Tag Archives: student loan

The Student Loan Bubble – Gambling With Your Future

(SchiffGold) Have you heard? The Democrats are going to fix the student loan mess! They’ve brought up the issue in almost every  Democratic Party presidential debate. All we need is a good government program and we can easily solve this $1.64 trillion problem.

Never mind that government programs caused the problem in the first place.

The student loan bubble continues to inflate. Student loan balances jumped by $32.9 billion in the third quarter this year, pushing total outstanding student loan debt to a new record. Student loan balances have grown by 5.1% year-on-year.

Over the last decade, student loan debt has grown by 120%.  Student loan balances now equal to 7.6% of GDP. That’s up from 5.1% in 2009. This despite the fact that college enrollment dropped by 7% between 2010 and 2017, with enrollment projected to remain flat.

In a nutshell, we have fewer students borrowing more money to finance their educations.

Before the government got involved, college wasn’t all that expensive. It was government policy that made it unaffordable. And not only did it manage to dramatically drive up the cost of a college education, but it also succeeded in destroying the value of that degree. Peter Schiff summed it up perfectly:

Before the government tried to solve this ‘problem,’ it really didn’t exist.”

Peter isn’t just spouting rhetoric. Actual studies have shown the influx of government-backed student loan money into the university system is directly linked to the surging cost of a college education.

Millions of Americans carrying this massive debt burden is a big enough problem in-and-of-itself. But it becomes an even more significant issue when you realize the American taxpayer is on the hook for most of this debt. Education Secretary Betsy Devos admitted that the spiraling level of student debt has “very real implications for our economy and our future.”

The student loan program is not only burying students in debt, it is also burying taxpayers and it’s stealing from future generations.”

This is yet another bubble created by government. Despite the campaign rhetoric coming out of the Democratic Party presidential primary debates, it seems highly unlikely Congress will do what is necessary to address the growing student loan bubble. And the Democrats’ solution seems to be to simply erase the debt – as if you can just make more than $1 trillion vanish without serious implications.

Like all bubbles, this one will eventually pop.

The bottom line is that the student debt bubble will ultimately impact US markets and average Americans.

Source: ZeroHedge

No College, No Problem: Silicon Valley’s Student Loan Solution

In the emerging new American world, you might not have to bury yourself in student loan debt in order to get a job: Even Silicon Valley tech giants like Google, Apple and IBM are playing by a new set of employment rules that looks beyond the exorbitantly expensive piece of paper on which a diploma is printed.

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A college degree has long been a mainstay of any kind of employment that can net you a job that does something more than simply make ends meet. Socially, it’s been a clear dividing line between the haves and have-nots.

Sometimes employers will require that you have a college degree even if it that degree is entirely irrelevant to the job at hand. The rationale has been that a college education provides you with a broad learning background and shows a certain sort of ambition and, hopefully, intelligence that can be put to practical use with enough training.

But it’s a very expensive rationale when you consider that new research estimates that by 2023, some 40 percent of student loan borrowers will default.

And waiting in the wings for new employees is a line-up of companies that have crossed off college degrees from their list of requirements. It’s a line-up that extends into Silicon Valley even.

Take Google, for instance, whose former SVP of People Operations, Laszlo Bock, feels that strict college degree requirements could lead to employers overlooking some of the best minds out there.

“When you look at people who don’t go to school and make their way in the world, those are exceptional human beings. And we should do everything we can to find those people,” the New York Times quoted Bock as saying.

Speaking to SafeHaven.com, the executive director of a U.S.-based boutique intelligence and due diligence firm with global operations said college degrees aren’t everything they’re cracked up to be and recruitment efforts don’t work well when it comes down to just ticking off a bunch of boxes.

“We want people who can think outside the box, think on their feet, and not be chained intellectually by linear thinking,” the executive director said. “Just because someone has earned a degree and managed to make it through to the end, doesn’t mean they can think out of the box. In fact, it often means they can’t. That is especially true in America, where job applicants tend to lack broad experiences, geographically and culturally.”

