How many times do I have to acquaint you hippie, pinko-commie, east coast libbie elite, tree-hugging, socialists with the preponderance of those saying there is no student loan bubble? Huh, how many times? How about one more: There is NO student loan bubble! None. I just said so. I don’t care what zerohedge says.
Back in late 2006 and early 2007 a few (soon to be very rich) people were warning anyone who cared to listen, about what cracks in the subprime facade meant for the housing sector and the credit bubble in general. They were largely ignored as none other than the Fed chairman promised that all is fine (see here).
And look how obviously correct he was. We’re now well on our way to “recovery”. Bernanke totally nailed it.
As for the rest, obviously the fault of the homeowners. Not the banks. They were duped by the homeowners and big gubemint, who literally put a gun to their head. Thankfully the banks were smart enough and still made money. Trillions of it in fact. And well-deserved, and well-earned. Versus the millions of unemployed who obviously choose to be unemployed. And who want these free-loaders working for them? Isn’t unemployment insurance a violation of the Declaration of Independence?
Yet one bubble which the Federal Government managed to blow in the meantime to staggering proportions in virtually no time, for no other reason than to give the impression of consumer releveraging, was the student debt bubble, which at last check just surpassed $1 trillion, and is growing at $40-50 billion each month.
This is how the free market works. If you can’t stand the heat, well get out of the trading floors. It’s called growth losers. Isn’t that what all you libbies wanted? Everyone going to college? Well there you go. Even though the wise and frothy has opposed this. Zerohedge continues.
However, just like subprime, the first cracks have now appeared. In a report set to convince borrowers that Student Loan ABS are still safe – of course they are – they are backed by all taxpayers after all in the form of the Family Federal Education Program – Fitch discloses something rather troubling, namely that of the $1 trillion + in student debt outstanding, “as many as 27% of all student loan borrowers are more than 30 days past due.” In other words at least $270 billion in student loans are no longer current.
A month ago, Zero Hedge readers were stunned to learn that unemployment among Europe’s young adults has exploded as a result of the European financial crisis, and peaking anywhere between 46% in the case of Greece all they way to 51% for Spain. Which makes us wonder what the reaction will be to the discovery that when it comes to young adults 18-24) in the US, the employment rate is just barely above half, or 54%, which just happens to be the lowest in 64 years, and 7% worse than when Obama took office promising a whole lot of change 3 years ago.
Although, yes, we agree that some may be dropping out of the labor force in order to go to college, incidentally the locus of the latest credit bubble, where they meet a fate worse even than secular unemployment: they become debt slaves of the Federal System, with non-dischargable debt at that, which even assuming they can get a job would take ages to pay back!But wait: there’s more – of all age groups, this is the one that has actually seen its wages drop the most under the Obama administration.
So not only are they unemployed, young adults are at least poor.
How can they be poor? They have appliances after all.
But fear not dear banks: taxpayers got your back, as usual.
As they should of course. Thank Dawg for the banks, who can help out the irresponsible taxpayer.
And as a courtesy reminder to our young up and coming “thinkers”, this is $270 billion in debt that can not be discharged. Go ahead – file for bankruptcy – see what happens.
The question then is – what is the student loan version of the ABX trade. After all if Bernanke is willing to blow another bubble, someone has to be able to profit when this latest soon to be failed attempt at central planning.
Discharged? Don’t think so. That would not be capitalism.
The banks are smart enough to profit. That is capitalism.
Ladies and Gentlemen, drum-roll please:
A key reason why a preponderance of the population is fascinated with the student loan market is that as USA Today reported in a landmark piece last year, it is now bigger than ever the credit card market. And as the monthly consumer debt update from the Fed reminds us, the primary source of funding is none other than the US government. To many, this market has become the biggest credit bubble in America. Why do we make a big deal out of this? Because as Bloomberg reported last night, we now have prima facie evidence that the student loan market is not only an epic bubble, but it is also the next subprime! To wit: “Vince Sampson, president, Education Finance Council, said during a panel at the IMN ABS East Conference in Miami Monday that lenders are no longer pushing loans to people who can’t afford them.” Re-read the last sentence as many times as necessary for it to sink in. Yes: just like before lenders were “pushing loans to people who can’t afford them” which became the reason for the subprime bubble which has since spread to prime, but was missing the actual confirmation from authorities of just this action, this time around we have actual confirmation that student loans are being actually peddled to people who can not afford them. And with the government a primary source of lending, we will be lucky if tears is all this ends in.
Student Loan Debt Hell: 21 Statistics That Will Make You Think Twice About Going To College
[snip, cut, do the jig]
[and it gets "better" ...]
The sad truth is that a college degree is not an automatic ticket to the middle class any longer.
But for millions of young Americans a college degree is an automatic ticket to student loan debt hell.
Student loan debt is one of the most insidious forms of debt. You can’t get away from student loan debt no matter what you do. Federal bankruptcy law makes it nearly impossible to discharge student loan debts, and many recent grads end up with loan payments that absolutely devastate them financially at a time when they are struggling to get on their feet and make something of themselves.
Oh ya, more smart capitalism:
So ya, what could possibly go wrong?