Obama Student Loan Debt Bubble About to Blow

It's interesting to watch some of the terms bandied about in headline news. For example, the LA Times headline reads S&P says student loan debt could be next financial bubble.

Next? Could Be?

What with the word "next"? Also what's with the words "could be"? Without a doubt student loans are in a bubble and have been for many years. The source of the problem, as it always is with financial bubbles, is cheap money, loans to nearly anyone, and in the case of student loans, no way to discharge the debt, even in bankruptcy.

From the article ...

"Student-loan debt has ballooned and may turn into a bubble," S&P said. "There are more defaults and downgrades for some student loan asset-backed securities."

Federal and private student-loan debt is approaching $1 trillion and surpassed credit-card debt for the first time in 2010, according to Mark Kantrowitz, publisher of FinAid.org, a college grant and loan website. Under U.S. law, student-loan debt -- unlike credit-card borrowings -- can rarely be discharged in bankruptcy court.

President Barack Obama last month proposed linking federal aid to a college's ability to control tuition costs. The plan calls for increasing campus-based aid only for schools that limit tuition-cost increases and penalizing those that don't.

The Next "Debt Bomb"

The Huffington Post says Student Loans Could Be America's Next "Debt Bomb"

Growing numbers of Americans are finding themselves bankrupt, with their college diplomas partially to blame.

Slightly more than 80 percent of bankruptcy attorneys say the number of their potential clients with student loan debt have increased "significantly" or "somewhat" in the past three to four years, according to a survey by the National Association of Consumer Bankruptcy Attorneys. And there's little hope those debtors will get out of their obligations; 95 percent of bankruptcy attorneys surveyed said that very few student loan debtors will be discharged from their loan as a result of undue hardship.

"Take it from those of us on the frontline of economic distress in America: This could very well be the next debt bomb for the U.S. economy," William E. Brewer, Jr., president of the NACBA said in a statement accompanying the survey.

With so many college graduates burdened with so much debt, the potent

Reality, Again Wrote: Feb 13, 2012 2:35 PM

Get the government out of the student loan business. Higher education is too expensive, just ask the Occupiers how much a degree in Community Basketweaving pays.

Flag as Offensive

gmallast Wrote: Feb 13, 2012 9:53 AM

For Heaven's sake, STOP blaming the victims!!!

As with the housing bubble, the problem was not irresponsible home owners but a massive scam to get people into debt so the banksters could make boodles off the interest. The same is true of the college debt bubble. Perfectly good students left with ever declining wages and worsening unemployment.

The essence of the problem is a plot to peonize Americans by the big banks, corrupt Congressmen, the Bush and Obama administrations, and The Federal Reserve.

This site does not allow enough space to really get into the issue and what is really going on.

Ask Rep. Barney Frank (D-Bank of America...er...Massachusetts). He seems to keep turning up in the middle of all these things like a bad penny.

Reality, Again Wrote: Feb 13, 2012 2:30 PM

The FORCED people to take those loans!

mouthfullofnails Wrote: Feb 13, 2012 3:13 AM

Yes, there was the Bush tax cut, but what spending did Bush and his Republican cohorts cut? Nada. In fact, the Republicans added another whole layer of socialist health care called Medicare Prescription in 2003, remember?

This proves my point, Republicans have a slobbering love affair with BIG government, they just can not be bothered to pay for it.

You have no point.

mouthfullofnails Wrote: Feb 13, 2012 1:40 AM

This Republican-controlled Congress voted to shore up the National Flood Insurance Program to the tune of $10 billion dollars. It's nothing but a redistribution of wealth from America's taxpayer's to millionaires with million dollar beachfront homes. This program is godless and immoral.

Here's a partial list of so called 'small government, free market' Republicans that voted to send taxpayer's monies to millionaires with million dollar beach front homes.

John Boehnor(R)
Eric Cantor(R)
Michele Bachmann(R)
Paul Ryan(R)
Allen West(R)
Daryl Issa(R)
Louis Gohmert(R)
Jeb Hensarling(R)
Dan Burton(R)
Michael Grimm(R)
Steve King(R)
Duncan Hunter(R)
Spencer Bachus(R)

Votes gleaned from http://www.govtrack.us/congress/vote.xpd?vote=h2011-562

If this country has oodles of money to send to millionaires with million dollar beach front properties, then why worry about food stamps to those below the poverty line?

mouthfullofnails Wrote: Feb 13, 2012 1:42 AM

Here's the typical Republican response about giving out flood insurance money to home-owners; "yeah, but not all of the money goes to millionaires with million dollar homes."

PRICELESS!!!!

yongamesser Wrote: Feb 13, 2012 12:04 AM

Republicans pretend to be for 'small' government, but are for HUGE government.

Republicans pretend to be for 'free' markets, but are really for rigged markets.

