The NEXT BUBBLE JUST BURST: Over $120 Billion In Federal Student Loans In Default

reply to post by MidnightTide

Originally posted by MidnightTide
Why does blame the banker get thrown under the bus, but never the government?

Because of ignorance.

People blame the free markets for the abuses that arise without ever understanding why they occur in the first place.

And now we've entered a new era of vilifying business in this country, ensuring our problems will only get much worse.

Businesses are *supposed* to make money.

Complaining about that is like complaining that water is wet.

What is broken is the role government plays in the free markets.

It incentivizes the creation of bubbles....it restricts real competition....and it promotes fraud. The trifecta of financial market disaster.

But for most of the public, it's easier to be spoon-fed dribble from the MSM, making them believe the corporate guys are the evil ones.

Someone recently made this analogy: Its like the issue with Pitbulls. It's not the breed that is bad, but the owner who encourages and produces the dangerous behavior.

Plain and simple.

Originally posted by MidnightTide

Originally posted by buster2010
People want to blame the government for this bubble but that is wrong. The blame should go to the banks and colleges because they are the ones that are scamming the government. Since 1980 tuition has gone up over 800% just what more at these schools is going on that costs so much? Maybe the cost would go down some if some of these coaches weren't paid so much Some coaches make between 500K to 1.5 million a year and a few of them make between 2 to 4 million a year.

Why does blame the banker get thrown under the bus, but never the government?

Yes, the banks and universities are taking advantage of these government backed loans....just get rid of the government involvement. Without that backing these banks won't be so fast to approve these outrageous loans....and unless these universities want to see a drastic reduction in enrollment, they are going to have to reduce tuition.

Because the government isn't supposed to be a for profit organization. So we get rid of the government because the banks can't control their greed? And people complained because Obama stepped in and stopped the banks from doubling the interest rates on student loans?

reply to post by loam

But for most of the public, it's easier to be spoon-fed dribble from the MSM, making them believe the corporate guys are the evil ones.

No they don't make the corporations out to be evil. The corporations do that themselves with their actions.

Someone recently made this analogy: Its like the issue with Pitbulls. It's not the breed that is bad, but the owner who encourages and produces the dangerous behavior.

Pittbulls were bred for nothing but violence and they are banned from many cities and counties. If there ever was a bad breed of dog it's a Pittbull.

reply to post by buster2010


Yes, banks are taking advantage - to eliminate it get the government out of the student loan business. If universities insist on having absurdly high tuition fees, their enrollment will drop like a rock as no one will be able to afford to go.

Originally posted by buster2010
reply to post by loam

 

Pittbulls were bred for nothing but violence and they are banned from many cities and counties. If there ever was a bad breed of dog it's a Pittbull.

Yes, they have been bred for aggressiveness, but that doesn't mean they are a bad breed. I know pittbull owners whos dogs are the sweetest things around....and one even prevented their child from being kidnapped from a stranger.

reply to post by buster2010


It would be pointless to rebut your post.

You're so drunk on the coolaide you drink, you'll never dry out.

Sad, really. Because otherwise you strike me as pretty smart.

Oh, well.

This report directly contradicts the.story in the op
Don't buy myth of student loan 'crisis'

the "bubble," the "bomb" that threatens the American economy like mortgage defaults do? Currently outstanding student loans total $876 billion — a lot, to be sure. There is $22 trillion owed on mortgages, with $8 trillion lost in defaults since 2008. If all students defaulted on their loans, the impact on the economy would be only one-tenth that of mortgage defaults. (One student in six is currently in default.) The student loan bubble is simply alarmist hyperbole.
there is one sector of higher education whose students bear a disproportionate debt burden: for-profit schools. Half of all student loan defaults are by students who attend for-profits. They leave school with, on average, 50 percent more debt than a private college student and 80 percent more debt than a public college student. Furthermore, for-profit college students graduate at about half the rate of students at public institutions and about 40 percent of the rate of students at private schools. Too many dropouts from for-profit institutions have the worst of worlds: big debt and no degree.

It is.nowhere near the amount of the housing bubble yet.
Calm down with this chicken little the sky is falling bull crap
The government is only their to.help poor people pay for.college
they are honestly not.trying to make a buck off uneducated.poor.people
student loan myth

My college loans are based on my own foolishness. I actually borrowed more than what I needed for tuition and books. Every mid semester I would get a check of whatever was left over after they took out tuition and books. I always said I would use the excess to pay off what I borrowed, but in the end I just squandered it. Being young and stupid at the time, I can see how a college student can put themselves in a future predicament.

