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Are Soaring Student Loans The Best Economic Indicator?

Tyler Durden's picture




 

Last night, Goldman entered into unchartered territory with its first observations of the student loan bubble in a piece titled "Are Student Loans Driving Consumer Credit Growth?" Most of the observations are nothing new, although author Alec Phillips does bring up one amusing implication of what the soaring student debt may mean in macro terms. Specifically, to Goldman the rise in debt is merely "A more important source of countercyclical credit. Since federal student lending standards are looser than most other forms of credit, they now rely mainly on Treasury borrowing for financing, and demand for them appears stronger when the labor market weakens, it seems likely that education-related debt will grow fastest at times when the economy slows and other lenders are pulling back." In other words, the rate of change in student debt is inversely proportional to the improvement in the US economy, or directly proportional to its deterioration. So since the student debt chart is, for lack of a better word, parabolic, what does that mean for the broader economy?

Source: Name The Bubble

Below are some of the other implications of the student debt bubble according to Goldman. All are oddly spot on:

  • A potential offset to lost savings. Declining home values and tight lending standards mean that households cannot finance college education through home equity loans and home equity line of credit as much as they did during the housing boom. Part of the rise in education-related borrowing may also be attributable to declines in financial investments; statistics released by the College Board indicate that total assets in college savings ("529") accounts grew by 32% from 2007 to 2011, compared to 182% from 2003 to 2007 (some of the earlier growth may also be due to the fact that these accounts were only established by Congress in 2001, and thus grew quickly in their early years).
  • A potential burden on younger consumers and homebuyers. While educational loans can potentially offer economic benefits, the growing share of recent and soon-to-be graduates with student loan debt could also negatively affect consumption and the macroeconomy. For example, Dynan (2012) uses household-level data to show that all else equal, households with a higher fraction of their income going toward debt service payments also experience slower consumption growth. In an environment where lending standards are tight, individuals with significant educational debt may also find it difficult to obtain a mortgage to purchase their homes or have to pay a higher interest rate to secure a car loan. In addition, Gicheva (2011) finds that student loans decrease borrowers’ long-term probability of marriage, which could negatively affect household formation.
  • A potential fiscal risk, which may at some point prompt a tightening in lending. Like other federal credit programs, the cost of student lending programs is accounted for using a framework specified under the Federal Credit Reform Act of 1990 (FCRA), whereby the net present value of cash flows over the life of the loan is discounted at the Treasury's effective borrowing rate; this estimated cost is counted as federal outlays in the fiscal year in which the loan is originated. Because of the difference in the Treasury's borrowing cost and the interest rate paid by student borrowers, these estimates typically show that each dollar lent under these programs generate a profit for the federal government. The assumption used in the President's most recent budget is a negative subsidy rate of 21%, i.e., a profit that reduces the reported deficit by 21 cents for each dollar of student loans disbursed in the fiscal year. However, given the elevated delinquency and default rates among borrowers--federal projections already assume significant defaults--this methodology may understate the cost to the federal government. The Congressional Budget Office has estimated that using a market-based discount rate, loans expected to be originated over the 2010-2020 period would be estimated to cost $52 billion, rather than save $68 billion as is estimated under official projections (see "Costs and Policy Options for Federal Student Loan Programs" Congressional Budget Office, March 2010). Given the magnitude of the federal deficit, whether these lending programs cost or save this much is not a primary issue for the fiscal outlook. That said, the accounting methodology for these loans currently provides the government with little incentive to restrict lending, but if costs begin to mount in the future, could prompt a shift in policy and a tightening in standards.

And the punchline:

The upshot is that the increases in consumer credit since 2010 are largely driven by student loans even after appropriately accounting for the recent shift from non-federal lending to federal lending. The rise in education-related debt has probably offset the pullback in other areas of consumer credit that occurred after the financial crisis, but does not come without its own risks.

Any wonder then why JPM is getting fast out of this latest debt-bubble?

 

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Tue, 04/17/2012 - 16:10 | 2352574 SheepDog-One
SheepDog-One's picture

I may look like Im just lounging around the apartment in my bathrobe and bunny slippers, but I'm ACTUALLY getting my MBA in economics online, paid for by gubment loan, and Im gonna be the next Bernank!

 

Tue, 04/17/2012 - 16:21 | 2352613 SilverTree
SilverTree's picture

I tend to look at the exchange rate of silver or gold adjusted for inflation as an economic indicator.

Tue, 04/17/2012 - 18:16 | 2352895 Chuck Walla
Chuck Walla's picture

It means more desperate people looking for ways to stay financially afloat as they await the firing of the Big Zero in Chief.  Then, they may have some hope for something more than this depression.

Tue, 04/17/2012 - 16:42 | 2352650 Harbanger
Harbanger's picture

Any School that may actually teach you something would have the following Statement of Loan Policy - Due to our independence from Government assistance, federal loans are not made available.

