA, Its Only USD Fiats Paper.
No Actual REAL MONEY GOLD Involved.
(Almost No-One Has Any GOLD Left)

Tue, 10/01/2013 - 10:15 | 4009624 Enslavethechild...
EnslavethechildrenforBen's picture

Usury is unpayable. What, do you think you can defy the laws of Physics?

Tue, 10/01/2013 - 10:00 | 4009554 Croesus
Croesus's picture

Completely On-topic: 

"Now is a great time to go back to school".....

"Now is a great time to buy housing".....

"Now is a great time to buy stocks".....


"Honk if you believe you a word of this crap"....

Tue, 10/01/2013 - 10:24 | 4009655 dryam
dryam's picture

Actually my post was on topic. There can be so much that can be learned by watching just one hour of a Prof. Bartlett video on the web after his passing......all for FREE. The government does not want the masses to be educated. They want the masses to FEEL educated and to be in massive debt, but they don't want people to truly be educated.

Tue, 10/01/2013 - 13:07 | 4010346 TORNasunder
TORNasunder's picture

I'm so high on Hopium I'll buy anything!

In fact I'm doubling down... on PMs that is.

Tue, 10/01/2013 - 09:54 | 4009531 LawyerScum
LawyerScum's picture

The Supreme Court has ruled that police do not have a constitutional duty to protect a person from harm.  From my observations during 10+ years in the criminal law biz, I gleaned that the most important duties of most cops were generating money (taxing the serfs) and seizing assets.  Protect and serve ain't part of the modern LEO vernacular.

Tue, 10/01/2013 - 10:15 | 4009623 MachoMan
MachoMan's picture

It makes sense...  It isn't a violation of your constitutional rights when police departments fail to keep PRIVATE actors from harming you (it's impossible).  However, this does not stop you from suing governmental actors on non-constitutional grounds...  although, state actors are generally immune from suit (for incredibly obvious reasons).  [note: if the state actor harms you, then it's a totally different story, although that actor will be generally immune from suit]. 

Tue, 10/01/2013 - 09:32 | 4009419 NoDebt
NoDebt's picture

I saw that yesterday somewhere.  He had his 5 year old son in the car with him, too.  Ended up being dragged from the car and beaten.  Even without a gun, I guarantee you I would not have allowed that to happen.  It's fairly easy to run over a LOT of motorcycles with a good sized SUV.  In both forward and reverse.  Gun would have been better to have, though.


Tue, 10/01/2013 - 09:36 | 4009442 Headbanger
Headbanger's picture

Oh, poor man..  Yeah right.   What was that asshole doing messing with bikers with his precious 5 year old in the vehicle.

Your post is exactly the arrogant attitude I'm referring to in my post below.

Bet you don't like "those kind of people" either.

Tue, 10/01/2013 - 09:43 | 4009462 fonzannoon
fonzannoon's picture

You seem to miss the whole fucking point. I am not sure where you see this dude fucking with these bikers. I did not see it. I saw them cut him off and hit the brakes.

Here is the best part. I have some buddies that are good dudes. They ride those bikes. They know that thanks to these guys the next time they are remotely close to being involved in an incident they will likely get beaten to shit by the cops just because.

Everyone loses. What cracks me up is the lack of police though. That's all I ever meant to point out. 4 mile chase on the west side highway in broad daylight that dumps out onto the sidestreet and the police are nowhere to be found. The city is fucked. It's basically mad max already. 

Tue, 10/01/2013 - 09:55 | 4009529 Headbanger
Headbanger's picture

Did you ever think that a lot of LEOs and fire fighters ride too?  But most of all, YOU and everybody else are responsible for the shit they get into and can't be relying on the police to show up instantly to get them out of it. Unless you believe  the "Nanny State"  should and must always protect you no matter what shit you get yourself into.

Tue, 10/01/2013 - 10:01 | 4009559 fonzannoon
fonzannoon's picture

Exactly. The irony is so many people in the city sold their rights away a long time ago for protection that they sure as shit are not getting in return today. So as pods pointed out, it will be funny to see things evolve in there, as (again) pods pointed out, real estate prices for instance, as people realize they have been had.

It's funny how you can make a really good point in one example and yet you seem to just root for a guy in a nice car to get killed in front of his family because he is driving a nice car and that made him arrogant enough to fuck with 50 bikers. 

Tue, 10/01/2013 - 10:09 | 4009601 Headbanger
Headbanger's picture

Oh the bikers just decided to beat the shit out of him for no reason!!??

The SUV driver did something to really piss off the bikers for them to react as they did.

Again, the lesson from this nasty episode is we all must be mindful of such events happening to us in hazardous situations (like driving) and can't expect the police to get us out of it.

So good luck to you in the real world. Or just avoid it completely.

Tue, 10/01/2013 - 10:13 | 4009621 fonzannoon
fonzannoon's picture

and good luck with your blind assumptions. Yep, a single dude out with his wife and 2 year old decided to fuck with 50 dudes on crotch rockets....and your proof is.....

