The Student Loan Problem

[LegendKiller]

http://www.bloomberg.com/news/artic...-loan-crisis-risks-turning-aaa-debt-into-junk

The student loan problem is starting to come to a head. Payment rates are slowing down massively, borrowers are on Forbearance/Deferment for far longer than they should be, Income Based Repayment is becoming more prevalent and borrowers are paying marginal amounts on debt. The result? Bonds backed by student loans are extending past their original intended maturity date which is a default. If the bond has a high probability of default, even if it has a low probability of not having a principal loss, it is junked by the rating agencies.

The "profit" we are making on Student Loans is farcical. There is no profit. The only way there is a "profit" is if the student loans are assumed to default at a nominal amount (12-20%) while the remainder pay full balance, full interest, on time, according to the original payment schedule. However, that is slipping and the discount rate used is the 10-year treasury, not a risk-based actual discount interest rate.

Now, you have to wonder, why did they actually end the FFELP program in 2010? Why, of course, to pay for ACA. The government realized it needed money from somewhere. Those big, evil, banks were making *huge* profits (not) from loans, why couldn't the government? So why not just get rid of the FFELP program and fund ACA using the "profits" from the loans to "fund" ACA.

But...now we are finding out that this farcical "profit" is just that, farcical. It is a sham. A flim-flam. A way of profiting off of the inability of students to repay the debt they are incurring. All of it perpetuated by the US government through multiple administrations, by both parties, and we are all on the hook for it.

This is just the beginning.

 

[Moonbeam]

The beginning of what, of universal free college education?

 

[JSt0rm]

but now they owe more interest and they wont get SS until its paid so muhahahaaha. Poor old people with degrees who have payed 4 times what they would have if they were not poor.

 

[Baasha]

"Education is not a commodity, O' Janasruti!" -Raikva (Chandogya Upanishad, Adhyaya IV)

 

[Zorkorist]

The beginning of what, of universal free college education?

The beginning of the end of telling people they can have an education "for free."

-John

 

[Jhhnn]

The article doesn't mention the ACA & the rest is just whining about reduced profit on existing bonds for the investor class, correct?

New loans come direct from the govt, eliminating the gratis returns to investors between treasuries & FFELP loans, also loan origination fees to bankers as well.

I'll agree that student loans are out of hand but you've wandered into conspiracy theory territory. I see a lot of loan forgiveness in our future over post- FFELP loans, something that's a lot cheaper if the govt doesn't have to pay off the bankers to do it.

 

[Zorkorist]

You realize that saying things like direct to the Government, and with swift Government action, just make people laugh hysterically?

-John

 

[Zorkorist]

The only thing Government is doing is fucking more and more kids that want to go to college.

-John

 

[alcoholbob]

The beginning of what, of universal free college education?

How do you prefer it be financed, hyper-inflating the currency or raising your tax rates?

 

[LegendKiller]

The article doesn't mention the ACA & the rest is just whining about reduced profit on existing bonds for the investor class, correct?

New loans come direct from the govt, eliminating the gratis returns to investors between treasuries & FFELP loans, also loan origination fees to bankers as well.

I'll agree that student loans are out of hand but you've wandered into conspiracy theory territory. I see a lot of loan forgiveness in our future over post- FFELP loans, something that's a lot cheaper if the govt doesn't have to pay off the bankers to do it.

It is common knowledge if you look around. The elimination of FFELP was tied to the ACA.

There were no "gratis" returns. There were marginal returns over benchmark rates since they were US Treasury-like bonds except they weren't directly treasuries, hence the marginal returns over Treasuries. Now we have an additional $800bn of assets sitting on the Gov'ts balance sheet, of which 50% aren't making payments and 20% will have defaulted in 3yrs.

Overall, the student loan problem has less to do about FFELP than it does the program as a whole. FFELP is just the most visible part of the iceberg.

 

[Mai72]

but now they owe more interest and they wont get SS until its paid so muhahahaaha. Poor old people with degrees who have payed 4 times what they would have if they were not poor.

This will affect all of us, so I wouldn't be laughing.

Do you like to pay taxes? Get ready to start paying out of you a**.

We need a solution, because it's only going to get worse.

 

[Zorkorist]

Less Government?!

-John

 

[Jhhnn]

It is common knowledge if you look around. The elimination of FFELP was tied to the ACA.

If it is, you should be able to link it up.

There were no "gratis" returns. There were marginal returns over benchmark rates since they were US Treasury-like bonds except they weren't directly treasuries, hence the marginal returns over Treasuries. Now we have an additional $800bn of assets sitting on the Gov'ts balance sheet, of which 50% aren't making payments and 20% will have defaulted in 3yrs.

Overall, the student loan problem has less to do about FFELP than it does the program as a whole. FFELP is just the most visible part of the iceberg.

Yes, the marginal return over treasuries was gratis, just like returns on GSA paper. A gimme for the investor class.

Unlike banks, the Govt has a variety of ways of dealing with their balance sheet because the balance sheet of the FRB really doesn't matter at all. It's like TARP where all the toxic assets went bye-bye.