As Bock suggested, employers are likely missing out on some great minds out there that have demonstrated an art of resourcefulness that defies the status quo.

Google, of course, is not alone. Glassdoor recently added 15 more companies to its list of employers willing to forego the college degree requirement for job applicants.

They include:

  • Google
  • Apple
  • IBM
  • Hilton
  • Costco Wholesale
  • Whole Foods
  • Lowe’s
  • Penguin Random House
  • Publix
  • Starbucks
  • Nordstrom
  • Home Depot
  • Bank of America
  • Chipotle
  • EY (UK)

Most notably, Penguin has job openings for marketing designer, senior editor and senior manager of finance, among things—and doesn’t have a college degree requirement, according to Glassdoor. Google offers everything from product manager and software engineer to research scientist and Administrative Business Partner—all open to people who can prove themselves beyond a college degree.

“Google and Hilton are just two of the champion companies who realize that book smarts don’t necessarily equal strong work ethic, grit and talent,” writes Glassdoor.

Speaking to CNBC last year, IBM’s vice-president of talent Joanna Daley said that some 15 percent of the tech giant’s new recruits in the U.S. didn’t have four-year college degrees. Why? Because IBM recruiters were looking first and foremost for people with hands-on experience. So, while college degrees weren’t frowned upon, the most fastest ticket to an IBM job was a stint at a coding boot camp or vocational classes that are specifically related to the industry.

Indeed, if you want to make it in today’s world, doors are opening up to those who can find alternative paths and avoid going into heavy student loan debt. It’s a job seekers’ market, and while recruitment is still overwhelmingly ticking off banal boxes, a revolution in human resources is making itself felt across industries.

Source: by Michael Kern of Safehaven.com | ZeroHedge

Student Debt Bubble Expands As Parents Do More Of The Borrowing

Not so long ago, student debt was mostly the responsibility of students. That is, you paid for college with loans and then paid off those loans with the proceeds of the good job you got with an advanced education.

These days it’s a little different. The cost of higher education is soaring, the jobs available to college grads don’t pay as much, relatively speaking, as they used to, and the size of loans available to students – though huge – don’t cover the full cost of many degrees.

One might expect these changes to lead more students to work for a few years and save up, or choose a cheaper degree, or eschew college altogether (as a lot of successful people now recommend) and substitute work experience for a diploma.

Some of that is happening but apparently the biggest change is that parents have stepped in to cover the difference between what their kids can borrow and the cost of a degree. As the chart below illustrates, until just a few years ago, the average debt of students exceeded that of students’ parents. But post-Great Recession, parents have given up trying to moderate the cost of their kids’ education and started doing the borrowing themselves. They’re now taking on the majority of new debts, and the gap is widening dramatically.

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Retirement Crisis?

So we can add student loans to the list of instances where people who once tried to control their borrowing have stopped trying and are now just going with the flow. Which means several things.

First, kids who if left to themselves and the market would probably opt for one of the aforementioned cheaper alternatives are still in high-cost, frequently low-reward degree programs, and are being sheltered from the consequences by well-meaning parents.

Second, the retirement crisis that everyone is talking about – in which people who have never saved a penny are approaching retirement age and looking at 30 years of abject poverty – is being made that much worse by parents taking on new debts at a time of life when they should be aggressively trending towards debt-free/cash-rich.

Third and most important for people who aren’t participating in this game of financial musical chairs, the eventual implosion of the student loan market – i.e., the point at which loan defaults become intolerable – will lead to a government bailout, making student loans everyone else’s problem.

But of course the government won’t raise taxes or otherwise inflict immediate consequences on the electorate. It will borrow the money and create enough new currency to cover the first few years’ interest, leaving the longer-term consequences for later years and other people.

