Quote :

" Zero Hedge has some lovely scary charts showing a remarkably sharp uptick in student loan delinquencies. The bubble has officially burst: As noted over at Reason 24/7 today, Market Watch has some additional reporting: New data released today shows 11% of student loans were 90 days or more past due in the third quarter, up from 8.9% in the previous quarter and 8.8% a year prior, according to the Federal Reserve Bank of New York. It’s also the highest since at least 2003, when the bank first started tracking student loan delinquencies. “It’s a red flag and a warning sign that more Americans are struggling to repay their student loans — things are bad, really bad, and getting worse,” says Rich Williams, higher-education advocate at the U.S. Public Interest Research Group, a nonprofit based in Washington. The latest data comes at a time when delinquencies on many other consumer debts, including credit cards and mortgages, are dropping. Overall, delinquency rates on outstanding consumer debt fell to 8.9% in the third quarter, from 10% a year prior, according to the FRBNY. Zero Hedge warned in September that the student loan bubble had already burst. Now we’re seeing the fallout. http://reason.com/blog/2012/11/29/pop-goes-the-student-loan-bubble"

Zero Hedge article: http://www.zerohedge.com/news/2012-11-27/scariest-chart-quarter-student-debt-bubble-officially-pops-90-day-delinquency-rate-g


Do not comment on the reputation of the source of the article.
This thread is based on your opinion and predictive abilities.

The main questions to answer in this thread are:

Is the student loan bubble about to burst?
What do you think we will see when the student loan bubble collapses?

11/30/2012 1:15:42 PM

I had to do a double take on who the OP is, but yes, I agree completely, the student loan market will crash, they're going just as free and loose as the housing market was in it's prime. I do think it will take a while longer, but when it crashes, it'll foot taxpayers with a lot of the bill, and students with the rest. All that needs to happen to fix it is easy, let people get out of it with bankruptcy. Then student loans dry up and colleges are forced to roll back costs.

11/30/2012 2:05:04 PM

Yes.

We will see many, many, many 20 somethings with jacked up credit, and no money, and no hope to repay their debt within the next 20 years. Some of the companies that ARE actually hiring entry level positions will skip over these folks. This will cause them to start their real careers even later.

Down the road, this will lead to fewer 30 somethings starting families, buying houses, buying cars, supporting their local economy, etc... These "younger people" will slowly start to realize just how much their generation got the shaft.

11/30/2012 2:05:06 PM

Quote :

"I had to do a double take on who the OP is, but yes, I agree completely, the student loan market will crash, they're going just as free and loose as the housing market was in it's prime. I do think it will take a while longer, but when it crashes, it'll foot taxpayers with a lot of the bill, and students with the rest. All that needs to happen to fix it is easy, let people get out of it with bankruptcy. Then student loans dry up and colleges are forced to roll back costs."

This is...exactly right? The fuck is going on here?

11/30/2012 2:07:48 PM

the difference between this and a reasonable thread is when he starts posting about how this was done on purpose in order to enslave people for the new world order

11/30/2012 2:09:20 PM

That's funny you say that because I believe there is no way they could have not known that giving out loans to anyone and everyone wouldn't yield this result.

11/30/2012 2:15:16 PM

11/30/2012 2:17:26 PM

I wish I could know exactly how this is going to play out. I'm aggressively paying off my student loan, but if there is some kind of bullshit "forgiveness" program a couple years after I finish paying it off I'll be pissed.

11/30/2012 3:29:20 PM

Quote :

"This is...exactly right? The fuck is going on here?"

11/30/2012 3:32:17 PM

^^depends on if your loans are public or private, if they're private, there might be some chance of principal forgiveness, but it's unlikley, probably just longer forberence or lowered intrest rate, if it's public, the only relief I could see offered would be some sort of bankruptcy deal, in which case I'd still go with paying it off.

The government actually did a decent job with making the mortgage adjustments only benefit the people who never should have been given the loans in the first place, I'd imagine they'd do the same on this.

11/30/2012 3:56:56 PM

It's due sooner or later, but zerohedge is kind of a joke. I'll pay attention to their predictions when they actually start owning up to their failed past ones.

11/30/2012 3:59:29 PM

^.

11/30/2012 4:01:03 PM

It's ridiculous to say the bubble "has" burst. The housing bubble didn't burst when forclosures went up, it burst when house prices went down. When there's some movement in student interest rates we can start saying the bubble "has" burst, untill then it's just "the bubble will burst".