Tue, 04/17/2012 - 19:33 | 2353055 dougngen
dougngen's picture

do they teach you to be a Kensian economist?

Tue, 04/17/2012 - 23:33 | 2353564 Cast Iron Skillet
Cast Iron Skillet's picture

as soon as you grow a grey beard ...

Tue, 04/17/2012 - 16:08 | 2352575 francis_sawyer
francis_sawyer's picture

It costs a lot to get into a "Girls Gone Wild" video these days...

Tue, 04/17/2012 - 16:09 | 2352579 Village Smithy
Village Smithy's picture

Massive student loans are just stealth unemployment payments. It keeps money (borrowed from the future) flowing into the economy but the recipient is not part of the jobless numbers. It's brilliant. Until it isn't.

Tue, 04/17/2012 - 16:46 | 2352658 Bam_Man
Bam_Man's picture

Give that man a cigar!

This whole student loan charade is a case of "We'll pretend we're lending you the money and you pretend you will pay it back". These loans will never be paid back and everybody knows it. It's really an unemployment stipend.

Tue, 04/17/2012 - 18:00 | 2352864 LetThemEatRand
LetThemEatRand's picture

Except they are generally non-dischargeable in bankrtupcy.  They will be paid back even if it takes most people their whole lifetime to do so.  Just think how great that will be for the economy in the coming decades, as more and more people in their peak earning years are sending off huge checks each month to pay back loans for their 20 year old diploma, rather than buying new BMWs.  

Tue, 04/17/2012 - 18:59 | 2352978 ChrisFromMorningside
ChrisFromMorningside's picture

I think he was implying that law will eventually be scrapped, for precisely the reasons you state (the massive wealth sink it creates for an entire generation). 

Tue, 04/17/2012 - 19:06 | 2353002 NotApplicable
NotApplicable's picture

Never happen. Slaves are never set free. NEVER EVER!

Same thing with "mortgage relief."

These are just political ideas to fight over in order to engage the apathetic class, sheeple voters.

Tue, 04/17/2012 - 17:04 | 2352704 trembo slice
trembo slice's picture

I work for my Congressman right now, and we get calls all the time asking us to sponsor the Student Loan Forgiveness Act.  It drives me nuts that people think that this is a viable option.  If people get 20,000-100,000 in debt forgiven (and not considered income by the IRS) I want my fucking check.  It would absolutely punish people that have made prudent decisions and not accumulated massive amounts of debt for an overvalued degree.

Tue, 04/17/2012 - 19:07 | 2353001 Hohum
Hohum's picture

Trembo Slice,

Like it or not, massive forgiveness of debt is probably the solution.  Unless you want hyperinflation, of course.

Tue, 04/17/2012 - 22:42 | 2353362 trembo slice
trembo slice's picture

I realize that our system is set up to benefit debtors at the expense of creditors, and turn the capitalists system upon its head.  It is just infuriating the injustice of the system.

I think the route TPTB will likely continue to take is inflation... since the men in charge are hysterically frightened of a healthy deflation of overvalued assets (including a degree).  As long as people don't wake up to what is going on, they will inflate.  It allows the government to cheat debt.

I just wish policy would quit subsidizing people's ability to go into debt, thereby forcing meaningful reforms instead of letting the system to get out of control. 

Tue, 04/17/2012 - 19:09 | 2353007 NotApplicable
NotApplicable's picture

Divide, conquer, rinse, repeat, ad infinitum.

Tue, 04/17/2012 - 19:28 | 2353047 ChrisFromMorningside
ChrisFromMorningside's picture

Let's recap. Education expenses have skyrocketed over the past two decades due to government policy and central bank actions, which the typical 20 year old has zero control over. Private banks conspired with the federal government to create a monumental debt bubble that funneled hundreds of billions of dollars in subsidies and loan-guarantees from the public treasury to private lenders. Baby boomers dumb down education in a decades-long process that began long before most college students were even born.

Elsewhere in the world, one nation (Iceland) goes through a quasi-debt jubilee and ends up restoring sanity (and independence) to their fiscal and monetary policy and returning to economic growth. Another (Greece), doubles-down on the debt charade and ends up going into a death spiral, hits historic unemployment levels and loses their democratic rights by having an unelected Goldman Sachs stooge installed as Prime Minister.

And out of some idiotic and petty sense of resentment you want our nation to go down the Greek path? All because you didn't have the wonderful privilege of paying exorbitant prices for a dumbed-down education as part of a system that was only put into place so private banks could fleece the public treasury? And you put the blame for this all on 20-somethings with practically no political power all because they had the utter gall of trying to get an education?

Meanwhile, you're sucking off the government teat with your taxpayer-funded salary and you work for the institution (Congress) that is responsible for putting this whole aforementioned^ system into place to begin with.

Wow. What a fuckin' tool. No wonder this country is so screwed. 