Many young students are not experts on budgets and financial responsibility and if somebody says you can borrow more than what is needed and get the excess back, most students would say hell yeah. I know I did.

But this is the part of the story that we haven’t read about in the papers: the part where students decide how much they would like to borrow to cover their expenses during the course of the year, through an option which is much less expensive than credit cards. And the reality is, students often borrow more – sometimes much more – than what their tuition expenses are. They borrow to pay their rent, buy their books, order pizza on the weekend, and sometimes to take trips or upgrade their television, or even to access funds with which to pay off other forms of debt they may have taken on.Let’s be clear: we are not blaming students for making these decisions, but instead drawing to light an issue inherent in the model that currently exists for federal financial aid, and making the case that the current framework can be improved.

The policy topics we will cover are: a. Allowing schools to limit (on more than just a case-by-case basis) borrowing in excess of direct educational costs. b. Limiting the amount schools can offer to cover living expenses to a standardized, state-specific amount. c. Utilizing means testing as a way to determine financial aid eligibility. a. Allow schools to limit borrowing in excess of direct educational costs.

blogs.capella.edu...

reply to post by loam


The US is in an economic death spiral things are going to get far worse for a while. Until the US finds its feet again. The same thing happened to the UK when it lost its empire statues...

reply to post by popcornmafia

Originally posted by popcornmafia
This report directly contradicts the.story in the op
Don't buy myth of student loan 'crisis'

That's because that magical analysis compares the numbers to ALL mortgage loans and not the sub-prime ones that pushed us over the edge in the first place.

They seem to have forgotten history. When you fix that problem, you see we are repeating 2008 all over again.

The ALL mortgage market comparison wrongly diminishes the significance of what's happening with student loans-- particularly the private ones. The numbers track to be nearly the same when you look at the subprime mortgage loan defaults that then later brought down the rest of the cards.

Believe there isn't crisis. It matters little. It will be evident soon enough.

Originally posted by popcornmafia
Calm down with this chicken little the sky is falling bull crap

Ostrich heads and sand come to mind.

I have not read all of the responses on this thread, but I HAD to respond as this issue has just recently come to bite me in the proverbial arse....
I have a 25 year old student loan that I apparently am considered "defaulted" on. here's the story:
I took out about $5,000 in Federal student loans in 1988 to attend a for-profit vocational school in Phoenix to become a surgical technologist...to BETTER myself, (eyes rolling)....
About 4 months before I was set to graduate, the school shut down taking all of my 5 grand and leaving me in the lurch with regard to my education. Another local vocational college allowed me to finish, with me having to borrow additional funds to graduate. My little piece of paper cost me a LOT of money and I never got to work as a surgical tech outside of the field I had already been working in: ophthalmology....so a useless education because every hospital wanted EXPERIENCE and my schooling was not continuous.
I paid on my student loan like a good monkey for the first 3 years after graduation, even though I never got to work in the operating room as a surgical technologist. I stopped when my finances got bad and could no longer afford the whopping interest and fines and fees.......fast forward 15 years...after never hearing a word about my student loan...I get a letter stating that my student loan had been discharged as a class action suit was brought against the original school that closed and that my debt had been discharged as a result of this lawsuit. I never worried about that loan because I refused to be personally ripped off by the closure of the school and the uselessness of my "degree"....remember....this loan was taken out in 1988 and was for less than 5 grand....
I got a call a month ago from someone stating they were with the DOE and that I owed THOUSANDS OF DOLLARS! I think the amount with fees and penalties and this WHOPPING interest rate was over 30 (yes THIRTY) thousand dollars on a 5 thousand dollar original loan! (one that had been discharged with a lawsuit AND a bankruptcy in 1994)
So...my point being....EVEN AFTER DEATH...a student loan collection agency will call to get money from the living relatives...from wills...taxes.......ANYTHING...and had my loan only been a few grand over the 5 grand I originally borrowed, then I could have handled it....but THIRTY GRAND from a FIVE GRAND loan? This is usury and COMPLETELY illegal and immoral...hell..even the BIBLE...the Torah...and maybe even the Koran, (I've never read it so...) states that usury is immoral!
This goes WAAAAAAAAAY beyond a "debt bubble" but another RIP OFF from the big banks to make sure the average human is a debt slave FOREVER.......
medical debt and student loan debt....two HUGE killers in American society that could be avoided if we were like OTHER civilized nations that provide free healthcare and a free education.....
but my opinion doesn't count or even matter in this nasty country that Amerika has become........

Originally posted by loam
reply to post by popcornmafia

 

Originally posted by popcornmafia
This report directly contradicts the.story in the op
Don't buy myth of student loan 'crisis'

That's because that magical analysis compares the numbers to ALL mortgage loans and not the sub-prime ones that pushed us over the edge in the first place.