Republicans say they are for 'taking responsibility', but their method of accepting responsibility is to always blame the most convenient Democrat for all the messes they created.

Republicans always vigorously wave the American flag but, in fact, their actions put our beloved country last.

Cherish the tax cut! Did the Greatest generation have tax cuts and Tea Parties during WWII when we were facing real Fascists?

Let's face it, when a Republicans tells you that he or she is in favor of 'small government and free markets,' aren't both of these lies?

Obama has never accepted any blame for any of his failures. He even took credit for things Bush did.

rsavic4704 Wrote: Feb 12, 2012 10:40 PM

Republicans promise that opting out of Social Security will bring great benefits to the young ones who would then be able to invest their social security money into the stock market?

Here's what Republicans said about moving US military personnel from pensions to private 401k plans.

"Wall Street is a ponzi scheme." or "US soldiers perform a dangerous task and need to be protected."

Why is the stock market a great thing for people opting out of social security but not a great thing to replace the statist/socialistic military pension plans?

chicaree Wrote: Feb 12, 2012 7:21 PM

College tuition has exploded. Used to be you could work and pay your way through college. That simply is no longer possible so students must take out loans. They graduate into a economy where there is no jobs. Yep that is a formula for a student debt loan issue. Cut govrnrment subsides for state colleges and Universities and just turn it over to private institutions. Last I checked a private university was $30.000.00 per year tuition. How many can afford that.

Richard111 Wrote: Feb 12, 2012 2:07 PM

You what BS usually stands for. Well, MS means "More of the Same" and PhD means "Piled higher and Deeper."

Ms Kelly Wrote: Feb 12, 2012 3:52 PM

I haven't heard that old saying since the 70's. Still funny though.

John1324 Wrote: Feb 12, 2012 1:59 PM

The problem of costs is even worse with "private profit" schools. They encourage students to take out loans for living expenses in addition to tuition and books. This, through commissions, gives the school more profit.

Since student loans are now not practically immune from default, if you can't get the high paying salary that school held out as a carrot to get you to sign up for more debt than you could ever hope to pay if you don't get the job, your family member who cosigned to get you a lower interest rate gets stuck with payment of thousand that they cannot afford.

My daughter and her husband are now taking just enough classes at community college to defer payments because it is much cheaper than making payments of about $1,000/mo.

Ms Kelly Wrote: Feb 12, 2012 1:47 PM

I got behind on my student loan and received a letter calling my loan and giving me the amount of the payoff. I was waiting to sell some real estate, and after it sold (about a month later) I wrote a check to Sallie Mae for $8,258.17. Instead of applying all the money to my loan, Sallie Mae held the money and made payments on my loan like I was still paying it off. This was all unbeknownst to me.

Three years later, I got a letter from Sallie Mae telling me I owed $278.00. I phoned and said “How can this be? I paid this loan off three years ago.” That’s when I found out what they had done. I had thrown away the letter I got from them, so I had no proof of the payoff amount.

continued...

Ms Kelly Wrote: Feb 12, 2012 1:48 PM

. I refused to pay the $278 resulting from interest on the loan. Now I have an unpaid collection notice on my credit report.

They’re all a bunch of thieves.

Dancing Bear Wrote: Feb 12, 2012 2:40 PM

Read this and be afraid. If Jackson were white he would have been lynched by now out of his line of work. http://www.tmz.com/2012/02/11/barack-obama-samuel-l-jackson/?adid=hero2

So now Samuel Jackson, like so many others, says he voted for Obama solely because Obama is black. So go figure. And find a way to leave your urban addresses for those city dwellers. Because when the dirt hits the fan, who do you think they are coming for?

Why does the GOP want to court minority voters? Do the think they will ever vote GOP? These eternal haters and bigots from the Democratic Party?

lmao, but only because it is so predictable. But actually tragic. Go. Now.

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Dancing Bear Wrote: Feb 12, 2012 2:41 PM

Yes they are. Premeditated thievery. It is what characterizes U.S. institutions at this time in history. The legal and banking professions are filled with snakes. Medical, not quite as bad but close. Large corporations earn their money by using sophisticated programming to figure out how the can extract one more cent from their customers. Bureaucrats and teachers not really working. It is a vile, vile, nation at present.

FairnessMan Wrote: Feb 12, 2012 1:43 PM

The problem is that probably 80% or 90% of the these "scholars" have no business being in college. Most have the IQ of a cabbage. But just as with the mortgage fiasco, everyone, however unqualified deserves and has a right to get into college.

rpm Wrote: Feb 12, 2012 1:39 PM

IMO, all "higher education" institutions should have to post in the lobby of the admissions and financial aid offices in block letters the percentage of students that are current on loan payments.

jmg11 Wrote: Feb 13, 2012 1:46 AM

Maybe you mean graduates of the institutions.