Tue, 04/17/2012 - 21:05 | 2353208 Slewburger
Slewburger's picture

Its called atonement, there must be mercy but also justice.

I can understand Kimbo's stance. I ate Ramen noodles in college until i developed an MSG allergy. I worked. I was poor, starving poor. MY CHOICE. I could have borrowed more, partied, eaten out. Hell I had plenty of friends that did.

If someone went to school and borrowed xxxx dollars, they are obligated by contract. But lets be real.... the debt should be purchased by a collection agency, the credit scores should reflect it and the negotiations can commence for a reasonable payoff amount.

This is the entire problem with the financial sector, bad debts are not recognized, not actualized into losses.

If people want laws, they should focus on the future, not themselves. Schools should be upfront with students, as well as the loan paperwork... stating that the loans are not discharged ever. And for every $ of federal load debt they receive; x% will be put up by the school towards scholarships.

I had a family friend commit suicide because of educational debt. It ruins lives and it is inescapable.

I have a younger friend that is 250k in the shitter on her way to a JD.... I've never told her that story, and wont.

Tue, 04/17/2012 - 22:52 | 2353390 trembo slice
trembo slice's picture

Whoa there snappy.  I'm a 20 something year old, study Austrian economics and therefore haven't taken on debt up to my eyeballs to pay for an overvalued education.  I'm a temporary intern making basically no money.  

Haha, dude, your angry post is literally cracking me up... seeing as you have me all figured out.  To be fair, I should have added the /sarc after my "I want my check" comment.  I certainly would resent bailing out anyone for making terrible decisions.  I don't know maybe it's the Libertarian in me that thinks people reap what they sow.  Being educated is not synonymous with going to college.  

Also, without the Fed continuously buying up US Treasuries Congress would be forced to make more fiscally responsible decisions.  I totally agree that Congress is inept, but let's not forget that what makes this entire shitshow possible is the absence of sound money.

haha, and yes ChrisFromMorningside... I'm your one downvote. 

Tue, 04/17/2012 - 21:42 | 2353290 Road Hazard
Road Hazard's picture

Trembo Slice, it drives me nuts that GM, Chrysler and banksters got bailed out by the US tax payers for failed business practices. Rather than let capitalism (what all politicans hail as the 2nd coming of Christ) do its thing and let them all fail, they lined up for some US, prime A fiat currency. Moron in chief, george 'dubya bush wrote the first few checks and obummer continues writing them til this day. You are a tool if you work for anybody in government. Also, I want my fucking check and I want my underwater mortgage fixed!

Tue, 04/17/2012 - 17:38 | 2352812 AustriAnnie
AustriAnnie's picture

Students are also being encouraged to get onto the food stamp rolls, because if they are on food stamps or other government assistance THEY CAN DEFER their payments (which means the students don't have to pay back the $, but they don't technically "default" either)

So:

1)unemployment is really worse than reported, since students are not counted in "jobless" statisticss

2)default rates are really worse than reported, because students on "assistance" are technically just "deferring" not defaulting.

3)not only are these students not getting jobs to pay back their student loans, they also can't fund social security or get us out of the debt hole we're in, and even worse, they are instead ADDING to the debt and entitlement burden

Tue, 04/17/2012 - 23:14 | 2353514 Free2Speak
Free2Speak's picture

My hairdresser says her 20-year-old daughter's friends, who have jobs, are all signing up for food stamps so they can save their cash for other things, like smartphones.  Disgusting.

Tue, 04/17/2012 - 23:48 | 2353607 trembo slice
trembo slice's picture

"Now since man is naturally inclined to avoid pain — and since labor is pain in itself — it follows that men will resort to plunder whenever plunder is easier than work. History shows this quite clearly. And under these conditions, neither religion nor morality can stop it."

- Frederic Bastiat 

Tue, 04/17/2012 - 16:12 | 2352582 HungrySeagull
HungrySeagull's picture

It is not difficult to register and get student loans in the thousands of dollars over a year or so.

Then turn around, audit the classes after a month and then use the rest for cash.

It is in effect a cash cow for people unconcerned about the "Future" when they cannot eat today.

Tue, 04/17/2012 - 16:47 | 2352660 blu
blu's picture

Indeed. It's one way to deal with your UE benefits running out at the far end of the 99 week tracks.

These loans will never be repaid. An insolvent government will then be forced to roll them off-balance-sheet into a bleak future until the end of the world.

Tue, 04/17/2012 - 19:14 | 2353026 NotApplicable
NotApplicable's picture

Like all other debts, I'm guessing they'll be the basis of the next "New & Improved" fiat, the Globo (or whatever it's called).

Since debt is now money, there's no way they'll let it just evaporate. Instead they're gonna ZIRP sovereign debt service costs down to nothing. It will only stop when people refuse to accept it as a form of payment.