As with all the other mini-bubbles out there, if student loans were an isolated problem in a sea of rock-solid financial behavior they’d be easily managed. But they’re just one of many time bombs set to explode shortly.

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Auto loans, credit cards, underfunded pensions and increasingly mortgages and home equity lines are all heading the same way domestically, while emerging market dollar debt (which dwarfs the US mini-bubbles) is just as precarious internationally.

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The question then becomes, how many of these bursting bubbles can the US paper over before the currency markets figure out that each will be followed by another, for as far as the eye can see?

Source: ZeroHedge

New Game Show Gives Millennials A Chance To Eliminate Student Loan Debt

Overinflated college tuition facilitated by a bottomless ocean of cheap student loans has so far trapped forty-five million Americans with a record $1.48 trillion in non-dischargeable debt – an amount which has more than doubled since the 2009 lows.

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As we reported in January, approximately 40 percent of student loans taken out in 2014 are projected to default by 2023 according to the Brookings Institute.

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However, a new game show on TruTV offers millennial contestants a chance to answer trivia questions – and if they win, the game show will pay off their student debt.

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“Paid Off,” a new trivia game show that premiered this week tries to illuminate the student debt crisis that has entrapped countless millennials. To get the balance right, the show’s producers partnered with a nonprofit group called Student Debt Crisis.

Its executive director and founder, Natalia Abrams, gave this advice to producers: “Every step of the way, from signing up for college to paying back their loans, it’s been a confusing process. So make sure that there’s some heart to this show.”

Video: Paid Off with Michael Torpey Season 1 Trailer 

Michael Torpey, a New York-based actor (“Orange is the New Black”) who is the host of the show, acknowledges that student debt is a crisis and one of the most difficult financial issues plaguing millennials in the gig economy.

“We’re playing in a weird space of dark comedy,” said Torpey, who developed the show with TruTV producers and various nonprofit groups. “As a comedian, I think a common approach to a serious topic is to try to laugh at it first.”

Video: Paid Off with Michael Torpey – The Story Behind Paid Off with Michael

The rules of game show are simple: Three millennial contestants, all of whom have an exorbitant amount of student debt, go head-to-head in a few rounds of trivia questions, hoping that their useless liberal arts degree enables them to answer enough questions right. If they win, well, the show will cover 100 percent of their outstanding student loans.

“One of the mantras is ‘an absurd show to match an absurd crisis,’” Torpey told The Washington Post. “A game show feels really apt because this is the state of things right now.”

Earlier this year, the show had a casting call in Atlanta – this is what the casting flyer stated: “truTV’s new comedy games show PAID OFF is going to do something the government won’t – help people get out of student loan debt! If you’re smart, funny, live in the Atlanta area and have student loan debt, We Want You!”

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Video: Paid Off with Michael Torpey – Finger The Masters

Torpey told NBC that “he strives to balance the light hearted trappings of a game show with an earnest, empathetic look at the student debt issue.”

“I want to be very respectful of the folks who come on our show, who opened their hearts and shared their struggles with us,” Torpey said. “I hope this show de-stigmatizes debt. I mean, there are 45 million borrowers out there. It is a huge number of people!”

Google searches for “paid off game show” have been rising since June.

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Meanwhile, “student loans forgiveness” searches have been surging over the cycle.

Source: ZeroHedge

43% Of Federal Student Loans Are Not Being Repaid

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Do you have outstanding debt from a federal student loan? If so, the chances are significant that you are behind on your payments or have not even tried to make any payments at all. As of the beginning of the year, there were approximately 22 million Americans with student loans — and, according to information from the Department of Education, only 12.5 million of them are current with their loan payments.

Around 3 million student loan holders are in some form of postponement on their debt. Through a deferment or forbearance, they have permission to delay their loan payments due to a hardship such as unemployment or other financial emergency. Approximately $110 billion in student loan balances are in some form of postponement.