11/30/2012 4:12:04 PM

Quote :

"the student loan market will crash, they're going just as free and loose as the housing market was in it's prime."

this.

In the early-mid 2000s, anybody could get a mortgage loan b/c they would just be packaged and sold off. Banks knew they assumed no risk, so they gave loans willy nilly.

Now, anybody can get a student loan b/c you can never discharge the debt until you pay it off. Banks know they have no risk, so they give loans willy nilly.

Fast forward...and loan standards/gov regulations will be so ridiculous that people who should be able to get financing will not be able to, stifling the market...Just like with mortgage loans now.

11/30/2012 4:26:27 PM

I would think the government's approach to this would be less heavy-handed considering the housing thing is a few people having to rent a little bit longer whereas this would prevent young people from getting an education.

11/30/2012 4:28:23 PM

let's discuss what it will look like when it bursts

11/30/2012 4:30:09 PM

^^in this case, simply allowing debt discharges would probably effectively choke off the availability of the loans...what bank is going to give an 18 year old with no assets a 100k loan that provides no real collateral w/o the government assurance that the borrower can never shed the debt?

11/30/2012 4:40:28 PM

If I had to guess, I'd say a major drop in tuition costs and closing/downsizing of universities. Public universities, being subsidized, might be less affected by this at first.

11/30/2012 4:44:05 PM

^ Agreed. I think what we're going to see is a culling of mid-tier private universities. The top dogs (your Harvards, MITs, etc.) will survive, but these smaller, lesser known institutions are going to have a hard time justifying their tuition in an environment where people will seriously question the benefits of paying more for a private school. I think public universities will survive though perhaps transformed.

I'm curious to see if this changes people's attitudes towards the benefits of college education in general. Though there are a few naysayers, the overriding dogma still argues that a college degree is a magical key to success. Also wonder what will happen when this current boom of college age students end and overall university enrollment numbers contract with the population, adding further pressure on universities.

11/30/2012 5:09:04 PM

Do you think states will restore funding that has been cut for state universities?

11/30/2012 5:41:24 PM

Quote :

" Then student loans dry up and colleges are forced to roll back costs"

ha, this won't happen.

They'd raise tuition or cut services before rolling back costs.

http://dashboard.ofb.ncsu.edu/f_b_bud_total.php

[Edited on November 30, 2012 at 6:03 PM. Reason : ]

11/30/2012 5:59:21 PM

Quote :

"I'm curious to see if this changes people's attitudes towards the benefits of college education in general. Though there are a few naysayers, the overriding dogma still argues that a college degree is a magical key to success."

It's also correct, secondary educations are in high demand, and the demand for them will only increase. We need college degrees, but we need them in STEM subjects, as the costs for education become more visible, degrees that are profitable are going to be the only ones that are easy to get financed.

11/30/2012 7:41:25 PM

Secondary educations yes
Four-year degrees no

Bachelor degrees have been put up on a pedastal in our child development culture. Yes, they are excellent assets to gainful employment, but they are not a requirement. Vocational educations are accessible, cheap and provide immediate access to middle-classmenship. There is little or no advocacy for that kind of career path in schools, but the standard of living afforded by these careers is often higher than that of careers stemming from four-year liberal arts degrees.

11/30/2012 9:14:37 PM

^^We also need more employment opportunities in the STEM fields; this is mostly a problem for advanced degrees, however.

11/30/2012 9:31:41 PM

Quote :

"Bachelor degrees have been put up on a pedastal in our child development culture. Yes, they are excellent assets to gainful employment, but they are not a requirement."

They are a requirement for high skilled high paid jobs. It's not like the market is saturated for 4 year degrees, we currently importing them from the far east.

Quote :

"We also need more employment opportunities in the STEM fields"

Engineers have the lowest unemployment rate for almost any degree, they're out there.

12/1/2012 11:53:59 AM

Quote :

"It's not like the market is saturated for 4 year degrees, we currently importing them from the far east."

Tell that to the philosophy major who served me beer last night.

12/1/2012 11:58:15 AM

Read my previous posts in this thread for context

12/1/2012 12:00:01 PM

Quote :

"^^We also need more employment opportunities in the STEM fields; this is mostly a problem for advanced degrees, however."

I don't understand in what industry this can possibly be true.

