Take notes. There'll be money to be made shorting some of these public companies when the student loan bubble bursts and/or everyone starts to realize a university education isn't the only path to prosperity.
One is taking classes at the community college, but the classes are apparently very poor quality and still around $3500 a semester (her annual income is ~$9000 / year). I told her to take Computer Science classes, but is that even good advice, anymore?
If you are looking for the equivalent of reputable liberal-arts degree (the closest you can get to a "liberal sciences" or engineering degree), you need to find the most advanced gen ed classes and skip over the remedial/basics... and then after 2-3 years transfer to another college for your BA/BS; hopefully with an academic scholarship backed by your poverty and stellar grades so far.
That said, it's possible we end up with a timing problem. What happens if Medicare, Social Security, and the Department of Education all become insolvent at the same time?
The political pressure will almost certainly leave the DOE out in the cold, meaning those loans might not be guaranteed.
Because even if you don't think it's "likely," I can think of plenty of cases where student loan data makes "sense" or is "logical," and you've provided no evidence (of which there is usually at least online anecdotal evidence, see: Dotcom Crash, Bitcoin) that people are making these loans solely to flip them. If you try to argue that the Loan-to-Originate model leads to this behavior, you may have to reconcile a lot of things in this paper: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2700179
http://trends.collegeboard.org/college-pricing/figures-table...
Sofia is one of 7 million former students in default on a record $115 billion of federal loans
Education Management settled with the government in November for almost $100 million over alleged illegal student-recruitment practices without admitting wrongdoing.
Predatory lending. Sound familiar?
FMS Investment Corp., a unit of Ceannate Corp. that tried to collect from Sofia, was paid $227 million by the Education Department from October 2011 through September of this year, the most of any debt-collection company under contract in that period, according to the agency.
The biggest debt collector works for the Department of Education.
The government has disbursed about $100 billion in education loans annually since the 2009-2010 school year, according to data compiled by the College Board. Just six years before that, the amount was almost half. The total has doubled since 2007 and is expected to double again in the next decade, as students and their parents borrow for college and graduate school.
Despite the fact that defaults are on the rise, predatory lending is on the rise, lots of students who are unable to complete an education are taking out loans[1], AND a lot of people getting their degree aren't sure it's worth it[2], despite all of this, lending is going to double again.
Bubbles aren't always clear, but this one is as clear as it gets.
The only question is, who is the government going to bail out when the bubble bursts?
[1]http://fivethirtyeight.com/features/half-of-people-who-went-... [2]http://www.gallup.com/opinion/gallup/185942/gallup-purdue-in...
I'm not sure what your point is about the largest debt collector having contracts with the DOE. Of course they do, that's almost a definitional thing. Pretty much the largest of anything has some kind of government contract.
Defaults are on the rise from a low base, and the securitized portfolios of these loans haven't really taken much of a hit, so it doesn't "sound familiar" because I don't see the same balance sheet risk as 2008 subprime, even though there are undoubtedly subprime elements to this. (For the sake of clarity, I'm referring to the subprime credit ratings and category, not the 2008 era).
I guess what I'm asking is, from what base is all this happening? Predatory lending is on the rise... from .5% of loans to 1%? 1% to 5%? 5% to 10%? Same with the others.
I guess what I'm trying to get out of this thread, is:
1. What novel insight is being presented here that invalidates huge amounts of sophisticated due diligence by incentivized, professional firms?
2. If none, what channel or mechanism is perpetuating something that everybody knows is a bad deal?
3. If everybody knows it's a bad deal, but there is something simply keeping it prodding along, this would not pass even the first level of risk management at these institutions, which really stresses the idea of #2.
This. As I said in another reply to my OP, the government is backing these loans, which makes everyone think they're golden - and that might be true. Perhaps the government will allow the bubble to inflate forever, but the government stepped in in 2008, and there were still plenty of short opportunities available.
But it's unquestionably a bubble if hundreds of billions of dollars (and rising) of loans are being made to people to buy something that A) has no collateral (making it worse than the subprime crisis) and B) the value of the service they're purchasing is, by all perceptions, dropping over time.
Available credit sets the price. Ramp it up and watch the tribute flow in.
With the figure of student loans held by the Federal government going up exponentially as of 2008 [3] (and with tuitions soaring by 6% a year) the chart certainly looks "bubbly".
Investor Bill Ackman believes there will likely be some form of forgiveness as there is "no way students are going to pay it back":
When asked if he was concerned about bubbles forming in debt markets as central banks around the world continue to keep interest rates near zero, Ackman cited student loans as his biggest concern.
“If you think about the trillion dollars of student loans we have outstanding, there’s no way students are going to pay it back,” Ackman said. He foresees a future where debt-laden students protest government officials, leading to some form of forgiveness. [4]
[1] http://www.wsj.com/articles/about-7-million-americans-havent...
[2] https://www.stlouisfed.org/on-the-economy/2015/april/delinqu...
[3] http://www.bloombergview.com/articles/2015-04-17/washington-...
[4] http://www.forbes.com/sites/antoinegara/2015/04/13/bill-ackm...
A repayment boycott would ruin a lot of credit scores, but bring the problem into focus... consider that a huge proportion of people are already in default.
Yes it's a sham, yes there is a huge opportunity cost but that's because our current system is mad.
https://www.google.com/finance?q=NASDAQ%3AAPOL&fstype=ii&ei=... (lost half of it's revenues in just 2 years)
https://www.google.com/finance?q=NYSE%3ADV&fstype=ii&ei=9Llt... (stagnate, revenues declining)