Another 3 million more student loan borrowers were delinquent, meaning they were between one month and a year behind on their loans. 3.6 million borrowers are at least a year behind on their payments and are considered to be in default. Government officials are concerned that many of the borrowers in default do not intend ever to attempt to pay back their student loans.

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The combined balance in delinquent and defaulted loans is approximately $122 billion, meaning that around $232 billion of the over $1.2 trillion student loan portfolio is in some form of distress. Other types of loans with traditional banks would not tolerate such a ratio — but what bank would loan money without credit checks, cosigners, or any evidence that the loan will ever be paid back? Essentially, that’s how student loans work. The government also has no collateral; they cannot repossess your education (yet).

There is at least some silver lining, as a 43% non-repayment rate represents an improvement over last year’s rate of 46%. The Wall Street Journal attributes much of the change to programs that allow some borrowers to lower their student loan payments by connecting them to a percentage of the borrower’s income (also known as income-driven repayment). The number of borrowers taking advantage of these programs nearly doubled over the past year to 4.6 million.

Fortune notes that the Department of Education has blogged that those who do not pay back federal student loans will not be arrested, but they will suffer problems in their financial future and will certainly have difficulties establishing good credit. Unfortunately, evidence shows that some borrowers may not care. The attitude may be that the government will eventually write off these loans or that the potential punishments are not worth a repayment effort compared to other priorities.

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Data from student loan servicer, Navient Corp. shows that the average attempts to reach borrowers in delinquency are between 230 and 300, or more than once every other day. Regardless of format — calls, letters, text messages, and e-mails — 90% never respond. Over half never even attempt to make a payment prior to default.

Income-driven repayment is the preferred compromise path that allows repayment without punishing those who legitimately cannot find work and afford repayment. There are four such programs offered through the Federal Student Aid website: REPAYE, PAYE, IBR, and ICR. If you find yourself among the 43%, consider income-driven repayment plans as a way to repay your debt without overburdening your budget.

If you are among those who are simply ignoring your obligation to repay, don’t. Just because you may never be jailed because of default does not mean that there are not consequences — and do not expect the government to bail you out. Even if the rules are changed, they may not be retroactive. Do the responsible thing and set up a program to pay as you can.

source: MoneyTips

7 Million People Haven’t Made A Single StudentLoan.gov Payment In At Least A Year


Perhaps it’s all the talk about across-the-board debt forgiveness or maybe the total amount of outstanding student debt has simply grown so large ($1.3 trillion) that even those with no conception of how much money that actually is realize that it’s simply never going to paid back so there’s no point worrying about, but whatever the case, the general level of concern regarding America’s student debt bubble doesn’t seem to be at all commensurate with the size of the problem. 

And it’s not just the sheer size of the debt pile that’s worrisome. There’s also the knock-on effects, such as delayed household formation and the attendant downward pressure on the home ownership rate, and of course hyperinflation in the rental market. 

Of course one reason no one is panicking – yet – is that the severity of the problem is masked by artificially suppressed delinquency rates. As we’ve documented in excruciating detail, if one excludes loans in deferment and forbearance from the numerator in the delinquency calculation, but includes those loans in the denominator then the delinquency rate will be deceptively low. In any event, as WSJ reports, even if one looks at something very simple like, say, the number of borrowers who haven’t made a payment in a year, the picture is not pretty and it’s getting worse all the time. Here’s more:

Nearly seven million Americans have gone at least a year without making a payment on their federal student loans, a staggering level of default that highlights how student debt continues to burden households despite an improving labor market.

As of July, 6.9 million Americans with student loans hadn’t sent a payment to the government in at least 360 days, quarterly data from the Education Department showed this week. That was up 6%, or 400,000 borrowers, from a year earlier.

The figures translate into about 17% of all borrowers with federal loans being severely delinquent—and that share would be even higher if borrowers currently in school were excluded. Additionally, millions of other borrowers who haven’t hit the 360-day threshold that the government defines as a default are months behind on their payments.