Tue, 04/17/2012 - 16:18 | 2352584 engineertheeconomy
engineertheeconomy's picture

Interest is unpayable. Unless you borrow the interest payments. Which just means you will owe even more money. The gubermint / bankers are all ponzi scam artist  criminals. Entities like GOOGLE that do nothing to expose them are in on the con too. Perpetual debt and slavery as a system of gobmint is not democracy, it's slaveocracy. Our country is under attack by the Federal Reserve and the rest of the scumbag bankers.

Why is our military doing nothing about it?

I mean, if our military won't stand up to our attackers, why do we even bother having a military?

OR IS THE FEDERAL RESERVE A BRANCH OF THE MILITARY ? ? ?

 

Tue, 04/17/2012 - 17:27 | 2352780 Dapper Dan
Dapper Dan's picture

engineer,

 that there, what you just said, is several lines of some great stuff!! 

I do know the FED/RES has a well armed police force.

 

Tue, 04/17/2012 - 17:33 | 2352796 TheGardener
TheGardener's picture

Another robot. No trader no troll. Automated responses in suspense, such the training thereof. Don`t fall for it , they still just feed on feeding their supposed trolling.

The programmers thereof ain`t stupid, real and clever human responses to get you off guard?

Tue, 04/17/2012 - 19:51 | 2353080 ChrisFromMorningside
ChrisFromMorningside's picture

"I mean, if our military won't stand up to our attackers, why do we even bother having a military?"

The Founding Fathers warned us that a standing army was one of the primary threats to liberty and democracy. Remember that the next time you see a neocon "conservative" waving the red, white and blue and calling on the U.S. to kill some more Muslims. Totally antithetical to the values the Patriots fought and died for. 

The army should be as minimal in size as possible and should be focused on domestic border defense, not global police actions. Citizens should have the right to arm themselves without any government limitations. Open-carry should be the norm in all 50 states. The federal government should be *extremely* limited in its ability to charter new law-enforcement capabilities, which are the right and responsibility of state and local governments. THOSE are the values of 1776!

Tue, 04/17/2012 - 20:13 | 2353124 HungrySeagull
HungrySeagull's picture

I hate to say this but we got in "Up to our Ears"

I love our Military, they are some of our best and brightest. However it is fucking time the OTHER Nations on the Earth to look to their own Defense; however small it may be as happened in the recent Russia/Georgian war...

Student loans will go away when a tipping point is reached. And it will happen sometime in the next decade.

College towns will become ghost towns. Remember that you can build nice buildings with wonderful accommodations for the students to keep them coming.

However a Generation will grow up having watched mommy and Daddy sit home on govt checks despite college degrees that are worthless.

That will be the Generation that wont go to College at any price.

Tue, 04/17/2012 - 16:15 | 2352596 Cursive
Cursive's picture

Our collective population is playing whack-a-mole with it's funding sources. People are desparate and money is getting more and more scarce. The end game is defualt or deflate.

Tue, 04/17/2012 - 16:41 | 2352648 blu
blu's picture

That is indeed the end-game. The board has evolved to that end, the pieces are in motion, feelings have no part to play.

The puppet masters have already glimpsed the board at the end. And you and I are not on it.

Make your plans accordingly.

Tue, 04/17/2012 - 17:07 | 2352722 Harbanger
Harbanger's picture

If feelings had no part to play, we wouldn't be in this fckng financial mess.  Puppet master:  I am your knight in shining armor coming to your emotional rescue....Buhaha!

Tue, 04/17/2012 - 19:00 | 2352977 Harbanger
Harbanger's picture

Banks were given a sht load of our money but they're afraid to lend it.  So money is scarce.  Low interest yes, but see if you qualify with the depressed values and income.  Some of my friends had equity lines of credit that were recinded before they were even close to maxed out.  I see deflation and buy what I can before they raise rates and open the $ dam gates again, then it's hyper time to buy/sell in the frenzy and get heck out of fiat. 

Tue, 04/17/2012 - 16:14 | 2352597 Jason T
Jason T's picture

got to give credit (pun intended) to mish shedlock for far better cutting through the consumer credit BS ..

Tue, 04/17/2012 - 16:18 | 2352605 Tyler Durden
Tue, 04/17/2012 - 16:17 | 2352600 bob_dabolina
bob_dabolina's picture

Why is the government involved in such pervasive predatory lending?

Eric Holder will need to investigate himself when it comes out that blacks aren't able to pay back their student loans, perhaps he may even need to sue himself.

Tue, 04/17/2012 - 18:09 | 2352882 Harbanger
Harbanger's picture

Not too long ago, "Professors" driving cabs was something only seen in failed socialist countries with "free" state-education (for those qualified).  We've been slowly progressing to know what the rest of the World felt like.

Tue, 04/17/2012 - 19:52 | 2353086 ChrisFromMorningside
ChrisFromMorningside's picture

An individual I know went in for a group interview for a bank-teller position. There were 3 PhD's among the 10 interviewees. 