Tue, 10/01/2013 - 10:27 | 4009673 dark pools of soros
dark pools of soros's picture

the guy owed gambling debts to the bikers

the wife owed them for all the meth she gets from them

the kid's real father is one of the bikers

Tue, 10/01/2013 - 18:04 | 4011788 Parrotile
Parrotile's picture

Range Rovers (usually black ones) are popular with Russian / Ukrainian Embassy staff (in London and Australia) for safety and security reasons.

It would be "interesting" to note the outcome of a comparable incident involving the Russkies (and it would not be just one pair of broken legs . . . . .)

Tue, 10/01/2013 - 10:40 | 4009730 FuzzyDunlop21
FuzzyDunlop21's picture

did you even read it? it takes like 5 minutes...

Tue, 10/01/2013 - 09:54 | 4009533 pods
pods's picture

Shhhh, you can't say that fonz. What would happen to RE prices in big cities if people realized that if EBTs stopped for a week their shining city would be Mogadishu?


Tue, 10/01/2013 - 10:01 | 4009558 CPL
CPL's picture

People somehow find stuff to do there everyday though.  Like meeting international friends, planning boat trips and holding them for ransom.

Tue, 10/01/2013 - 11:26 | 4009940 max2205
max2205's picture

I'd be worried if tbis were securitized and leveraged and sold to the sheep. ...oh wait


Ben will hold them till your greag grandchildren are dead

Tue, 10/01/2013 - 12:09 | 4010147 LawyerScum
LawyerScum's picture

I'm picturing something more like the Walking Dead, pods.

Tue, 10/01/2013 - 10:54 | 4009797 Black Swan 9
Black Swan 9's picture

Exactly, fonz. I live here part-time and am moving out later this month.

Sooner rather than later.

What I observe here on a daily basis between the haves and the have-nots is frightening as the gap widens.

A friend of mine was attacked by a man in Chelsea, a relatively safe area, a year ago. This man followed my friend into a convenience store on 22nd & 9th. He tried to grab my friend's iPhone. He refused to give it up. A scuffle ensued, they ended up on the ground, the convenience store owners watching, but not getting involved, understandably. My friend had shoved his phone into his pants front pocket. The man started savagely biting my friend's upper arm to release his grip on his phone in his pocket. My friend is stubborn, refused to give it up -- and "won". And lucky the guy was unarmed but for his teeth.

I cannot give here an adequate description of what my friend's arm looked like after the attack, like vicious dog bites, bruised, black, deep purple & red teeth marks, skin broken in several places, full jaw, upper and lower teeth impressions are now scarred in several places on my friend's arm. A great momento from living in NYC in times like these, and those to come. A warning of sorts, for anyone paying attention. I am.

The anger and desperation as evidenced by these stories is growing in the great economic divide, and I believe, it's only going to get worse.

Tue, 10/01/2013 - 14:26 | 4010742 IdiocracyIsAlre...
IdiocracyIsAlreadyHere's picture

And since they won't be able to touch the real "haves" it will be the "have a little" people who who will really be the victims here.  Have a good cellphone, nice watch, good shoes, small amount of cash in your wallet?  Good luck not getting robbed.  Be a bankster or a hedge fund crook taking your private limo back to your yacht?  Nothing to worry about.  Not only do you have your own (armed) security, the cops will coming running at just the hint of your distress.  Fun, isn't it?

Tue, 10/01/2013 - 15:32 | 4011102 Black Swan 9
Black Swan 9's picture

Again, exactly. Though I wouldn't be surprised to read about home invasions at some point in the future. Targeting CEO's, banksters & political "leaders" -- people are getting THAT angry - I see it here and on other sites, more and more extreme anger over the last 5-6 years, references to the French Revolution, and heads hanging from lamp posts..

Moving back full-time to the Philly suburbs - an illusion of good times, but safer, for now. When the bubbles pop, everyone on the grid will be affected, but the cities will have it the worst.

Better 5-10 years early (conservative estimate?), than a week or so too late.

Tue, 10/01/2013 - 14:39 | 4010825 Omen IV
Omen IV's picture

That event is really not that bad - in the 60's, 70's and 80's  - it was very weird - much more violent but the city was much more fun and exciting than today - tompkins park was insane  - dont worry about it !


Tue, 10/01/2013 - 15:19 | 4011036 Black Swan 9
Black Swan 9's picture

"dont worry about it !"

Living in the city, I worry more about the days to follow when EBT cards stop working.

Tue, 10/01/2013 - 17:48 | 4011731 Parrotile
Parrotile's picture

Your friend probably needed a significant range of antibiotics to treat the resulting infection: Human bite injuries are as bad as, and as difficult to treat effectively, as animal bites - irrespective of the degree of dental hygiene of the "biter" (and I'd assume the assailant might not have been to scrupulous in that area). Bear in mind that the "normal" oral cavity biofilm is home to about 25 thousand species (possibly more)!

Tue, 10/01/2013 - 09:40 | 4009450 Grande Tetons
Grande Tetons's picture

Take your SUV to Sturgis this summer and test your strategy in the real world. 