They seem to have forgotten history. When you fix that problem, you see we are repeating 2008 all over again.

The ALL mortgage market comparison wrongly diminishes the significance of what's happening with student loans-- particularly the private ones. The numbers track to be nearly the same when you look at the subprime mortgage loan defaults that then later brought down the rest of the cards.

Believe there isn't crisis. It matters little. It will be evident soon enough.

Originally posted by popcornmafia
Calm down with this chicken little the sky is falling bull crap

Ostrich heads and sand come to mind.

edit on 30-9-2012 by loam because: (no reason given)

I dont believe it is as.bad as stated.in the op or as not a problem at all in the myth article.
Somewhere in between there is the truth. Bringing this.issue to light will help inform more
people about the very real.risk of getting a student loan.
Funny how these issues when published the authors come to two totally different conclusions.

Originally posted by SilentNoise
I don't think the student loan bubble can burst. At least not until loans start averaging around the hundreds of thousands of dollars. Death is about the only way to get out of repaying your student loan. So as long as you're alive, you're going to have to try and repay it somehow.

It looks like there are a few government programs/incentives to help pay it back or loan forgiveness/deferral.

.

Even death won't "forgive' the loan as the collectors will call family, friends, etc to try and collect...and god forbid if you got a co-signor as then THEIR lives become hell after your death...so NO...DEATH doesn't even negate that loan.....only the government can get away with not paying its bills.....

Originally posted by loam
reply to post by buster2010

 

It would be pointless to rebut your post.

You're so drunk on the coolaide you drink, you'll never dry out.

Sad, really. Because otherwise you strike me as pretty smart.

Oh, well.

edit on 30-9-2012 by loam because: (no reason given)

What's makes you think I'm an Obama backer? I'm voting for the same person in this election like I did in the last election Ron Paul.

People laugh when I tell them it took me 8 years to get my Bach. degree. Well, I worked my butt off working full time supporting a family of 5. Know what? I'm debt free! I don't owe 40,000 in student loans because I worked HARD for it. Took me longer, but I sacrificed and it is paying off now. DEBT FREE!

The sad part is college counselors are encouraging students to get into student loans saying, "You'll be able to pay it off." But, there are not enough JOBS! Slow and steady wins the race folks.

We need to get half way descent paying factories and teach kids how to work in the trades and agriculture. All the old farmers and ranchers that supply our food are getting old. Farming and animal husbandry is a respectable job. We need plumbers, electricians, construction workers, etc. These jobs don't need college education, all they need is high school education. No loans to default on are needed. These college kids are straddled with debt and have lost years of working. Overeducated workers many times feel they are worth more than the trades jobs and screw up the other workers. They need to get the country back on track and fire all the people that said this would work. I see many big businesses going under within two years because noone will be able to afford things. We need to nip this in the butt, not by 2020, that will be too late. Our big businesses need to take immediate action to get this country back on line or get their butts out of this country and let someone who will create real jobs get a shot. Big corporations who outsource jobs can move their office to a foreign country and be banned from selling anything in the USA. Half of them are fronts anyway for other interests. They are not real Americans if they are outsourcing everything.

These loans are a bet that's being hinged against a broken job market. The service jobs which are available simply can not pay in the time frame that the banks want. It looks bad on its own, but is just a symptom of a much bigger problem.

What they need to do is fix the domestic job market:

1. Bring back tariffs. These will mostly be on goods people want rather than need. However I'd also shift the balance by making tariffs apply specifically to products and services by operations which don't comply with U.S. standards for worker safety or the environment. Maybe those factories overseas would bother to clean up a bit to not be taxed, if not, then let's bring that bacon back home. Blue collar manufacturing jobs may not be specifically what college students would need, but they would serve to help fuel the local economy which would stimulate the need for white collar jobs.

2. Have some kind of tax incentive to hire inexperienced workers. This means that companies should get some kind of tax write-off for worker training, and even have some aspect earmarked specifically to new hires which have a record of student loan debt. (The "not experienced" thing is complete B.S. and only serves to negatively impact the economy in the long run, as experience doesn't come out of nowhere. Shame that it would have to take an act of government, but it appears that the market lacks foresight for sustainability without some regulation involved.)

Originally posted by detachedindividual
So, locking people up is off the table. What next? How else does the federal government expect to get that money?

