The next bubble

I can’t find any breakdown in this LA Times piece, but I have to wonder: How many of these loans are from the shell game run by for-profit colleges? Because they’re almost designed to have students default, much like mortgage derivatives. and in the meantime (watch above video), Republicans want to push through rate increases that will make it even more likely. Hmm… maybe this is not an accident:

Reporting from Washington— Some experts have called the nation’s soaring college debt load a “ticking time bomb” — a looming crisis threatening young adults, their families and the broader economy.

A new report raises even more alarms: It’s likely that as many as 1 in 4 borrowers was carrying a past-due student loan balance in the third quarter, the Federal Reserve Bank of New York said Monday.

That’s a much higher delinquency rate than previously thought. By a more conventional measure, the New York Fed said, 5.4 million of 37 million borrowers with student loan balances had at least one past-due student loan account — a 14.6% rate.

Many educators are concerned about the increasing financial squeeze on college students and their families and the repercussions for the nation’s economy.

W. Norton Grubb, a professor at UC Berkeley’s School of Education, is worried that rising debt levels are forcing some students to drop out. Only 40% to 50% of those enrolling at universities such as the California State University schools end up completing their degrees, he said.

Such figures have helped bolster a long-held belief by scholars that America’s declining or stagnant college graduation rates have become an Achilles’ heel in the competitive global economy.

The New York Fed report concluded that “student loan debt is not just a concern for the young. Parents and the federal government shoulder a substantial part of the post-secondary education bill.”

[…] The New York Fed said the past-due balances on student loans amounted to $85 billion, or about 10% of the total owed. The same 10% rate applies on average to other types of consumer delinquent debt, such as mortgages and credit cards.

But Fed researchers said delinquency figures for student loans understate the magnitude of the problem. That’s because the calculations don’t take into account that federally guaranteed loans, which make up the bulk of student debt, typically don’t require repayment while borrowers are still in school and for six months after graduation.

3 thoughts on “The next bubble

  1. Since most student loans are federally-backed, doesn’t the president have the authority to allow more-lenient forebearances, perhaps with a moratorium on interest rates until unemployment falls to, say, 6% or so?

  2. Indentured servant; a person who came to America (or went to college) and was placed under contract (a student loan) to work for another (the 1%) over a period of time, usually seven years (in this case for a lifetime). Isn’t it now against the law to include student loans in a bankruptcy proceeding? What a great country.

  3. I think that what the oligarchs are trying to tell us is that the upper economic classes are now full and no longer taking applications for membership.

    The ladder of opportunity and upward mobility is out of service.

    Please check back later.

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