Tue, 10/01/2013 - 09:42 | 4009467 fonzannoon
fonzannoon's picture

Or 2nd avenue apparently

Tue, 10/01/2013 - 10:58 | 4009800 Tucson Tom
Tucson Tom's picture

I just put a third clip in my car.Better to be judged by twelve,than buried by six.

Tue, 10/01/2013 - 09:33 | 4009424 Headbanger
Headbanger's picture

My bet is he was messing with the bikers cause he's an asshole driving an expensive SUV and doesn't like "those kind of people".

He's lucky to be alive. I bet he won't pull that shit again.

That's called "welcome to the real world" asshole!

Tue, 10/01/2013 - 09:39 | 4009447 fonzannoon
fonzannoon's picture

Yeah a small dude rolling in a Range Rover with his wife and 2 year old decided to fuck with 50 bikers on crotch rockets.....yup let me risk my family's lives takng on 50 dudes.

That may be the dumbest fucking idea I have ever heard of. By the way, the asian dude did fuck up. If that dude tried to rip my car door open I would have backed up and ran half of them over, then slammed the gas and ran the other half of them over. I would not have left until they were littered all over the west side highway.


Tue, 10/01/2013 - 10:11 | 4009603 shovelhead
shovelhead's picture

Damn straight Fonz.

These punks on riceburners pulled a drop and squat on that guy. This is coming from a long time biker.

I would have left behind lots of goo if that were me.

Tue, 10/01/2013 - 09:46 | 4009481 Dr. Engali
Dr. Engali's picture

This may be the dumbest ass comment I've read in a while. I'm sure that a guy driving with his family is going to mess with a group of bikers. 

Tue, 10/01/2013 - 09:47 | 4009493 fonzannoon
fonzannoon's picture

and it started out with a bunch of greenies. This country is fucked Doc. All the people on here who claim to not fall for the red team blue team bullshit are too busy falling for all the other traps. Some guy drives a nice car. String him up and beat him to death....because....


Tue, 10/01/2013 - 10:04 | 4009579 Dr. Engali
Dr. Engali's picture

I agree. It amazes me that anybody can read that story and then blame the guy in the SUV. The logic of the situation never registers with them. The thought never crosses their mind that maybe the bikers were just a group of assholes.

Tue, 10/01/2013 - 10:00 | 4009544 Headbanger
Headbanger's picture

You should talk!  Do you think the bikers just decided to beat this idiot for no reason at all!!??

Get a clue you mook.

Tue, 10/01/2013 - 10:06 | 4009582 fonzannoon
fonzannoon's picture

Watch the video you dumb fucking putz.

They cut him off and braked. He bumped one of them from the back. They stop.  One dude sprints up and tries to rip his door open and the guy tears ass outta there. So I bet 40 of those guys only saw the guy tearing ass outta there and wreaking havoc and they chased him down and beat him. 

It's a crazy scenario and the guy was on his own, as you so eloquently point out, to defend himself. Can you blame him? 

Where do you see him fucking with them? 

Tue, 10/01/2013 - 10:13 | 4009614 shovelhead
shovelhead's picture

Forget it Fonz.

You can't fix stupid.

Tue, 10/01/2013 - 10:16 | 4009628 Headbanger
Headbanger's picture

Oh he just bumped one of them in the back!?  As if that's an OK thing to do when you're driving a 4000 pound SUV and hit a motorcycle in heavy traffic. That's called "vehicular assault" and the bikers had every right to defend themselves from this menacing SUV driver.   Again, he's lucky to be alive.  If he did that in a rural area, he would have been shot dead.

Tue, 10/01/2013 - 10:20 | 4009650 Dr. Engali
Dr. Engali's picture

Hey dumb ass. The biker zipped in front of him then slammed on his brakes. 

Tue, 10/01/2013 - 10:58 | 4009808 Hulk
Hulk's picture

and there ain't no way a SUV out stops a bike...

Tue, 10/01/2013 - 15:06 | 4010974 jerry_theking_lawler
jerry_theking_lawler's picture

This shit would never happen in a legal carry state.....

Tue, 10/01/2013 - 10:10 | 4009605 4 wheel drift
4 wheel drift's picture

get a clue ?


these fuckers were blocking him and others, indeed, they came to a stop...  they act as though they own the road....    i have been in a similar situation and these losers (*the bikers*) are the arseholes relying on their numbers, namely, mob courage.

so the real question is... why these shitheads were blocking the road and disturbing the peace?  A = because they have mob courage and they fell they can get away with it....   until they cannot.

so fuck them....   i'd like to see ONE of these losers attempt to do this shit act as an indivdual .....  without their mobsupport.   fat chance of that.

Tue, 10/01/2013 - 10:18 | 4009647 Headbanger
Headbanger's picture

Oh so the SUV driver had the right to hit the bikers cause they were "blocking the road" !!??

Large groups of bikers "block the road" for everybody's safety including idiots in SUV's.


