25
Mar
12

Higher-ed bubble watch

Yeah, that student debt thing?  Not going so well:

(Aside: When is thirty billion dollars a negligible sum?  Apparently, it’s when Tim Cavanaugh wants to make a dollar figure sound super scary by rounding up to the nearest one-significant-digit value.  Srsly, guys?)

Here’s Fitch:

The Federal Reserve Bank of New York recently reported that as many as 27% of all student loan borrowers are more than 30 days past due. Recent estimates mark outstanding student loans at $900 billion- $1 trillion. Fitch believes that the recent increase in past-due and defaulted student loans presents a risk to investors in private student loan ABS, but not those in ABS trusts backed by FFELP loans.

Now, that last sentence is rather interesting.  Why doesn’t Fitch think that FFELP-backed student loan debt is risky?  Quite likely it’s because federal student loans are nearly impossible to discharge in bankruptcy.  Which, incidentally, helps explain why lending institutions are so insouciantly cheerful about handing out huge amounts of credit to anyone who qualifies for such a loan, and thus why the price elasticity of demand for post-secondary degrees seems to be so damn low.

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2 Responses to “Higher-ed bubble watch”


  1. April 18, 2012 at 21:38

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