There is no way out of student loan debt. It's like child support debt that has been awarded by a court. The money WILL be taken at some point unless you simply disappear and work under the table. If you participate in the system. They can garnish your wages and withhold tax refunds until it's paid. If that doesn't cover it, when you die your estate is seized and sold until the debt is repaid, only after that can it be passed on. It's a very long term way of collecting on the debt but unless you die without assets and work under the table your whole life (meaning you probably didn't get much out of that education in terms of extra money) it will be reclaimed. Bankruptcy will not eliminate student loan debt.

Originally posted by detachedindividual
And what were the toxic mortgages?

It makes no difference what heading these things have. They are associated to a business, that business is in debt, the debt will not be paid back, the business collapses. You could call it anything you like, it still doesn't change the fact that it is a debt that will not be paid.

These banks forecast their entire business on what they "expect" to happen. When it looks good for them they'll conveniently move it into one column, and when it looks bad for them they'll move it into another - just as the government does with unemployment figures.

A debt is a debt. It's not going somewhere just because you call it something else.

Toxic mortgages were loans made that the banks knew had a low chance of being repaid, but because of CDO's and the rating agencies failing people invested in them as if they were AAA investments when in reality they were extremely high risk. Had those investments been properly rated the banks wouldn't have been able to sell as many loans, and we wouldn't have had situations like teachers unions investing pensions into them.

The major difference between student loans and the mortgage crisis is that student loan debt isn't being sold off as a AAA rated investment when in reality it's B- at best, and likely lower. That doesn't mean there aren't issues, because there are but when the student loan bubble bursts it's not going to send people out of their homes and shut down businesses across the country. It's "only" going to destroy the credit of millions of people that went to college and enslave them to a debt they can't repay for most of the rest of their life.

Originally posted by Hefficide

Credit bubbles of any kind always irk me because I see them as scams. Total scams. Including this one.

Let me break it down...

I have ten bucks in my pocket and I make a deal with my friend Bob that I'm going to loan him the ten bucks, and that he's going to pay me back a dollar per year. But since I'm being so generous about the low payment, he needs to pay me back for twenty years. Bob agrees because the terms - a buck per year? Totally reasonable.

Oh, I also add in a caveat that if Bob fails to pay me on or before January first, there's a twenty-five cent late charge for that. And there's a ten cent per year administrative fee, to compensate me for book keeping, etc..

Well, twelve years later Bob dies, decides a buck a year is too much, whatever. Now I cry foul. I scream that Bob has gutted me. So I start telling everyone that I loaned Bob ten bucks and that the no good son of a gun defaulted on me.

Problem is, Bob paid me about fifteen or sixteen bucks already. Technically I am several bucks ahead.

Over simplification? Definitely. But this what banks do. This is one of their tricks.

Add that to the unbelievably naive' concept that unregulated markets will "regulate themselves to prices based upon what the market will bear"... and you get this. Kids wanting an education, having to pay tuition that is jacked up way beyond its value, and ensnared in usury, predatory lending, and high interest loan tricks.

This whole mess has now give rise to a consumer response that I see more and more often these days. Deliberate default. I have a relative who deliberately destroyed her own credit and literally broke the law by buying things she never intended to pay for. Her rationale? "The banks are crooks so, screw-em. I got mine!"

There are a lot of people with that mindset. While I cannot at all condone the behavior, I do understand the sentiment behind it.

If we continue to have a nearly totally unregulated market - we're going to sink.

~Heff

I did the same thing with my credit. After all the decent jobs left my area and I was left with a choice to work at Walmart I said F- it and walked away from my credit. It's been 7 years since then and I find life a lot more easier.

I was one month behind on my truck payment and Ford Mo Co credit had the audacity to call my neighbor. They asked my neighbor if the truck was in my drive way. I called them and told them to come get the truck and shove it up their rear. I went out and bought a used truck for a fraction of the cost. I couldn't be happier.

7 Years later and I still have creditors calling and bugging me.

If this isn't a planned implosion, then why is our Government doing such a good job playing the part? I think we should be taking some cues from Iceland right about now!

Technically, there is no fluctuating net asset value (NAV) to create a bubble. Secondly, student loans are not collateralized and then sold up river.

Why student loan debt feels like a bubble:

(1) Baby Boomers are not retiring.
(2) ‘Tight credit’ leading into QE3.
(3) New grads competing with experienced displaced workers accepting lower wages.
(4) The middle class is shrinking. (Our economy ‘was’ based on the middle class).

So the above forces educated people who had to take out loans to pay for said education into underemployment, thus keeping them from in-turn stimulating the economy with higher disposable income. (Vicious Cycle). Hence, why it is not a bubble - no speculation.

The Fact is:

Usury needs to go away, it is the least productive idea ever invited.