Tue, 10/01/2013 - 10:25 | 4009664 4 wheel drift
4 wheel drift's picture

no, but he hit them because one of the bikers STOPPED.....   WHY ?   clearly to provoke the SUV driver...

as i said.....   i would like to see ONE of these losers try it as a single individual....

i.e. STOP on an open road for no reason.....    he will get crushed....  obviously, he would not do it...

so WHY did he do so in this instance ??  again...  A = mobcourage....

as i said.....  FUCK THE BIKERS, bunchalosers

Tue, 10/01/2013 - 14:59 | 4010918 InflammatoryResponse
InflammatoryResponse's picture

And they were only messing with the guy because OF the SUV he's driving.   A Range Rover, about a 60k vehicle last I saw. they were thinking lets mess with the rich guy.



Tue, 10/01/2013 - 10:38 | 4009607 derek_vineyard
derek_vineyard's picture


fuck those punks

praying on the 'weak'....fucking pussies

Tue, 10/01/2013 - 10:12 | 4009612 Agent P
Agent P's picture

Story says a biker cut him off and slammed the brakes (aka fucking with the SUV) and got bumped as a result.  Story says the driver stopped, but then fled (running over bikes and a biker) after they started attacking his vehicle, and that's when the shit really got messy.  Still, sounds like it was at least one biker that was the instigator in the whole mess.  I'm guessing you ride and that most of the riders you know are good guys, but that doesn't mean there aren't any dickheads out there on motorcycles...or dickhead Asians driving Range Rovers for that matter...but the story and the circumstances strongly suggest the biker(s) was the cause of problems in this specific situation. 

Tue, 10/01/2013 - 11:50 | 4010046 MachoMan
MachoMan's picture

Here are some additional videos that have reportedly been removed from the social media page(s) of the motorcycle driver.

Tue, 10/01/2013 - 10:02 | 4009566 asteroids
asteroids's picture

The guy is an asshole. He should have instantly stopped and rendered assistance. Fault, and justice come later. What a moron risking a child on such a stupid stunt.

Tue, 10/01/2013 - 10:08 | 4009594 fonzannoon
fonzannoon's picture

rendered assistance to the crazy guy sprinting up to tear him out of his car? LOL

Oh yes, I clearly remember, "Shelter in place" is advocated on here bigtime.

Tue, 10/01/2013 - 10:14 | 4009627 derek_vineyard
derek_vineyard's picture

once the shit got hot i would have taken out as many of those bikers as i could to try and get away

thats the jungle, baby

cuts both ways----would a gun been any better?   if he pulled a gun during the chase, chances are helmet cam off and someone caps him---if he has a gun he has to USE it

either way its life or death

Tue, 10/01/2013 - 10:43 | 4009739 MachoMan
MachoMan's picture

If you're threatening my wife and kids (and me), then it's your ass...  if there's 50 of them and I'm in an SUV, then it's motorcycle bowling time.  Do the best to keep everyone calm and get wifey to call the cops while you meander towards the popostation, keeping only to streets (highways) where you will not get stopped...  It would also be a good time to start piecing together makeshift weapons in the event everyone in the car isn't already packing.

The guys that were chasing him down probably didn't know that their crew members were the ones starting the whole mess...  maybe they didn't care, but I'm giving them the benefit of the doubt.

Tue, 10/01/2013 - 09:33 | 4009426 dryam
dryam's picture

Completely off topic, but related to unsustainable exponential growth.... Al Barlett passed away earlier this month. His You Tube videos are excellent. Here's one of his last long interviews....

Tue, 10/01/2013 - 09:33 | 4009427 Grande Tetons
Grande Tetons's picture

True. Although, I am sure the bikers would have capped his ass first. 

Tue, 10/01/2013 - 09:32 | 4009409 GetZeeGold
GetZeeGold's picture



Yeah.....that 29.5 hour/week job is not conducive to paying off the student loan. That's if they can find a job at all.

The only good thing is they've still got their parent's healthcare.

Tue, 10/01/2013 - 09:35 | 4009430 Cursive
Cursive's picture


It's hard to imagine that anyone would target rich people...thank you, BernanQE.

Tue, 10/01/2013 - 10:21 | 4009648 libertus
libertus's picture

The whole system needs a redesign. I like like what this outfit is doing . It cuts out the middle man and helps to elimintate the bloated administration. In addition it rewards good professors while forcing out the dead wood using a very radical concept--an open and transparent marketplace. Keep and eye on these guys--although the CEO looks a little dorkey. 

Tue, 10/01/2013 - 10:21 | 4009649 libertus
libertus's picture

The whole system needs a redesign. I like like what this outfit is doing . It cuts out the middle man and helps to elimintate the bloated administration. In addition it rewards good professors while forcing out the dead wood using a very radical concept--an open and transparent marketplace. Keep and eye on these guys--although the CEO looks a little dorkey. 

Tue, 10/01/2013 - 12:05 | 4010123 WillyGroper
WillyGroper's picture

OT but relative. Anyone see on Bloomberg an interview where a guy was asked about cash & he said he had a whole lotta singles?

Anyone recall a theory quite awhile back re: fiat in denominations other than $1 will only be worth a fraction of that $1 even if it's in a $100 denomination?

Tue, 10/01/2013 - 09:29 | 4009407 Cursive
Cursive's picture

Now, THAT's a hockey stick!