I don't know where you're coming from in particular, but a lot of people I do hear from advocate more people going into vocational crafts, for instance. They cite things like Germany who does very well for itself with a more highly-vocational focused educational system. The problem is that this argument has basically been through-and-through debunked as snake oil. There are very high skill laborers working for Boeing complaining that their craft makes less money today than they did 20 years ago. The aviation industry certainly won't make your argument.

The health care industry seems like the only place with jobs to spare right now, and those jobs do require advanced degrees and certification.

Is this magic STEM demand you speak of snapping up Mechanical Engineers from NCSU? Where? The auto industry?

Maybe our joy should be directed at the shale gas boom, which now, more than ever, needs plenty roughnecks to work in dangerous, carcinogenic jobs in the middle of nowhere made possible by a handful of engineers at Halliburton who created a more perfect fracking fluid.

12/1/2012 4:56:36 PM

lol at zerohedge being a joke. There isnt a person in the industry that doesn't read zerohedge. They are always the ones breaking the big news stories days/weeks/months in advance.

12/1/2012 5:32:39 PM

Easy Financing allows Costs to Skyrocket.

If we have learned anything, its that we haven't learned anything at all.

I know a girl working at a local retail store, who has like six figure student loan debt, and went to NCSU for like 6-7 years, kept changing majors, did not graduate, took as much out as possible (housing, meals, etc) hardly worked.

She is back living with parents, working FT and her student loan payment = the majority of her check.


There has to be a better balance between keeping college affordable, and enabling stupid irresponsible borrowing that will never be paid back.

12/4/2012 6:22:12 PM

Quote :

"All that needs to happen to fix it is easy, let people get out of it with bankruptcy. Then student loans dry up and colleges are forced to roll back costs."

the fuck? Kris and I agree? only 17 days till the Apocalypse...

12/4/2012 9:31:58 PM

India's Bold Solution to the U.S. College Crisis: Federal Universities

http://www.theatlantic.com/business/archive/2012/11/indias-bold-solution-to-the-us-college-crisis-federal-universities/265343/

Good read. I'm dating someone who went through the Indian Federal University program and she's pretty darn bright!

12/5/2012 8:54:08 AM

Zerohedge is a website for people who huff paint.

12/5/2012 8:55:29 AM

Sometimes they even break stories that other outlets don't report at all, because they never end up happening at all! Now THAT'S bold, daring journalism.

12/5/2012 8:56:49 AM

^^^ I don't buy the idea of a Federal university system. The only advantage I would see is that the universities might be shielded from the broader fluctuations that state budgets suffer from.

However, I don't think it's going to make a difference. We already have a very massive system of large, heavily subsidized public universities, several of which could go toe-to-toe with some of the best universities in the world, and those have done nothing to place any sort of downward pressure on average college tuition. Do we really think that adding another dozen or so public universities would really make a difference in the grand scheme of things from a market perspective?

Also, if the Federal government is going to start running their own university system, would it a) create disincentives for states to bother maintaining their own systems if the Feds build one in their state and b) would there be eventual pressure to funnel Federal research funds to national universities?

If you want the Federal government to step and do something, you should attack from the angle of Federal research money. Use that as a tool to force universities, particularly private institutions, to provide greater visibility into their finances and then develop incentives to push universities to become more lean and efficient (there's a lot of talk already about administrative bloat).

12/5/2012 1:30:38 PM

I'm skeptical that the idea of federal universities would even pass a constitutionality test.

12/5/2012 1:33:14 PM

To quote the article re: State Schools:

Quote :

"Why federal universities instead of state universities? State spending is likely to focus on the existing state university systems. But that will have a limited impact on total college availability, for two reasons. First, increased state funding for existing universities may simply displace alumni funding or tuition funding. That could lower the net price of college, but would have a limited impact on enrollment. Second, there are many geographic areas that don't yet have elite universities, or only have a few (Ohio comes to mind, as well as much of the Southwest and the Pacific Northwest). Federal universities could fill these gaps. Finally, it's very difficult to coordinate policy between states, and if we want to create new universities on a large scale, only federal government can do it."

I can attest to administration bloat, as I worked at a major university for about 5 years in their finance division. From what I've seen, most of the money donated from alumni seems to go to....courting alumni for more money. Dining halls with $5,000 chairs, new buildings with absurd and costly architecture, etc.

I'd like to see something like the requirements we've put on healthcare providers to put 85% of premiums into actual healthcare. Not sure how to do that with universities, maybe set a maximum that can go towards administration and alumni services.