In Greece, it's not uncommon for PhD's in engineering to be working as fruit-vendors in the local market. 

Tue, 04/17/2012 - 16:20 | 2352604 i_call_you_my_base
i_call_you_my_base's picture

"For example, Dynan (2012) uses household-level data to show that all else equal, households with a higher fraction of their income going toward debt service payments also experience slower consumption growth. In an environment where lending standards are tight, individuals with significant educational debt may also find it difficult to obtain a mortgage to purchase their homes or have to pay a higher interest rate to secure a car loan."

Good thing we have GS to help us figure out the implications of debt.

That they even feel a need to say it is sad.

 

Tue, 04/17/2012 - 23:20 | 2353534 Free2Speak
Free2Speak's picture

How much does he get paid to state the obvious?

Tue, 04/17/2012 - 16:20 | 2352607 xela2200
xela2200's picture

The government is debating to not allow people with too much student debt from leaving the country. I can already see Mexicans crossing the border meeting over burden students going the other way. Maybe sharing some water, best places to eat, gardening tips, what have you. What a crazy world it is turning into. It is just funny how the US government thinks that people are just going to every command they issue.

Tue, 04/17/2012 - 16:28 | 2352633 SimpleandConfused
SimpleandConfused's picture

Why is that funny.  Do you see anything in our behavior to challenge that assumption?

Tue, 04/17/2012 - 16:37 | 2352647 blu
blu's picture

Nice

Tue, 04/17/2012 - 23:33 | 2353566 Free2Speak
Free2Speak's picture

Yes, they are seeing the writing on the wall and are barring the exits.  Also, if you have $50 in unpaid taxes, you can't leave the country.

I predict that the Great Obama will "forgive" all the unpaid student loan debts --on one condition: you serve in the military for a few years.  Uncle Sam needs fresh recruits to keep the war machine going.

Tue, 04/17/2012 - 16:24 | 2352617 rabbitusvomitus
rabbitusvomitus's picture

Soooo, this is how the future generations of our country finally and irrevocably give up their freedom, via government student loans that CANNOT be defaulted on. When they graduate from institutions of higher learning (sarc) the IRS will garnesh their wages if they try and walk away .. unless you agree to a lifetime of government servitude... oh wait a minute aren't they one in the same..

Tue, 04/17/2012 - 16:24 | 2352621 SimpleandConfused
SimpleandConfused's picture

Economy?  Who cares anymore.  Apathy reigns supreme.

But the market?  Easy answers.  BTFD.

But when do you sell, you might asked this simple and confused man.

Another easy answer.  Sell when the fed says things are looking better.  Then short when he says he might have to tighten.

I have learned so much from ZH.  First, disasters in world economies just don't happen so long as a population is entertained.  Doesn't matter if there is recession or depression, people who have TV and soccer to watch and beer to drink will never really give a good rat's damn.

Secondly, when the markets are nothing more then a mechanism for the fed to get his boss re-elected, then just do what the fed says and BTFD.  There you go; easy money!

Tue, 04/17/2012 - 16:26 | 2352624 poopyjim
poopyjim's picture

Student loans are just another form of unemployment benefit. Anyone can get them and paying them back is only required if you have an income, and even then it's mostly socialized. Out of a job? Go back to school. What a joke. If I get laid off I'll just spend the next 20 years getting like a dozen masters degrees whilst partying my arse off.

Wonder what the unemployment chart would look like without this student loan welfare.

Tue, 04/17/2012 - 17:43 | 2352825 krispkritter
krispkritter's picture

I know several people who are nearing 30, never held a real job, are 6-figures in debt, and just 'leaving' college. Well, that was until they found out there are no jobs paying what they need to survive and are now considering going back 'inside'. I have a relative who's nearing 40, has I don't know how many degrees, has never had a job for more than a year, and is still in college. It's not just a piece of paper! It's a lifestyle!

Tue, 04/17/2012 - 16:25 | 2352628 mr. mirbach
mr. mirbach's picture

Kids need to go to college because they sure aren't learning anything in the k-12 public indoctrination system.

Tue, 04/17/2012 - 16:37 | 2352639 blu
blu's picture

The only thing they needed to learn was how to be a citizen and how to participate in a democracy. K-8 education alone was supposed to fill that need, and that's why education is required to this day, and why the government went to extraordinary lengths to push schools into every remote part of the country, starting 200 years ago.

Everything after K-8, that was for the elites. Finishing school and university fraternities. It was all the elitist social networking before Facebook. Nobody with a real life cared.

Public education was not supposed to be about getting a job either. Never. How anyone got that idea is beyond me. In the still recent past kids went from grade school to working the family farm, or working in dad's shop, or joined the trades where their real education began. K-8 education meant nearly nothing to their adult lives, apart from basic literacy skills.

College. Oh man. Those guys are in trouble. Their relevance to anything is really eroding.