Tue, 10/01/2013 - 09:35 | 4009435 auntiesocial
auntiesocial's picture

this is where it gets tricky- not only do you need to figure out how to support yourself with part time income and your master's degree, but you also have to pay back those student loans with the afformentioned same part time job. you can split atoms and pennies while you chew on your extended diet of ramen noodles that you were talking about relinquishing two years ago.

welcome to the new millennia bitches!

Tue, 10/01/2013 - 09:33 | 4009417 One And Only
One And Only's picture

I know how to fix it!  Nationalise it

Tue, 10/01/2013 - 09:46 | 4009484 BobPaulson
BobPaulson's picture

Shouldn't be a problem. 140B is less than two months of QE. Just tack it on the list of bad paper and roll some FRN wallpaper over it.

In five years when QE has a few more zeros on the end,we'll look back and chuckle at a paltry 140 billion.

Tue, 10/01/2013 - 09:32 | 4009420 ak_khanna
ak_khanna's picture

The main aim of the political class and the central bankers around the world is to create one bubble after another for the zombie bankers to feed on. The majority of the population who actually work hard to earn their living by engaging in productive work have to pay the price by either loosing a majority of their earnings in the form of taxes, interest on loans or paying the bill for the bailouts.

Tue, 10/01/2013 - 09:34 | 4009421 Tabarnaque
Tabarnaque's picture

And there goes one of the 2 pillars of America’s credit expansion! The other one being the sub-prime auto lending. 2 more bubbles getting ready to burst. Enslaving the young right from the start. This is modern Feudalism.  

Tue, 10/01/2013 - 09:43 | 4009461 Tsar Pointless
Tsar Pointless's picture

It is, brought to you by another 'f' word, fascism.

Yet there are those morons who still think we have "communism" or "socialism".

I don't get it.

Tue, 10/01/2013 - 10:47 | 4009756 MachoMan
MachoMan's picture

We have self interest...  classifying it is to engage in the same nonsense as the blue vs. red debate.  Self interest manifests itself in many forms, but the most important is rent seeking.  How rent seeking is baked into the system is not particularly important.

Tue, 10/01/2013 - 10:52 | 4009785 RKDS
RKDS's picture

"Yet there are those morons who still think we have 'communism" or "socialism'."

I know; it's driving me to drink.

Tue, 10/01/2013 - 14:34 | 4010788 IdiocracyIsAlre...
IdiocracyIsAlreadyHere's picture

Correct.  All one needs to look at is Mussolini's definition of the word "fascism" to understand that is exactly what we live under.

Tue, 10/01/2013 - 09:34 | 4009433 ziggy59
ziggy59's picture

Maybe its the "students" selling their fillings, crowns, gold teeth, and bling thats causing the PMs to drop today?

Tue, 10/01/2013 - 09:38 | 4009444 Sudden Debt
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Tue, 10/01/2013 - 09:44 | 4009473 Charles Nelson ...
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U.S. Secretary of Education Arne Duncan said. “The Department will continue to work with institutions and borrowers to ensure that student debt is affordable. We remain committed to building a shared partnership with states, local governments, institutions, and students—as well as the business, labor, and philanthropic leaders—to improve college affordability for millions of students and families.”

Uhh yeah, sure asshole!

Tue, 10/01/2013 - 09:49 | 4009497 yogibear
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Try and find cash work. Kill the beast. Default, and get out of the corrupt system

Tue, 10/01/2013 - 09:50 | 4009508 CaptainObvious
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“The Department will continue to work with institutions and borrowers to ensure that student debt is affordable."

And just how the fuck are you going to do that, Arne?  You firing all the overpaid administrative staff at public universities?  Banning new construction of pools, hot tubs, and stadiums?  Making the professors teach the courses instead of paying grad students subsistence wages to teach them, perhaps?  Fuck you, Arne.  Fuck you with a rusty sewage conduit.

Tue, 10/01/2013 - 09:46 | 4009477 lunaticfringe
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The largesse seekers, finding out that they have been swindled by the bankers who sold them an education, are now angry that they do not have the means to pay back the loan. Thus they will work diligently to reduce the interest rate and then ultimately find a way to default without consequences.

The bankers have already socialized their losses by dumping this big loser onto the taxpayers once again. The haves keep fucking the havenots.

This is how the end game plays out. It is exactly like a poker game. The few and best players (the minority) get all the chips. The majority (losers) seeing this, find a way to get their chips back while holding the winners hostage.  

This is the end game for all democracies, failed Republics or otherwise. When the have nots become the majority- they simply find a way to abrogate the law or change the rules to seize the assets of the minority. (wealthy) Witness QE or the "affordable care act" which is quite affordable if you are broke dick poor. Not so affordable if you manage to make 45k a year- you pay full price.

Everything you are seeing now are the new rules as established by the majority. Ultimately they will find a way to seize all wealth and redistribute it. It really is two wolves and a lamb voting on what is for dinner. 

Tue, 10/01/2013 - 09:46 | 4009486 yogibear
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Everyone neesds to stop paying and working. Kill the beast.