Quote :

"I'm skeptical that the idea of federal universities would even pass a constitutionality test."

General Welfare Clause, easily.

[Edited on December 5, 2012 at 1:37 PM. Reason : .]

12/5/2012 1:37:04 PM

Not with the current SC.

12/5/2012 1:48:29 PM

^

When SCOTUS adopted the ruling in US v. Butler back in the FDR administration, it pretty much gave congress plenary power to tax and spend (ie, general welfare) as it so chooses.

This Hamiltonian take on the general welfare clause has been widely accepted in jurisprudence since that time, regardless of the make-up of the court.

Thus while you may say "not with this court," you're actually wrong to be that dismissive.

Sure, Scalia, Thomas, and Alito would dissent citing the opposing limited Jeffersonian view on the General Welfare clause, but I'm 99.9% sure Roberts and Kennedy both would heed the precedent that's been observed for nearly 75 years.


So Str8Foolish's defense of a Federal University via the General Welfare clause has a good chance of being upheld when viewed through the lens of the congressional tax and spend power.

12/5/2012 3:43:37 PM

I think the establishment of a federal university system would be sufficiently unprecedented to the point where its judicial legitimization would not be a foregone conclusion. Education is the biggest and last domain that state governments really handle. You could make the argument, and lots of people would, that transferring the responsibility of running universities to the hands of the federal government would be the nail in the coffin of dual federalism.

12/5/2012 3:53:33 PM

As to the STEM degrees argument. In our department in RTP we have hired something like 30 people in the last 6 months and are set to bring more in after the new year. And to give an idea of scale there were something like 95-100 before the hiring run. Over of half of those are new college hires.

12/5/2012 3:57:22 PM

Quote :

"I think the establishment of a federal university system would be sufficiently unprecedented to the point where its judicial legitimization would not be a foregone conclusion. Education is the biggest and last domain that state governments really handle. You could make the argument, and lots of people would, that transferring the responsibility of running universities to the hands of the federal government would be the nail in the coffin of dual federalism. "

a) 10 years ago, you could've said that about the health care system. Things change.

b) The modern view of the Commerce Clause already drove that nail years ago.

12/5/2012 6:55:17 PM

States didn't have the kind of control over healthcare 10 years ago that they currently have over education. Education is the last thing that states are expected to operate. They will not give it up easily, and the conservatives on the court will not let it go without a fight.

Like I said, it would be close but it's definitely not an open and shut case.

12/5/2012 7:00:36 PM

Quote :

"federal university system"

12/5/2012 11:08:19 PM

Evolution not taught at federal universities. or whatever the political fad of the time says.

12/5/2012 11:15:11 PM

I don't see why a Federal University system means ending the State system? Why can't we have both? It's not like the education market is super-duper saturated with cheaper-than-private options.

12/6/2012 10:36:04 AM

Quote :

"federal university system"

Yes, it's about time we brought our higher education system up to par with our globally respected K-12 system.

12/6/2012 11:41:11 AM

Yeah because the Federal aspect is totally the key aspect in K-12. Not the State-based curriculums, or the municipality-based funding and administration.

The key indicator of the quality of education is local property taxes, aka local wealth. Inequality has skyrocketed over the past 30 years, and the average quality of education, not surprisingly at all, has dropped as the fewer and fewer (as a proportion) wealthy people move into economically segregated enclaves.

Just look here at that darn Federal K-12 system:



Take something like this next chart, keep in mind the funding of schools through local property taxes, combine that with increasing inequality, and it's no surprise that the average scores over the nation drop:



Destroyer, I know you love each and every opportunity to attribute a problem to the Federal government, this is not a case of that and it'd demonstrate some actual discretion and critical thinking on your part to admit so.

[Edited on December 6, 2012 at 11:52 AM. Reason : .]