Each new crop of students is experiencing the same problems” with repaying, said Mark Kantrowitz, a higher-education expert and publisher of the information website Edvisors.com. “The entire situation isn’t getting better.”

The development carries big implications for borrowers, taxpayers and the economy. Economists have warned of student-debt defaults damaging borrowers’ credit standing, which would hurt their ability to borrow for things like cars and homes. That in turn would hamper the economy, which relies heavily on consumer purchases for economic activity. Delinquencies also drain government revenues, which are used to make future loans.

So what’s the solution you ask? According to the government, the answer is the income based repayment plans. Here’s The Journal again:

 Education Secretary Arne Duncan said declines [in some categories of delinquencies] resulted from rising participation in income-based repayment plans, which lower borrowers’ monthly bills by tying payments to their incomes. Enrollment in the plans surged 56% over the past year among direct-loan borrowers.

The administration has urgently promoted the plans, mainly through emails to borrowers, over the past two years in an effort to stem defaults. The plans set payments as 10% or 15% of their discretionary income, defined as adjusted gross income minus 150% the federal poverty level.

The plans carry risks, though, for both borrowers and the government. Many borrowers’ payments aren’t enough to cover the interest on their debt, allowing their balances to grow and threatening to trap them under debt for years.

At the same time, the government could be left forgiving huge amounts of debt if borrowers stay in the plans. The government forgives balances after 10, 20 or 25 years of on-time payments, depending on the plan.


But aside from the fact that these plans will cost taxpayers an estimated $39 billion over the next decade – and that’s just counting those expected to enroll in plans going forward and ignoring the $200 billion or so in loans already enrolled in an IBR plan – the most absurd thing about Duncan’s claim is that, as we’ve shown, IBR programs don’t drive down delinquency rates, they just change the meaning of the term “payment”:

See how that works? If you can’t afford to pay, just tell the Department of Education and they’ll enroll you in an IBR plan where your “payments” can be $0 and you won’t be counted as delinquent.

So we suppose we should retract the statement we made above. You are correct Mr. Duncan, these plans are actually very effective at bringing down delinquencies and the method is remarkably straightforward: the government just stopped counting delinquent borrowers as delinquent.

Source: Zero Hedge

Sugar Daddies Are Paying Their Share Of The $1.3 Trillion Student Loan Balance

As noted previously, we are in a new dark age where college does not pay. At $1.3 trillion, the student debt balance is not getting any smaller. Facing a lifetime of debt slavery, the millennial generation is doing whatever they can to avoid homelessness. Whether it’s stripping or working at Rent A Gent, all options are on the table. Now, they are flocking to Seeking Arrangement to prostitute themselves so they can pay for school. Since 2009, the number of student sugar babies has increased by 1,200%!

The labor force participation rate for college graduates has been on a relentless downtrend.

Bachelor Degree Labor Force Participation

It is getting even more expensive to go to school. Even after adjusting for inflation, college costs have gone up more than 400% in the last 30 years.

College Tuition

The student loan balance has nearly tripled in the last decade.

Student Loans

Many young people don’t see any good alternatives to going to school, so they jump in head first. Facing enormous bills, they turn to sites like Seeking Arrangement for help. These aren’t just women either. 15% of student sugar babies are men, and plenty of sugar mommas are on the site too.

Here are the numbers.

Seeking Arrangement Stats

And here are the sugar babies by major.

Top Sugar Baby Majors

The abundance of nurses on Seeking Arrangement shouldn’t be surprising for regular readers. Personal care aides and nurses are the fastest growing jobs in America.

Most New Jobs

Here are the perks of Seeking Arrangement.

Sugar Baby Perks

And here are the sugar babies.

Sugar Babies

Previously, it was common for students to take food and service jobs, but soon, you will hear college students casually sharing their day with their sugar daddy. Welcome to the modern hooker economy.

by Daniel Drew