Posts Tagged ‘student loans’

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by @anarchyroll
6/8/2014

There is something about the word, and the monetary figure trillion that catches one’s attention. Trillion, as in; the total amount of student loan debt in America is $1 trillion.

A standing rule I have is that anytime the word debt and trillion are together in the same sentence, it is worth keeping an eye and an ear on.

Elizabeth Warren has been attempting to push a student loan debt reform bill through Congress. A bill that would in essence, allow debtors to refinance their student loan debt, something that is not currently allowed to happen.

President Obama has now formally put his support behind the bill.

Student loan debt has real potential to be the next bubble that busts the entire economy akin to the housing and dot-com collapses of the previous two decades.

The other important piece of the legislation is that it lowers the interest rates on the loans themselves. The first benefit of the bill helps those already in debt. The second benefit helps those yet to take out loans. Sounds like a common sense piece of win win legislation. Naturally in Washington it is facing an uphill battle with stark opposition.

Regardless of political affiliation or economic situation, $1 trillion of debt must be formally addressed with public policy of some kind to at least take a small preventive measure against a future recession or depression caused by outstanding debt on a mass scale as currently exists with student loan liabilities.

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by @anarchyroll
3/5/2014

A lot has been written about student loan debt, but apparently not a lot of research has been done into the subject. The Department of Education releases default rates once a year, but that is just about it. Are you surprised at this? So was the New York State Federal Reserve Bank. Two analysts working their essentially had to do a bulk of the research that is now often cited by the media and protest groups.

They found that the percentage of 25-year-old college graduates with student loan debts essentially doubled while the average loan balance increased 91% from 2003 to 2012.

Economists are looking at education borrowing as the next bubble that could burst and drag down the US economy along with it. Much like the housing bubble, there are a lot of government backed loans being given away with a rubber stamp to large amounts of people who are unable to immediately if ever repay. Government officials are openly comparing student borrowing to the mortgage-backed security crisis of 2008. And remember, this article opened with the fact that there has been little study and even less data available on the subject.

Mortgage backed securities, credit default swaps, and derivatives trading are all complicated things. Let’s keep the education bubble concept simple.

Student loan debt in America = $1.2 trillion (with a T) more than any other form of consumer debt.

Much like the series of articles written about quantitative easing (QE), there will be multiple articles written about student loan debt as well as the debate over raising the minimum wage. These are the three economic issues I feel most passionately about and wish to shine light upon. Let those numbers listed above wash over you for a bit. Do you know anyone dealing with student loan debt? How are they doing? What is their quality of life?

It’s not just the loan or the interest, it is the unemployment, underemployment, or complete non-existence of careers in the fields thousands if not millions of students are graduating with each year. It’s not just the monthly payment on the loan(s). It’s the monthly payment on the loan plus rent, utilities, food, transportation, etc.

The Education Bubble and the student loan debt crisis are one and the same. They are intertwined, they are two terms describing essentially the same thing.

How is higher education a bubble akin to the dot-com, real estate bubbles, and other asset bubbles? We’ll cover that in part 2…