Stop contributing to the education and bankster cabal.

Tue, 10/01/2013 - 09:48 | 4009489 debtor of last ...
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I saw a docu from Louis Theroux on youtube about crystal meth. A couple, both addicted were asked: how do you earn your money? The woman said: in the past i made 10 grand a week dealing meth. But now we both have student loans......

Wow, how they fucked up your wonderful country Americans...

Tue, 10/01/2013 - 09:47 | 4009490 CaptainObvious
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I'm going to make a wild guess here, but I betcha the gubmint assholes at the Department of Education who orchestrated this clusterfuck are not getting furloughed.

Tue, 10/01/2013 - 09:47 | 4009491 SheepDog-One
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Looks to me like the biggest blowoff top in history right when everyones been totaly conditioned to believe nothing bad will happen ever again.

Tue, 10/01/2013 - 09:48 | 4009499 lizzy36
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No worries.

Departement of Education will send out their S.W.A.T. team to collect blood from a stone.

Yes, teh Departement of Education has a S.W.A.T team, because really everyone needs their own S.W.A.T. team. 

Tue, 10/01/2013 - 18:14 | 4011817 Parrotile
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Getting to the stage in the USA where everyone needs to be their own "One-Man SWAT Team" - might help reduce incidents such as this one -

Tue, 10/01/2013 - 09:50 | 4009505 taketheredpill
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U.S. Taxpayers won't be on the hook because Student Loans can't be discharged in bankruptcy.


So as soon as the students get a job they will be able to start paying off the balance of the loan.


Oh.  Now I get it.



Tue, 10/01/2013 - 10:12 | 4009615 BlueCheeseBandit
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What if the debt is never repaid because of permanent unemployment/fleeing the country/suicide?

Tue, 10/01/2013 - 12:11 | 4010160 epwpixieq-1
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Why should they get a job, if they can live on government subsidies. In this way government pays them to live and they, with the government money, MAY pay back their worthless diploma.

For lets make one thing clear, what most of these kids are getting in collage, in Europe this type of knowledge is given to students in high school for free.

Tue, 10/01/2013 - 09:51 | 4009512 yogibear
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The bankster debt-slaves are getting restless.

Tue, 10/01/2013 - 09:51 | 4009514 Dr. Gonzo
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Got to get myself a Coleeege educaasion.

-Freddy "Boom Boom" Washington

Tue, 10/01/2013 - 10:06 | 4009588 falga
falga's picture

Ok the student debt is equivalent to about 10 trillion Yen +. They just decreed a 5 trillion yen stimulus today, so why don't we sell Japan some of this debt paper in nice little packages. They already have a quadrillion Yen debt, a little more won't hurt....

Tue, 10/01/2013 - 10:12 | 4009609 BlueCheeseBandit
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Giving kids a debt burden the size of a house in the midst of a depression isn't working!?

Tue, 10/01/2013 - 10:12 | 4009611 WallowaMountainMan
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"The irony that this is happening in the aftermath of Bernanke's disastrous ZIRP policy is not lost on anyone."

coincidental, but this line tells the big story:

"For-profit institutions continue to have the highest average two- and three-year cohort default rates at 13.6 percent and 21.8 percent, respectively.

golly gee whizzaroonie. do you think the 'can't discharge student loans in banktuptcy' had anything to do with whom the privates 'lent' guaranteed by the u.s. of a. $$$'s ?

and yes it is possible to blame the bernak for qe'ing, but without that bankruptcy law, default rates would look more in line with historic norms.

my best guess.


Tue, 10/01/2013 - 11:00 | 4009825 DOT
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You cite the higher rates but neglect to provide the gross figures. I'm betting the total debt from public schools far exceeds that of private schools.

Tue, 10/01/2013 - 14:45 | 4010857 IdiocracyIsAlre...
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It is not the traditional private schools that are being discussed here (they actually have the lowest defaults) but the rent-seeking wealth extraction scheme known as "for-profit" schools.  These were set up precisely to take advantage of the student loan non-discharchable goverment insured scam.  Kaplan, University of Phoenix, Strayer, ect are only "education" in the loosest sense of the word.  You are stuck in the private always better than public meme and in that is not the case here.  Just wait until these parasites get their hands on K-12 $$$ under the scam of vouchers and "school choice" (NOT "free market" in any sense of the word).  Debt begins as soon as the kiddos are up and walking.  Don't think for a minute that is not the goal.

Thu, 10/03/2013 - 11:57 | 4018654 WallowaMountainMan
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Wed, 11/06/2013 - 21:22 | 4009663 Widowmaker
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Tue, 10/01/2013 - 10:26 | 4009665 I Write Code
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There is a looooong running con, where they set up a "school" and recruit "students" who apply for federal loans from Uncle Sugar and never attend classes, in fact the students may never exist at all, for that matter the school may not exist at all, just the money is real.

When there is a TRILLION dollars of manna running loose, wouldn't you?

Some of the largest for-profits are really just variations of this scam writ large, gobmit money taps first and last, and maybe some kid learns something along the way kind of by accident.