12/6/2012 11:43:37 AM

Quote :

"Editor's note: William J. Bennett, a CNN contributor, is the author of "The Book of Man: Readings on the Path to Manhood." He was U.S. secretary of education from 1985 to 1988 and director of the Office of National Drug Control Policy under President George H.W. Bush. (CNN) -- A college degree was once synonymous with academic excellence and workforce readiness. Today, it seems synonymous with debt and underemployment. Last week, the Federal Reserve Bank of New York reported that student loan debt increased to $956 billion, more than auto loan debt or credit card debt. More worrisome, the student loan 90-day delinquency rate increased to 11% this past quarter and for the first time exceeds the "serious delinquency" rate for credit card debt. Student loan debt is reaching bubble-bursting levels. By comparison, in October 2007, the start of the subprime mortgage crisis, 16% of subprime mortgages were 90 days delinquent, according to Federal Reserve Chairman Ben Bernanke. By January 2008 it accelerated to 21%. If the economy heads off the fast-approaching fiscal cliff and tax rates spike for lower- and middle-class Americans, it may accelerate student loan defaults to crisis levels. The big banks got their taxpayer bailout; taxpayers may soon be on the hook for another. William BennettEven if the markets manage to avoid another debt crisis, the mountain of student loan debt is already taking its toll on a weak economy. Become a fan of CNNOpinion Stay up to date on the latest opinion, analysis and conversations through social media. Join us at Facebook/CNNOpinion and follow us @CNNOpinion on Twitter. We welcome your ideas and comments. In September, Pew Research Center reported that a record one-in-five households owe student loan debt. The average student loan debt in 2011 was $23,300. Unlike credit card debt or automobile loans, student loans are virtually impossible to liquidate, even after declaring bankruptcy. So 20- and 30-year-olds buried under student loan debt are forced to put off other purchases crucial to the health of the economy, like buying a car or home or investing in the markets. Many are moving back in with their parents and delaying marriage and starting a family, two of the most vital building blocks to a healthy and prosperous economy. Valuable human capital is withering before it can even set its roots. The problem now rests in the hands, and wallets, of taxpayers. In 2010, the federal government consolidated its power in the student loan industry so it could eliminate private middlemen and directly issue and guarantee loans. By 2011-12, the federal government issued 93% of all student loans. By nature, student loans are inherently risky. Students have hardly any credit worthiness. But the government is making a bad situation even worse. Federal lenders are notoriously lax. For example, they don't distinguish between loans to students pursuing highly employable fields such as health and education, and students pursuing majors that have a high unemployment rate, like architecture and arts. And yet, the federal government continues to flood the higher education market with more loans. In 2010, the Department of Education distributed $133 billion in student aid. In 2011, it was nearly $157 billion, a 17% increase. As I've said before, these increased subsidies have not curtailed student loan debt or tuition costs. What's driving this debt crisis is a vicious cycle of bad lending policies eerily similar to the causes of the subprime mortgage crisis. Over the past 50 years, it has become conventional wisdom that everyone should go to college. High school guidance counselors and college admissions offices preach it, parents believe it and politicians cater to it. With near-universal demand and parents willing to pay or borrow almost anything to get their son or daughter through college, colleges and universities can drive up their prices. When tuition prices rise, the government subsidizes the difference by increasing federal loans. But these easy loans, many of which are increasingly going to middle-class students, only increase the price ceiling that colleges can charge, thus completing, or starting, the cycle. Of course, these aren't the only problems in today's higher education financial crisis. Many colleges and universities are failing at their most basic responsibility: education. Students are graduating ill-equipped for the needs of the modern workforce. More than half of all college graduates in 2010-11 were unemployed or dramatically underemployed. Many employers rate college graduates today as unprepared or only somewhat prepared for the job. Reform is needed at many levels. Money-hungry institutions should be subject to more accountability and transparency; uninformed consumers should be aware of the alternatives to four-year colleges like trade and technical schools; and irresponsible federal lending needs to be reined in. But above all, American society at large must stop pushing the notion that everyone should, or deserves, to go to a four-year college. It took a recession and massive taxpayer bailout for Americans to realize that not everyone should, or deserves, to own a home. We can't afford to learn this lesson the hard way again. "

http://www.cnn.com/2012/12/06/opinion/bennett-student-debt/index.html?iid=article_sidebar

I don't usually agree with this guy but the article and ideas are pretty good.

[Edited on December 6, 2012 at 11:54 AM. Reason : .]

12/6/2012 11:52:34 AM

So the housing bubble bursts, the economy crashes because so much of it is tied to the housing market, and people lose their homes.

When the student loan bubble bursts, what happens? No one will get kicked out of their homes, nothing is crashing. The economic recovery will continue to be sluggish because we have a generation of people who can't afford to buy a house right away, and there are lots of reasons this is bad, but is it really a bubble? What does it look like?

12/6/2012 1:09:51 PM