Wednesday, March 28, 2012

The First Crack: $270 Billion In Student Loans Are At Least 30 Days Delinquent

zerohedge | Back in late 2006 and early 2007 a few (soon to be very rich) people were warning anyone who cared to listen, about what cracks in the subprime facade meant for the housing sector and the credit bubble in general. They were largely ignored as none other than the Fed chairman promised that all is fine (see here). A few months later New Century collapsed and the rest is history: tens of trillions later we are still picking up the pieces and housing continues to collapse. Yet one bubble which the Federal Government managed to blow in the meantime to staggering proportions in virtually no time, for no other reason than to give the impression of consumer releveraging, was the student debt bubble, which at last check just surpassed $1 trillion, and is growing at $40-50 billion each month. However, just like subprime, the first cracks have now appeared. In a report set to convince borrowers that Student Loan ABS are still safe - of course they are - they are backed by all taxpayers after all in the form of the Family Federal Education Program - Fitch discloses something rather troubling, namely that of the $1 trillion + in student debt outstanding, "as many as 27% of all student loan borrowers are more than 30 days past due." In other words at least $270 billion in student loans are no longer current (extrapolating the delinquency rate into the total loans outstanding). That this is happening with interest rates at record lows is quite stunning and a loud wake up call that it is not rates that determine affordability and sustainability: it is general economic conditions, deplorable as they may be, which have made the popping of the student loan bubble inevitable. It also means that if the rise in interest rate continues, then the student loan bubble will pop that much faster, and bring another $1 trillion in unintended consequences on the shoulders of the US taxpayer who once again will be left footing the bill.

7 comments:

Anonymous said...

I'd like to thank you for the efforts you have put in penning this blog. I am hoping to check out the same high-grade content from you later on as well. In truth, your creative writing abilities has motivated me to get my own, personal site now ;)
Here is my website ; free forex software

Anonymous said...

Hello this is kind of of off topic but I was wanting to know if
blogs use WYSIWYG editors or if you have to manually code with
HTML. I'm starting a blog soon but have no coding skills so I wanted to get advice from someone with experience. Any help would be greatly appreciated!
Also visit my webpage ... work from home opportunities

Anonymous said...

Magnificent web site. Lots of useful info here. I'm sending it to some pals ans also sharing in delicious. And certainly, thanks for your effort!
Check out my web page :: online jobs from home without investment

Anonymous said...

I was recommended this web site by way of my cousin. I'm now not positive whether this submit is written via him as nobody else know such distinctive approximately my trouble. You are amazing! Thanks!
Also visit my page ... forex market trading

Anonymous said...

I feel that is among the most significant information for
me. And i am happy reading your article. However want to statement on some common things, The site taste is wonderful, the articles is
actually great : D. Excellent process, cheers
Look at my blog cedar finance.com

Anonymous said...

Hurrah! In the end I got a website from where I can really obtain
useful facts concerning my study and knowledge.
Have a look at my blog post ... buying penny stocks

Anonymous said...

You are so awesome! I do not believe I have read anything
like this before. So wonderful to discover someone with some original thoughts on
this topic. Really.. thanks for starting this up. This website is one thing that's needed on the internet, someone with a bit of originality!
Look at my weblog ... awesome penny stocks scam