Tue, 10/01/2013 - 10:27 | 4009668 ShrNfr
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File a bankruptcy and owe more than you began with:

Tue, 10/01/2013 - 18:21 | 4011840 Parrotile
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A great, and seemingly fail-safe, money-making scheme for the lenders -

"The process under Chapter 13 of the code generally restricts these borrowers from making full payments on student loans during the three-to-five-year bankruptcy period. That allows lenders to add interest, late fees and other penalties to the student-loan balances during that time."

Makes an already expensive "education" even moreso.

Tue, 10/01/2013 - 10:29 | 4009675 shovelhead
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So what's the beef with the for profits schools. The kids are defaulting on trade schools because theres no jobs. Period.

The next time your AC goes out or your toilet stops working call a State University (nonprofit...Ha) Masters degreed in Womyn's Studies unemployed to come fix it.

Do you really think there aren't 'shareholders' in the 'non-profit' school system?

Can't guess who?

Tue, 10/01/2013 - 15:34 | 4011103 IdiocracyIsAlre...
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You mean rent-seeking wealth extraction scheme known as "for-profit" schools?  These are not traditional "trade" schools.  These were set up precisely to take advantage of the student loan non-discharchable goverment insured scam.  Kaplan, University of Phoenix, Strayer, ect are only "education" in the loosest sense of the word.  These fine institutions cannot wait to get their hands on K-12 $$$ as well under the scam of vouchers and "school choice" which are NOT "free market" solutions.  Debt peonage begins as soon as the kiddos are up and walking.  Don't think for a minute that is not the goal.

The flaws of state universities pale in comparison to these parasites.  Oh, and "Womyn's Studies" departments are not found solely at state schools, most of the elite private colleges have them as well. 

And if I have to pay taxes, I would rather they go to provide an education for someone than funding the MIC war machine and bailing out banksters' bad bets.

Tue, 10/01/2013 - 10:30 | 4009677 Catullus
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There's no amount of interest to be had that makes a 10% default rate feasible. Just so a couple of furloughed government might read this: THE STUDENT LOAN MARKET SHOULD NOT EXIST.

Tue, 10/01/2013 - 10:30 | 4009678 Antifaschistische
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two cents...

Immediately implement an inverted loan eligibility formula.

If your school has a 25% default rate, then student loans will only be available for 75% (1 - 25%) of your schools tuition.


Tue, 10/01/2013 - 10:29 | 4009679 goldenbuddha454
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Gee, I can remember a certain president wildly pushing everyone to go back to school.  How's that workin out for ya America?

Tue, 10/01/2013 - 10:30 | 4009687 warezdog
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lets not forget the account trick used to not count any of the loans "bad" if they're past 120 days. In reality this problem is MUCH MUCH worse than it appears

Tue, 10/01/2013 - 10:54 | 4009789 Fepericzer
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It is actually the opposite.  For typical consumer and business loans and credit products, the loans disappear from the statistics at 120 days delinquent:  they are written off as bad debts.  For federally guaranteed and direct education loans, they default at 360 days delinquent, and nothing has been written off since the 1990s.  This artificially inflates the "defaulted portfolio," and borrowers who owe on these loans can rarely escape them.  Disability discharge is now pretty straightforward, but the borrower then owes taxes on the discharged amount, just like any private or public debt cancellation.  Bankruptcy discharge is extremely difficult to obtain.

Tue, 10/01/2013 - 10:32 | 4009690 TheSkipper1967
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That chart reminds me of when I was 18 years old and woke up in the morning.  To bad it doesn't give me the same feeling. 

Tue, 10/01/2013 - 10:42 | 4009741 Fepericzer
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Cohort default rate is based on Stafford borrowers who entered repayment during a particular 12-month period.  It has nothing to do with dollars, just borrowers.  The dollars cannot be calculated from it.  In addition, it has nothing to do with originations.  Some borrowers enter repayment years after their first loans were originated.  These in fact are your lowest-risk borrowers because they are completers.  Those who enter repayment within a year or two of origination tend to be dropouts -- or completers of short-term certificate programs.  The dirty secret is the high debt is correlated with low default risk, not high default risk.  In general, the fewer the loans you have taken out and the lower your cumulative debt, the greater the chance you default.  Of course there is a tipping point somewhere at which too much is too much.   

The last chart is incorrect and does not reflect a secular increase in federal education loan indebtedness.  It simply reflects a policy change.  From 1966-1994, federally-guaranteed loans had the field to themselves.  These are guaranteed against default by the taxpayer (100% for loans through 1993, 98% for most years' loans after that) and received a quarterly guaranteed rate of return from the taxpayer.  There were numerous other subsidies as well.  Players included lenders (banks, nonbank lenders, nonprofit lenders, state lenders, etc.), guaranty agencies, and secondary markets.  Direct Loan, introduced in 1994, had the minority of the annual origination market share until 2010.  For the last three years, only Direct Loans have been originated.  Guaranteed lending is no longer authorized, although loans issued before July 2010 continue to exist.  Within the past year, the total balance of outstanding Direct Loans exceeded guaranteed loans for the first time.   