Tue, 04/17/2012 - 17:03 | 2352703 Winston Churchill
Winston Churchill's picture

Unless it's a practical science subject:

Engineering,chemical,mechanical or electronic.

Anything else,may as well be black underwater basket weaving.

Tue, 04/17/2012 - 23:00 | 2353489 Dry Drunk
Dry Drunk's picture

Well, at least the public indoctrination system is working. I think it has improved over the years. Now, students come out and really know how to live in a democracy.

Compulsory education is the lynchpin upon which all the other illusions stand. If you let your kids go to the state school they will grow into good statists.

Tue, 04/17/2012 - 16:25 | 2352631 blu
blu's picture

Student loans are another way of pulling forward future demand into the present. Once they get out of college their loan payments will suck up future discretionary spending dollars while adding nothing to GDP. They will have become part of the non-producing welfare system, even if they have a job.

Economic death spiral. Bought a couple years if that, nothing more.

Tue, 04/17/2012 - 16:55 | 2352641 vast-dom
vast-dom's picture

...

Tue, 04/17/2012 - 16:34 | 2352642 Papasmurf
Papasmurf's picture

I've had dozens of calls from telemarketers offering student loans.  My good credit record and the fact that I'm likely to return to college at 60 years old makes me a prime target for these loans. 

Tue, 04/17/2012 - 16:41 | 2352649 LFMayor
LFMayor's picture

Come on man, every campus needs some creepy old men to scare the Sorority sisters.  It's almost a solemn, civic duty.

Tue, 04/17/2012 - 17:55 | 2352846 bobola
bobola's picture

You listen to a telemarkerter when they call....??

Why..??

I pick up the phone  and say "Hello" and as soon as they start their speil I hang up.

It really slows down these calls.

Tue, 04/17/2012 - 19:27 | 2353046 Dapper Dan
Dapper Dan's picture

As a rule I will tell the caller that I am very interested but I must find a pen to write the information down, then  set the phone down and walk away, periodically yelling out load about not finding a pen, I have stalled them for over 7 min.   a personal best!

Tue, 04/17/2012 - 20:46 | 2353183 EvlTheCat
EvlTheCat's picture

Your post made me LOL and reminded me of this:

Fun with telemarketers

http://www.ahajokes.com/off06.html

Tue, 04/17/2012 - 23:38 | 2353582 Free2Speak
Free2Speak's picture

When telemarketers call me, I ask them to donate to Ron Paul.

Tue, 04/17/2012 - 16:45 | 2352652 navy62802
navy62802's picture

OT - The black swan that no one anticipates is a change in bankruptcy laws. Legislators are pushing for a change in existing bankruptcy law that would allow student debt to be discharged in a standard bankruptcy filing. As it stands now, it is nearly impossible for a debtor to discharge student debt in bankruptcy. Creditors can even garnish Social Security payments in order to get repayment for student loans. If the laws are changed to allow the discharge of student loan debt, it will entirely change the playing field. Lenders will tighten their lending standards. Numerous lending institutions will take massive losses, and we may see a repeat of the 07/08/09 financial crisis. But first, more people are going to have to get on board with the few legislators that are pushing these changes.

/sarcasm on

PS - Student loan debt is good debt. Nevermind that if you can't repay the loans, your credit will be destroyed and you won't be able to find a job. Go spend whatever you need to in order to get educated because the potential salaries out there are worth it. So what if your credit score falls to 100? No matter, it's good debt.

/sarcasm off

Tue, 04/17/2012 - 16:52 | 2352675 Dingleberry
Dingleberry's picture

You may be correct about changes the bankruptcy laws. I would welcome it as I believe that is the sole reason tuition has gone parabolic like it has.  That will help these kids (and even older adults) get out from under the mountain of debt/interest that crushes them.

On the other hand, bankruptcy doesn't exactly make one virgin white again. Their credit is fucked for several years, and they will still have (albeit a smaller) financial headache. Everything and everyone uses credit scores now for everything. Including jobs, clearances....everything. And mortgages and auto loans.....no easy answer. They are fucked. It's ony a question of how long they are. 

Tue, 04/17/2012 - 17:10 | 2352733 navy62802
navy62802's picture

On your second point, yes, I agree. But what's the alternative? If you default on your student loans, your credit score goes to shit anyway and you can't get a job. At least this way, people could get rid of the debt and then work themselves out of the hole. As it stands now, those student loans stick with you, even if you go into bankruptcy. With the current laws, your credit score can essentially never be salvaged until you finally kick the bucket.

Tue, 04/17/2012 - 20:06 | 2353109 Dingleberry
Dingleberry's picture

we agree. bankruptcy is better than indentured servitude.....for life.

Tue, 04/17/2012 - 20:09 | 2353114 ChrisFromMorningside
ChrisFromMorningside's picture

I actually disagree with his second point. If there is a debt default then that will indeed *greatly* tighten lending standards. At that point, many of the things that we currently see as a necessity and as (near-)universally attainable (i.e. a car, a fat mortgage, consumer credit lines) will come to be seen as a luxury that not everyone takes part in. So, in the long run, those who default won't be missing out on much.

