damn that's some prime ownage served rare!
Hopefully soon. It's ridiculous and everyone knows it, even more so than the housing bubble I think (not the severity of the crisis in terms of economic cost, but its simple stupidity and unsustainability). It's completely ludicrous, everything about the current cost of degrees in the US. Other Western nations don't behave as stupidly.
Heh, you know the tax payers will be on tap to handle the bail out for the crash, right?
This is SUPER interesting as it explains why there is nothing to break the positive feedback loop of spiraling college costs.
Its basically up to the students to decide its not worth it. But everyone urges them to the contrary. So until a generation learns the hard way, I don't think the general population will 'get it.'
Let's see there chucklehead. In my professional realm of responsibility I oversee about $2bn of student loan backed bonds (FFELP and Private). If one of the bonds I have recommended, or have dominion over, loses $1 of principal, I am professionally responsible. As in, there isn't a single person in my firm that is answerable for that loss other than me.
Now let me ask you, how much research have you dedicated to studying the student loan problem? How much are you paid to do that research? How much money do you have at risk, or your career at risk?
I will answer that for you. 0 hours. $0 dollars. 0 career.
I can give you a litany of reasons why this will not even be close to the mortgage crisis for the actual investments. Foremost among those is that the US Government is on the hook for about 85% of the risk. As in they either own 100% of the loans, or guarantee ~97% of the principal. Thus, unless you are a B-bond investor (Usually AA through BBB rated slug of a student loan bond, about 3% of the overall principal balance o the pool), you will not lose $1 of principal. Thus, this will *NOT* bring down a single bank. To quantify that risk, lets say $300bn of FFELP bonds exist (~100bn of privates), that means that only $9bn of bonds are even under moderate risk. But for those to be under risk 100% of *ALL* loans would have to default. Even if 50% default only $4.5bn is at risk, not including excess spread which will make up the bulk, if not all, of those defaults.
To quantify that, I think at the peak of the mortgage crisis there were somewhere north of $12 *TRILLION* of mortgages outstanding, 10x as much, and banks and investment funds had hundreds of billions, if not trillions, at default risk.
The only risk to this is the federal government and a small portion of private student loans. Even if PSLs defaulted 100% from the borrowers, over 70% have co-signers, meaning parents are also at risk. Considering the 2005 bankruptcy law (and IRS code) made student loans non-dischargable unless under extreme financial duress (I can get you the specific sections if you want), it means that *BOTH* borrower and co-signer have to declare bankruptcy under extreme financial duress to get the loans discharged. Considering most AAA PSL ABS bonds are covered by 30-40% of enhancement, it would take at least 80% of borrowers to default *AND* both signers get bankruptcy dismissal.
Even then, if non-AAA bonds got hit, only 30% of below-AAA bonds would, so maybe 30bn of principal. Still *far* smaller than mortgages.
In other words...
The dick hair that I left on the urinal this morning at work has forgotten more about finance than you'll ever know.
This is SUPER interesting as it explains why there is nothing to break the positive feedback loop of spiraling college costs.
Its basically up to the students to decide its not worth it. But everyone urges them to the contrary. So until a generation learns the hard way, I don't think the general population will 'get it.'
Correct. There is an infinite amount of money that ends up funding the backstop. Banks will perpetually loan money infinitely and make handsome profits in addition to the College Industrial Complex,colleges will increase the prices on a hyper inflationary basis since there is an infinite supply of money.
1 million dollar college degrees, 50K jobs. YES this is coming in the future.
Eventually America will become a defacto Fiefdom.
SoFi is an interesting one.
Let's see there chucklehead. In my professional realm of responsibility I oversee about $2bn of student loan backed bonds (FFELP and Private). If one of the bonds I have recommended, or have dominion over, loses $1 of principal, I am professionally responsible. As in, there isn't a single person in my firm that is answerable for that loss other than me.
Now let me ask you, how much research have you dedicated to studying the student loan problem? How much are you paid to do that research? How much money do you have at risk, or your career at risk?
I will answer that for you. 0 hours. $0 dollars. 0 career.
I can give you a litany of reasons why this will not even be close to the mortgage crisis for the actual investments. Foremost among those is that the US Government is on the hook for about 85% of the risk. As in they either own 100% of the loans, or guarantee ~97% of the principal. Thus, unless you are a B-bond investor (Usually AA through BBB rated slug of a student loan bond, about 3% of the overall principal balance o the pool), you will not lose $1 of principal. Thus, this will *NOT* bring down a single bank. To quantify that risk, lets say $300bn of FFELP bonds exist (~100bn of privates), that means that only $9bn of bonds are even under moderate risk. But for those to be under risk 100% of *ALL* loans would have to default. Even if 50% default only $4.5bn is at risk, not including excess spread which will make up the bulk, if not all, of those defaults.
To quantify that, I think at the peak of the mortgage crisis there were somewhere north of $12 *TRILLION* of mortgages outstanding, 10x as much, and banks and investment funds had hundreds of billions, if not trillions, at default risk.
The only risk to this is the federal government and a small portion of private student loans. Even if PSLs defaulted 100% from the borrowers, over 70% have co-signers, meaning parents are also at risk. Considering the 2005 bankruptcy law (and IRS code) made student loans non-dischargable unless under extreme financial duress (I can get you the specific sections if you want), it means that *BOTH* borrower and co-signer have to declare bankruptcy under extreme financial duress to get the loans discharged. Considering most AAA PSL ABS bonds are covered by 30-40% of enhancement, it would take at least 80% of borrowers to default *AND* both signers get bankruptcy dismissal.
Even then, if non-AAA bonds got hit, only 30% of below-AAA bonds would, so maybe 30bn of principal. Still *far* smaller than mortgages.
In other words...
The dick hair that I left on the urinal this morning at work has forgotten more about finance than you'll ever know.
Our firm does collections on student loans, and the ramp-up in claims is getting to be... "impressive".
That being said, what is VERY sad is the cosigners on these loans get stuck paying the bill. Yeah I know it's their stupidity for cosigning on little Billy's music history degree at $20K/year, but still painful to see Grandma getting stuck writing the check after she saved every penny her whole life.
damn that's some prime ownage served rare!
Alternator sized too!
My three kids have already been told that they'll most likely be attending a JuCo their first two years unless they can break even on the tuition costs through scholarships and grants, then they can go where they want.
I started college as an adult and did a year at a state university on campus, a year at a JuCo, and then two years online at another state university. Thanks to my military service after 9/11, I managed to put money in my pocket usually to finish my degree.
While I agree that the market has to change and that it is taking advantage of people, there are plenty of people that are flat out stupid for the decisions that they've made. Rather than research and price shop, they simply took the bait and eventually those of us that are responsible will pay for them somehow, some way.
fuck me. D:
let me guess, one of those books was written by the professor??
It won't be anywhere close to the mortgage crisis. The US Government owns almost all of the risk. The "equities" backing them are perpetual lifetime enslavement to the debt payment.