Student Loan Delinquencies Reach "Unsustainable 15 Percent"

[Parsad]

Article on delinquent student loans.  Cheers!

 

http://www.bloomberg.com/news/2013-01-29/overdue-student-loans-reach-unsustainable-15-fair-isaac-says.html

[JEast]

There is some good research out their that this is a big issue.  One such item is attached by Wells Fargo's chief economist John Silvia.  However, since most of it is government sponsored the tax payers are the suckers again.

 

http://charlotteeconclub.org/2013%20JAN%20Student%20Loans%20-Silvia.pdf

 

Cheers

JEast

[Phaceliacapital]

http://www.zerohedge.com/news/2013-09-05/jpmorgan-stop-making-student-loans

 

I am very curious as to whether this can be translated into an investment ideas, apart from banks, which companies will be hit by student loans not performing?

 

So unfortunate my BB terminal is at the office :D

[DTEJD1997]

Hmmm:

 

Could "for profit" schools be harmed by this?

 

How about text book publishers?

 

How about text book retailers?

 

First Marblehead used to be big in student lending...can't recall what happened with them.

 

I am sure I am missing others...

 

I think education is undergoing a structural change.

[matjone]

There are some hard stories behind these numbers.  I am mostly a libertarian, but I think if you take a look at the effect this debt is having on people's lives, you can see something needs to be done. I liked the proposal to let this debt come off in a bankruptcy.  And at the same time, the system obviously needs reformed to keep us from getting back here.  Maybe some type of requirement that the loans have to be under some maximum debt service/income ratio?  Maybe just get the gov out of it?  I don't know, but I don't see how you can leave it the way it is.

[valueorama]

http://www.zerohedge.com/news/2013-09-05/jpmorgan-stop-making-student-loans

 

I am very curious as to whether this can be translated into an investment ideas, apart from banks, which companies will be hit by student loans not performing?

 

So unfortunate my BB terminal is at the office :D

 

Given that these are govt-guaranteed loans no company/bank gets affected. Tax payer is on the hook. It is basically showing that unemployment/under employment of newly minted graduates is creating the trouble.

[jay21]

There are some hard stories behind these numbers.  I am mostly a libertarian, but I think if you take a look at the effect this debt is having on people's lives, you can see something needs to be done. I liked the proposal to let this debt come off in a bankruptcy.  And at the same time, the system obviously needs reformed to keep us from getting back here.  Maybe some type of requirement that the loans have to be under some maximum debt service/income ratio?  Maybe just get the gov out of it?  I don't know, but I don't see how you can leave it the way it is.

 

Students generally don't have income. 

 

The problem, imo, is increasing demand for college causing prices to rise.  People don't look at college as an investment and do an ROI analysis.  At some price, it doesn't make sense to go to college.

[bookie71]

AND most student debt survives bankruptcy.

[DTEJD1997]

Hey all:

 

Just saw a disturbing article about "non-profit" education today.

 

Evidently there are some schools that have low graduation rates.  That is even allowing a 6 year period for a student to graduate.

 

The article profiled 11 schools, and the University of Houston (downtown) was ranked #11!  Evidently, only 14% of students who enroll graduate within 6 years!

 

http://dailycaller.com/2013/09/06/these-11-universities-are-awful-and-should-be-demolished-down-right-now/university-of-houston-downtown-creative-commons-ed-uthman/

[Olmsted]

There are some hard stories behind these numbers.  I am mostly a libertarian, but I think if you take a look at the effect this debt is having on people's lives, you can see something needs to be done. I liked the proposal to let this debt come off in a bankruptcy.  And at the same time, the system obviously needs reformed to keep us from getting back here.  Maybe some type of requirement that the loans have to be under some maximum debt service/income ratio?  Maybe just get the gov out of it?  I don't know, but I don't see how you can leave it the way it is.

 

You can be a libertarian and think that something needs to be done without any cognitive dissonance whatsoever: get the government out of the student loan business, put it in private hands.  Private lenders would do a much better job than the government about giving loans to good risks - and that would be the best way to keep people from getting buried in debt pursuing dumb degrees at subpar schools that don't lead to a job.

 

But would that make loans harder to get for [insert disaffected Democrat voting bloc here]?  Of course it would.  But that is the point.  The unlimited availability of stupid credit hurts many of those who receive it, and hurts everyone paying for college.  It hurts many of those who receive it because many of them will bury themselves in debt pursuing suboptimal ends.  (And if you want to pursue social mobility goals, there are better ways.)  It hurts everyone paying for college because colleges, knowing that they have a captive audience who will tap the government to pay whatever tuition is demanded, can raise prices to whatever level they feel like, really.  The only group government student loans unequivocally helps are those who benefit from the educational largesse.  Think college administration, professors, etc. (Oh, another ultra-left voting bloc, what a coincidence...).

[matjone]

I think you bring up some good ideas.  I'd just like to make sure that the decision to grant the loan is based solely on the student's field of study and the student's ability.  I suspect that if you had zero government regulation, kids with wealthy parents would have an unfair advantage.  I mean, if I am lending my own money,, and I have two kids who are qualified, but one is poor and the other one has wealthy parents who will co-sign on it, obviously the wealthy kid is less risk.

[boilermaker75]

Hey all:

 

Just saw a disturbing article about "non-profit" education today.

 

Evidently there are some schools that have low graduation rates.  That is even allowing a 6 year period for a student to graduate.

 

The article profiled 11 schools, and the University of Houston (downtown) was ranked #11!  Evidently, only 14% of students who enroll graduate within 6 years!

 

http://dailycaller.com/2013/09/06/these-11-universities-are-awful-and-should-be-demolished-down-right-now/university-of-houston-downtown-creative-commons-ed-uthman/

 

 

These are dismal graduation rates. But it might speak more to these schools not being able to attract students who are capable of college.

 

Graduation rate is a good metric, but only if there is a way to check how these graduate rates are achieved. If the college starts making all classes A, B, or C, with no D or Fs, then the increase in graduate rate will not mean anything.

 

I did my Ph.D. in electrical engineering at Purdue. I had a fellow grad student who took a professor position at another prestigious private university in the same state. Every semester he would give some Ds and Fs. He would be called in to see his department head and the dean of engineering and be told they did not have D and F students in their university. He would tell them they would be getting Ds and Fs if they were at Purdue. He did not get tenured.

 

Edit: Here is a related link that might be of interest,

 

http://www.gradeinflation.com/

[Gamecock-YT]

Great 10 part series on why 'the tuition is too damn high'

 

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/08/26/introducing-the-tuition-is-too-damn-high/