From:
http://www.zerohedge.com/...
"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."
Got that? Lenders WERE 'pushing loans to people who can't afford them'
Isn't this the problem behind the mortgage crisis? Lenders making loans the borrowers couldn't afford?
But wait - you can't EVER get out of a student loan -not even through bankruptcy. But what if you can't get a job that pays enough to pay off those loans? What if you can't get ANY job (sadly not too uncommon now)?
From:
http://www.usatoday.com/...
The amount of student loans taken out last year crossed the $100 billion mark for the first time and total loans outstanding will exceed $1 trillion for the first time this year. Americans now owe more on student loans than on credit cards, reports the Federal Reserve Bank of New York.
Students are borrowing twice what they did a decade ago after adjusting for inflation, the College Board reports. Total outstanding debt has doubled in the past five years — a sharp contrast to consumers reducing what's owed on home loans and credit cards.
Also from:
http://www.zerohedge.com/...
Trying to find the original Bloomberg reference (they were a sponsor of the event) but so far all reports link back to ZeroHedge
More bullets from Bloomberg:
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.
The bubble in the sector is over
Noted political dynamic of education funding
U.S. is currently 16th in the world in degree attainment
He notes the U.S. education secretary and U.S. president have probably looked at that number
Nevertheless state universities are struggling because state governments are poorer: Sampson
Says a sustained effort is underway at some schools to bring in out-of-state tuition, which typically pay 100% of the cost
Barbara Lambotte, a senior credit officer at Moody’s said during the panel that student loan lenders are chasing the same potential borrowers
Everybody is going after borrowers with co-signers and high FICOs, also students who may be going to the better schools: Lambotte
Gary Santo, a MD at First Marblehead said during the panel that borrowers too are being more conservative in theirchoice of education funding
Lambotte said Moody’s outlook on private student loan ABSmarket is negative, but newer loans should perform better
An article in 2010 from USAToday provides further background:
http://www.usatoday.com/...
more info opn student loans:
http://www.zerohedge.com/...
In summary
Lenders are NO LONGER pushing student loans on students that can't afford them - meaning that they WERE doing so previously.
The total Student Loan market is larger than Credit Card debt in the US - and is GROWING while credit card debt is DECREASING
Note: Credit Card debt is decreasing in part as people pay down credit cards, in part because banks write off bad credit card debt. Student Loans cannot be discharged in bankruptcy and are 'forever' but how do you pay a student loan back if you cannot get a job AT ALL - or if the only job you can get does not pay enough to let you make payments on your student loan?
restating from the Intro:
The amount of student loans taken out last year crossed the $100 billion mark for the first time and total loans outstanding will exceed $1 trillion for the first time this year.
from the same USAToday article:
The portion of borrowers in default — more than nine months behind on payments — rose from 6.7% in 2007 to 8.8% in 2009, according to the most recent federal data
Anyone wondering what the CURRENT default rates are? I sure doubt they've improved.
And you thought the subprime mortgage meltdown was a problem? You can walk away from a house. You can't 'walk away' from a student loan - though it may be impossible to pay it back.
But don't worry - lenders won't suffer any losses on student loans.
Student Loans are guaranteed by government.
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So.... how can this work out well? for anyone but the lenders that is.....
Lenders pushed loans they knew were unaffordable on college students.
College graduates - or non-graduates- are left owing on debt they can never escape, even if it is unaffordable. They can expect to be in a new form of 'indentured servitude' paying off this debt. Don't expect this generation to be buying houses or cars or much of anything anytime soon - even IF they can find employment.
Government will be making good on this debt to banks and other lenders - loading up taxpayers with MORE national debt in the process.
Once again, lenders making loans they KNEW would be bad get off scot free. The borrowers are in debt for the rest of their lives. The taxpayers get screwed making good these loans when they can't be paid back.
I won't even get into the rising cost of college made possible BECAUSE of Federally guaranteed loans - without them colleges might not have raised costs faster than inflation. At least colleges (the not for profit ones at least) are no longer pushing loans as much..... though maybe because it's harder to get them....
A friend had to pull their child from a 4 year college when a local bank would no longer write student loans - after doing so the previous year and saying they would do so again. This did not occur until well into the college term last fall, forcing the student to pay OUT OF POCKET for that term. They had to do so for their transcript to be released, so they could get credit for the year and a a half of classes they had taken. They finished out last year at a local Community college and are now working a minimum wage job to try and save enough to get back to college.
Though incurring some debt myself to finish college, I would STRONGLY advise against doing so today. It's hard enough starting out in life - doing so with monstrous debt is near impossible. A previous comment on this topic.
http://www.dailykos.com/...