 

[LegendKiller]

If it is, you should be able to link it up.



Yes, the marginal return over treasuries was gratis, just like returns on GSA paper. A gimme for the investor class.

Unlike banks, the Govt has a variety of ways of dealing with their balance sheet because the balance sheet of the FRB really doesn't matter at all. It's like TARP where all the toxic assets went bye-bye.

Why don't you do what normal people do, just google it, read a few sources, and learn. Don't be a lazy fuck.

Yes, a gimme for insurance companies, pensions, and mutual funds.

Who, exactly, do you think invested in AAA rated government guaranteed securities?


But let's just ignore the problem.

 

[HomerJS]

It is common knowledge if you look around. The elimination of FFELP was tied to the ACA.

There were no "gratis" returns. There were marginal returns over benchmark rates since they were US Treasury-like bonds except they weren't directly treasuries, hence the marginal returns over Treasuries. Now we have an additional $800bn of assets sitting on the Gov'ts balance sheet, of which 50% aren't making payments and 20% will have defaulted in 3yrs.

Overall, the student loan problem has less to do about FFELP than it does the program as a whole. FFELP is just the most visible part of the iceberg.

Common knowledge is President Obama is an American citizen

Link or shens. WND and Breitbart don't count

 

[LegendKiller]

Common knowledge is President Obama is an American citizen

Link or shens. WND and Breitbart don't count

What's hilarious is that you libbies are running around worried about the ACA Link when, in actuality, is that the link is just as farcical as anything else related to student loans. Not because it doesn't exist, but because the money is a joke.

There are no savings. Whether some savings were allocated to ACA or not is meaningless.

The real story is why there aren't any savings. I'd think you guys would be all over that part of it, but, instead, you'll defend that there are savings to justify ACA, but ignore that an entire generation of kids are fucked.

I'd think you guys would be more than happy to talk about how to fix that problem. Nope, let's worry about ACA.

 

[Zorkorist]

It's all fake money.

-John

 

[nickqt]

What's hilarious is that you libbies are running around worried about the ACA Link when, in actuality, is that the link is just as farcical as anything else related to student loans. Not because it doesn't exist, but because the money is a joke.

There are no savings. Whether some savings were allocated to ACA or not is meaningless.

The real story is why there aren't any savings. I'd think you guys would be all over that part of it, but, instead, you'll defend that there are savings to justify ACA, but ignore that an entire generation of kids are fucked.

I'd think you guys would be more than happy to talk about how to fix that problem. Nope, let's worry about ACA.

You bring up the ACA and then find it hilarious that people are talking about the ACA.

Nice move!

 

[LegendKiller]

You bring up the ACA and then find it hilarious that people are talking about the ACA.

Nice move!

The ACA is more of a side show, but it was the justification for the government to completely take over the student loan market. But the justification was hollow since there are no profits. The government is going to lose boatloads of money.

It's funny to see you guys flail around. As soon as somebody mentions ACA, even tangentially, you guys get all apoplectic and seize up without the ability to see the bigger picture.

Shit's almost pavlovian.

 

[Zorkorist]

It's all fake money.

-John

 

[unokitty]

... shifting ethos of debt forgiveness

In America, the burden of student loans has become a major issue for the budding 2016 presidential race – with one candidate announcing this week a plan for “immediate relief” for college-loan borrowers...

Across at least part of the developed world, a political battle is under way between advocates of fiscal rectitude and forces of fiscal populism...

... the campaign for the Democratic presidential nomination in 2016, the popularity of left-wing candidate Sen. Bernie Sanders of Vermont has surprised many (including rival candidate Hillary Clinton), as he pairs a call for high taxes on the rich and on Wall Street with the goal of free college for all.

“Many young people are graduating with mountains of debt for degrees that will not lead to jobs,” Sen. Marco Rubio of Florida said in a speech this week. “And many who need higher education the most – such as single parents and working adults – are left with few options that fit their schedules and budgets.”

In announcing his proposal for free public-university tuition for those who meet enrollment standards, Sanders said the overall economy won’t be ready to prosper “if, every year, hundreds of thousands of bright young people cannot afford to go to college, and if millions more leave school deeply in debt."

... Governor O’Malley sought to outmaneuver Sanders with his own proposal for “debt-free” college for all, plus generous refinancing terms for existing student loans ...

One Democratic Presidential Candidate calls for 'free college.' Another, calls for free college plus generous refinancing terms for existing student loans... Do I hear yet another offering even more?

Student loans a major election issue?

Free money for student loan debtors vs. derision for those that paid their own way?

After all, if you could afford to pay for your own education, why can't you also pay for everyone else's?

Occupy the White House?

Uno

 

[Zorkorist]

It's all fake money.

-John

 

[Zorkorist]

The important thing, in police states, is to make sure you don't owe more money than you have.

-John

 

[brianmanahan]

It's all fake money.

-John

all money is "fake" because it has little intrinsic value beyond what society has assigned it

- brian

 

[Zorkorist]

You'll need money for bribes, taxes, certificates, and pay for jail everyone the stat3 incarcerates.

-John