QE has nothing to do with federal student lending.  These loans are not taxpayer liabilities.  They are taxpayer assets.  A loan held by Acme Bank is not a liability.  It is an asset to the bank's shareholders.  The accounting is almost exactly the same.  Banks issue a bunch of loans and create a loan loss reserve on their books.  Some loans default.  In the case of federal loans, Uncle Sam has collection powers that average banks and credit unions could only dream of.  Uncle Sam makes a profit even on many of the loans that default.

Treasury charges DOE (and other federal agencies that have direct loan programs such as USDA, VA, Energy, DOT, and HUD) a surprisingly-high interest rate.  Senator Warren's idea to charge federal education loan borrowers the FR overnight funds rate was good politics but a major budget-buster, when Treasury is charging direct loan programs 4% for loan capital.  

There isn't a bubble, and it is not bursting.  Rates willl be coming down as the highest-risk era of postsecondary education has already passed.  You just have to wait a couple years until the repayment cycle.  The for-profit education boom of 1995-2010 has ended.  Schools are intentionally reducing enrollments sharply, in part to reduce default risk and to meet the gainful employment requirements that didn't meet lower-court muster but made a lot of sense to the public.  It is also a rubber-band effect from the fake default rates of a few years ago.  The trend line is a lot flatter than it looks.  Unauthorized consolidations created artificially-low "cohort" rates during the mid-2000s as Stafford borrowers prepaying their loans fattened the denominators.  Do you really think national enrollments increased 50% during 2004-06?  This also left the subsequent cohorts stuffed with high-risk, low-balance borrowers that the consolidation lenders didn't want.

Tue, 10/01/2013 - 12:23 | 4010194 BlueCheeseBandit
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"These loans are not taxpayer liabilities. They are taxpayer assets. A loan held by Acme Bank is not a liability. It is an asset to the bank's shareholders."

Worked in the housing bubble.

Tue, 10/01/2013 - 16:31 | 4011411 Fepericzer
Fepericzer's picture

It actually did work.  Most lenders and loan holders were issuing loans that were guaranteed.  Many of those that were not guaranteed were bailed out.  In the case of federal student loans, there is far less risk for the shareholders -- American taxpayers (for Direct Loans) and investors (for FFEL loans) -- than in the housing market.  Unlike Fannie/Freddie, where the guarantee and taxpayer backstop is only imagined, for federal student loans it is very real.  For Direct Loan and FFEL, Uncle Sam has collection powers that private banks could only dream of.  Default is not the end.  It is a second beginning for the cash that will be collection over the years.

Tue, 10/01/2013 - 17:03 | 4011565 Suisse
Suisse's picture

Unless the government nullifies the debt  with some sort of bail out for political reasons in order to buy votes because the debt cannot be paid back by unemployed people living with their parents. 

Tue, 10/01/2013 - 10:48 | 4009762 Tucson Tom
Tucson Tom's picture

I just put a third clip in the car for my 911 Kimber.Better to be judged by 12 ,than be carried by 6.

Tue, 10/01/2013 - 11:14 | 4009885 Bobportlandor
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Very troubling where it's all headed.


With membership in the Guard, you have the opportunity to receive 100% tuition assistance furthering both your college education....



Tue, 10/01/2013 - 11:50 | 4010045 q99x2
q99x2's picture

Up my FASFA Bernanke Mother Fucker.

The UC System has to support Big Sis and she ain't cheap.


Tue, 10/01/2013 - 12:02 | 4010110 Whiner
Whiner's picture

No one seems to want to focus at all on what enraged the biker dudes. Typical prejudice against bikers who are at extreme vulnerability to cars which killem daily.

Tue, 10/01/2013 - 13:11 | 4010365 SamAdams1234
SamAdams1234's picture

One choice alone: return statute of limitations and bankruptcy discharge. Without them it is only a matter of time before the debt-serfs look for a scaffold.

Tue, 10/01/2013 - 13:10 | 4010367 SamAdams1234
SamAdams1234's picture

One choice alone: return statute of limitations and bankruptcy discharge. Without them it is only a matter of time before the debt-serfs look for a scaffold.

Tue, 10/01/2013 - 14:40 | 4010819 BullyBearish
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Dryam...thanks for the link, Al Barlett RIP, so glad we have the ability to listen and learn

Wed, 10/02/2013 - 10:08 | 4013533 pholosophy1
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Strange how you imply that "for profit" institutions would likely be the ones to result in a job.  The for profit "on line" "education" that is offered by corporate entities, likely all run by conservative idiots, exist for one thing and one thing only, to take advantage of the student loan system by walking anyone with a pulse through the process to borrow as much as possible, then walk them through their often useless, unaccepted by respectable institutions and often not accredited by many states (they only need one state to accredit them to sell their supposed curriculum to anyone with a pulse) curriculum just far enough into the semester that they cannot withdraw, then laugh all the way to the bank.  Many have dropout rates 2x the default rate and all that student loan money, nearly a trillion dollars, has gone into their pockets.  If they deliver $.10 on the dollar in services for the money they obtain I would be surprised.  They all should be highly regulated or outright banned for delivering such poor metrics!!

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