Tue, 04/17/2012 - 16:48 | 2352669 ejmoosa
ejmoosa's picture

Student loans you have no intention of paying for?

 

I am certain it has something to do with the popularity of Apple products, regardless of their price.

Tue, 04/17/2012 - 16:52 | 2352676 libertus
libertus's picture

In July the Stafford Rates rise to 6.3%? from 3.2%? unless CONgress does something. When I walk the halls of the university where I'm finishing my dissertation I see zombies under the spell of cheap credit and the promise of a never ending supply of brains and cash in the form of 18 year olds that they can eat and enslave.

The party is over.

Check out my take on this at http://vermont.academia.edu/RobertSkiff/Papers/1296007/Blowing_the_Last_...

 

Tue, 04/17/2012 - 16:57 | 2352687 lemonobrien
lemonobrien's picture

they can pay it off through military service.

Tue, 04/17/2012 - 17:14 | 2352743 navy62802
navy62802's picture

That's how I did it. I sacrificed five years of my life in exchange for an undergraduate education. It was rewarding, I can proudly say that I served my country, and I'm debt-free. I come from a lower-middle income family, and if I hadn't chosen the course I did, I would be one of the types of people we're talking about. Instead, I chose the prudent course. This is why I feel little sympathy for people who graduate with a degree in underwater basket weaving and $100k of student loans.

Tue, 04/17/2012 - 18:56 | 2352967 MachoMan
MachoMan's picture

holy shit man...  what's wrong with learning a trade instead?

Tue, 04/17/2012 - 19:11 | 2353012 navy62802
navy62802's picture

I did learn a trade ... aerospace engineering.

Tue, 04/17/2012 - 20:05 | 2353106 Hulk
Hulk's picture

Any chance you can get us off the planet ???

Tue, 04/17/2012 - 23:48 | 2353605 Free2Speak
Free2Speak's picture

It was so uplifting seeing the FINAL "flight" of the space shuttle today.  <Sigh.>

Tue, 04/17/2012 - 20:45 | 2353181 Clowns on Acid
Clowns on Acid's picture

Any chance you can send Berrnanke to the moon?

Tue, 04/17/2012 - 23:43 | 2353593 Free2Speak
Free2Speak's picture

Glad it worked out for you.  But not everyone comes back alive or in one piece.

Tue, 04/17/2012 - 20:06 | 2353112 Dingleberry
Dingleberry's picture

or stripping.....or fight club.

Tue, 04/17/2012 - 17:01 | 2352702 Payne
Payne's picture

rack up the debt get a great degree and move out of the US.  New Zealand or Austrailia maybe Brazil.  Default.

Tue, 04/17/2012 - 18:12 | 2352889 TheGardener
TheGardener's picture

Twilight zone thinking in New World escapes with the same dysfunctions ? Make a degree there and be as useless
in the real world as you were born. Defaulted upon birth ?

Tue, 04/17/2012 - 17:05 | 2352710 Mysteerious Roo...
Mysteerious Rooshian Vooman's picture

Paulista Uprising in Georgia Against the NDAA & the Federal Reserve

Good news! Georgia's GOP Congressional District conventions were Saturday the 14th. Here's some news from the 12th District Convention in Vidalia. We presented two resolutions: one to repeal Section 1021 of the NDAA, and one to End the Fed. Both passed with 95% majorities. We unseated one delegate to Tampa and took that spot (one of three) and took one alternate spot (also one of three). Here's what happened:

http://goo.gl/O69We

http://www.youtube.com/watch?v=vMAxieKFvss

RON PAUL 2012

 

Tue, 04/17/2012 - 21:04 | 2353217 EvlTheCat
EvlTheCat's picture

I loved it! ROFL

"...

Whereas the piratical grounds that are held by the Federal Government to warrant the anti-terror portions of this odious Act are, in fact, themselves groundless, given that Public Health statistics show that death from acts of terrorism is less likely then death from dog bites, from lightning strikes, from diarrhea, and from misadventure with bathtubs and vending machines.

..."

Golf clap!!

Tue, 04/17/2012 - 17:08 | 2352721 Silversem
Silversem's picture

I am a student in trading cfd's and i only make money studying

Tue, 04/17/2012 - 17:08 | 2352726 bobola
bobola's picture

Americans had a total of about $870 billion in student loan debt in the third quarter of 2011. Spread out over every American, that's nearly $2,800 per person.

80 percent of Americans held credit cards as of 2008, compared to the 15 percent of consumers who now hold student debt,.

From the second to the third quarter of 2011 alone, outstanding student debt grew by 2.1 percent. Data suggests that wages are not keeping up with that growing debt.

