Are Student Loans the new Sub-Prime Bubble?

American Thinker ^ | 04/17/2015 | Chriss Street

[SeekAndFind]

On April 15 Tax Day, Americans paid about the same amount of income tax as total student loans outstanding. The St. Louis Federal Reserve on the same day published a report titled ‘Student Loan Delinquency: A Big Problem Getting Worse?' The Fed has determined that of the $1.3 trillion in non-bankruptcy-dischargeable student loans, the delinquency rate for students in repayment is over 27 percent. With tuition at the University of California and other top schools growing faster than inflation, student loan defaults are skyrocketing.

Prior published student loan reports have stated that the “30+ days delinquency rate for all student loans increased significantly over the past 10 years -- from 11 percent to slightly above 17 percent.” But most analysts believed that the 77 percent of the increase over the period from 2004 and 2010 was uniquely due to the Financial Crisis.

Many of these analysts argued that the default rate growing to only 17 percent from the 15.8 percent in 2010 demonstrated that rise in student default rates was peaking.

But when the Fed researchers Juan M. Sánchez and Lijing Zhu dug deeper, they determined that for student loans made from October to December 2010, about 45 percent of the loans were not in repayment. This implied that only about 55 percent of student loans for the period are being repaid.

Adjusting the delinquency rate “to consider that only a fraction of the borrowers have payments due,” the Fed concluded that after all the expanded deferral programs, the student loans delinquency rate was actually 27.3 percent for all loans in repayment.

That means the delinquency rate rose from less than one in nine former students a decade ago to over one in four today.

[originalbuckeye]

I believe I remember the Dems floating the idea that if you ‘take a Government job after graduation, your loans will be forgiven’. I can tell you that loans, if taken out by a parent who then dies, ARE forgiven. The student loan program, after being Federalized so the Government could reap the profits of the interest, will go into default and there we are with another area of financial crisis.

[alloysteel]

An awful lot of individuals who were unable or unwilling to make the effort to acquire a certificate of competency in a particular field of study that led to gainful employment, were simply GIVEN loans with no visible collateral, and when the time came to repay the obligation, they had no means of doing so.

Trapped like a fly in a spiderweb, they could only struggle futilely. The new liberal solution? ALL college level education should now be “free”.

Not everybody is college level material, so this casting of seed on barren ground is futile at best. The striving and deprivation that are involved in the years of acquiring the necessary training or mental discipline are themselves a means of forging a productive and satisfying lifetime.

Not to say, that those who either by talent or by inclination, do not seek a college degree, are in any way a lesser person than the student who had prepared in advance for college. The problem is, that those who prepare for trade work hare held in lower regard than those who aspire to lofty professions.

But plumbers are as important to any society as philosophers, and any economic model that results in making either plumbers or philosophers of lesser value, shall find that neither their pipes nor their theories hold water.

[stephenjohnbanker]

When the govt loans some mope 100,000 for a degree in Black studies, you have a sub prime bubble.

[Rodamala]

[nascarnation]

The legendary Judge Smails!

(RIP Ted Knight)

[Jumper]

A kid goes to the college and wants a grant so the admissions folks tell him he/she has to apply for Federal Aid/Student Loan program to be eligible.

Next a kid with no job who could not buy a TV or car is given in excess of $17,000 annually for the purpose of getting an education.

The kid follows his/her dream and gets a non-revenue producing college education/degree, or worst they blow it on a great apartment, consumer purchases and partying....

All the time they are borrowing the money which adds up to the value of a starter home after four years, they come out of college with basically a monthly payment equal to their rent or a substantial amount towards a home loan.

No one tells the kid they could buy a house for $100,000 and it would take a $750 a month to pay the loan off in 30 years, but essentially this is what a kid signs up for - is it then any wonder there is a problem when they cannot get a job with the 'LACK' of skills to enter the job market after college.

Now let the kids who go free because of race make it to graduation without debt, they are then given Small Business Loans, or hiring preferences to help gain employment or start a business.

Part of the solution is fewer costs associated with the institutions payroll and fewer students in non-employable degree study programs attended with Loan monies.