In 2006, new graduates left school with an average of $19,646 in debt, according to the Project on Student Debt, an initiative of the Institute for College Access and Success. In 2010, that figure was up by nearly 29 percent, to $25,250. Meanwhile, in 2010, median weekly earnings for college graduates 25 and older were at $1,144, up only 10 percent over 2006, according to the Labor Department. While those are not exactly the same populations—many new graduates are under 25—the numbers do suggest that pay is not keeping pace with debt.

http://www.usnews.com/news/articles/2012/03/06/5-shocking-facts-about-student-loan-debt

 

Tue, 04/17/2012 - 17:43 | 2352827 trillion_dollar...
trillion_dollar_deficit's picture

This morning I had to sit through a company presentation from a recent hire who happens to be a newly minted "Master of Health Administration" at one of my state's fine unaccredited MHA programs. Suffice to say that if he represents the future and the future is full of similar "Masters of _______", then we are well and truly fucked as a country. A complete moron who couldnt tell his ass from his face. The lack of basic mathematical skill was absolutely appalling. 

Wed, 04/18/2012 - 00:01 | 2353641 Free2Speak
Free2Speak's picture

Who needs math skills for Health Administration?  With Obamacare, we need true believers who can carry out orders --not smart people who will question the government's fuzzy math.

Tue, 04/17/2012 - 18:08 | 2352849 reTARD
reTARD's picture

In the near-term, yes. Long SLM and at first sign of ponzi collapse switch to short SLM?

Are student loans driving up the stock market? LOL. Instead of studying the kids are enjoying their college experience and gambling in the ponzi stock market (or providing the fiat firepower for others, ie education industry). Up, up and away!

Some of us (perhaps only Jimmy Rogers and myself) under-estimated what the Fed could do when they performed Operation Twist which kept knocking us from our attempts to short the long end of the Treasuries. Perhaps something similar could occur with Sallie Mae which is different from Fannie and Freddie?

Tue, 04/17/2012 - 18:28 | 2352920 Everybodys All ...
Everybodys All American's picture

Shouldn't the loans come with a caveat. The caveat being that these students take and pass at least a basic finance/economics class. So they understand they will have to pay these loans back some day.

Tue, 04/17/2012 - 18:38 | 2352933 penexpers
penexpers's picture

DEFAULT BITCHEZZZZ!

Tue, 04/17/2012 - 18:46 | 2352947 tempo
tempo's picture

A trillion $ of subprime loans w no collateral or income sounds peachy, particularly if you'r making $250000 per year teaching your personal political dogma to lapdog students who hang on your every word.

Tue, 04/17/2012 - 19:02 | 2352987 Yardstick of Ci...
Yardstick of Civilization's picture

Is there a student loan equivalent to ABX (except one that everyone can trade?), or would such a contract be such a bad PR idea that TPTB just won't ever let it happen?

If there isn't such a trade out there, could one be created for a retail investor synthetically?

Tue, 04/17/2012 - 19:07 | 2353005 Arnold Ziffel
Arnold Ziffel's picture

My neighbor's son bought a new Mustang, a new flat screen and a new iPad with his loan money....atta boy, Biff!

Tue, 04/17/2012 - 19:12 | 2353022 q99x2
q99x2's picture

I can see it now in front of the 7-11s.

Bachelor's Degree please donate $1.

Master's Degree please donate $2.

PhD Degree in Economics - please lend me $3.

 

Tue, 04/17/2012 - 19:24 | 2353043 ceedub
ceedub's picture

Bought over $2000 worth of gold from my fall/spring loans.

 

If I don't get an internship this summer I plan to go to class and take out as many loans as possible and buy more gold.

Tue, 04/17/2012 - 20:42 | 2353175 Clowns on Acid
Clowns on Acid's picture

You are learning arbitrage early...grasshopper.

Tue, 04/17/2012 - 20:31 | 2353052 GoodMorningMr.V...
GoodMorningMr.VanRumpoy...'s picture

Yes but the real question? When are they going to start pooling and tranching these bad boys into more fantastic financial products?

 

Oh wait they already did  Student loan Asset-Backed Securities (SLABS). 

 

Now we know why the 2005 BAPCPA amendments changed years of existing law to require the student loans to be some sort of special unsecured claim that can't be discharged.

Great financial products.  Guaranteed stream of income. Like trading pools of slaves.

Wed, 04/18/2012 - 00:09 | 2353667 Free2Speak
Free2Speak's picture

Slavery, exactly --and so thinly disguised!  Maybe somebody should warn the students about the SLABS being loaded onto their backs.

Tue, 04/17/2012 - 20:33 | 2353157 mootsman
mootsman's picture

30k owed for the anthroplogy degree doesn't seem so opportune once the bourbon wears off

Tue, 04/17/2012 - 22:18 | 2353392 Common_Cents22
Common_Cents22's picture

The Democrats are working on a bill for student loan forgiveness.   Fokkers.  You know its part of an election year stunt.

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