Students are current because they don't have to pay anything until they graduate.

Hisemiester Wrote: Feb 12, 2012 12:51 PM

Question: If everyone is in debt from the individual to the many countries. The whole world is in debt and on the verge of failing. Why can't all forget the debt of others and start anew? Now that is a thought, you think? Ha!

Ms Kelly Wrote: Feb 12, 2012 1:52 PM

Hisemiester:

In the Bible, God ordained what was called the Year of Jubilee. All property was to revert back to its original owners and all debt was forgiven. This happened every 50 years for Israel (in the Old Testament). I can’t imagine having that kind of system, but it sure is interesting to think about.

Marie278 Wrote: Feb 12, 2012 12:41 PM

Sad thing is a LOT of these kids that get student loans use them for everything BUT their tuition--pay rent, some buy cars, big TV's for their room/apt., you know--pocket money. Then they moan when they're told they have to pay it back and how "unfair" it all is (reference many of the Occupy people). Then, these same unemployed college students will only consider a job in whatever they hold a degree in--like they have the degree, it is someones responsibility to give them a job in that field and at TOP dollar. They rather shirk their responsibilities than take a job so they can payback what they owe.

Congratulations American, we have succeeded in raising a bunch of lazy, entitled, irresponsible children.

PSGret Wrote: Feb 12, 2012 1:15 PM

Marie, lets not forget a prepondance of defaulted student loans are the responsibility of government employees, if the gov can't collect from their own how can we expect them to collect from non-government debters.(most of which are unemployed), by the same token I wonder how many government employees pay their income taxes?

Warrior10 Wrote: Feb 12, 2012 12:34 PM

Don't worry kids, there will be debt forgiveness and gubmint jobs available for all. There's plenty of millionaires to pay for this!

Marie278 Wrote: Feb 12, 2012 12:30 PM

And good luck trying to find these people. I just got three thick letters (on the same day) from the Dept. of Education looking for someone who lived here over 8 years ago. I had heard the Dept. of Education was sending out letters to delinquent borrowers so I cannot imagine it could have been anything else. And and explosion of the student loan bubble will happen soon. Watch for Obama to start a new "program" to forgive these loans for those students who cannot find jobs. Then those WITH jobs will quit so as not to have to pay their loans back. I mean, why should only those without jobs be forgiven? Thus the peril of an entitlement society.

alopekos teumesios Wrote: Feb 12, 2012 7:27 PM

A wrong address for delinquent student loans can lead to some serious consequences for the current resident of a home after the deadbeat has left. Check this out.

http://www.infowars.com/student-loans-and-doe-s-w-a-t-teams/

You too could have a DOE SWAT team doing dynamic entry through your front door at 4 AM to collect on another person's delinquent loans. Better not try to defend your home or they'll cut you down and plant a few ounces of cocaine on your corpse.

Gilchrist Wrote: Feb 12, 2012 12:25 PM

A B..l S..t degree is nothing more than a replacement for the high school education a student should have received and a device for delaying their entry into the real labor pool for four years. Government should fund college education only for those disciplines it has difficulty competing with private industry in exchange for a term of indentured service just like they do with ROTC. Business should not get to cherry pick new graduates, but should be expected to fund the education of those disciplines it needs, also in exchange for a term of indentured service. That ought to reduce the pool of unemployable graduates with worthless majors. Study what is needed or pay to study what you want.

SJHiggins Wrote: Feb 12, 2012 12:24 PM

So you know roll meant roll - if I didn't roll over those working for the government loans which they were encouraged by the government DOE to allow for increase amounts. If I didn't roll over them with positional authority many would have increased debt load instead of lessening the debt load. It is a mess and will get messier. Too many people aren't willing to make the right choice instead they choose the easy - and it is wrong every time!

SJHiggins Wrote: Feb 12, 2012 12:18 PM

Part 2 I firmly believe that an on-campus experience is way over rated and overpriced. Sports, adult ed, international students (that they slow down to get more), state funding, pell, Gov grants are all cash cows to fund pensions, union staff and over paid full-time professors who never teach a class. Eliminate sports, state funding, expand adult education (require all students to work!), require 40 weeks a year of college courses – one course at a time 5 weeks twice a week for 3 hours, pell grants reduced to $3500 not $5500, require a full load teaching for every professor and NO tenure, NO LOANS except personal local bank loans- that would require each student to work so they could show the ability to pay back (starts immed.).

silentCalfan Wrote: Feb 13, 2012 1:35 AM

Shiggins, you make several valid points, but you leave out an important one: the role of parents. Both of my daughters graduated from college in the late 90's debt free; no loans ever; I paid cash for everything. One wanted to go to an expensive college. I said no; you will go to a school I can afford without borrowing, or you will not go. Oh, I also told both that I would pay for only 4 years of college, and it was up to them to get the degree within 4 years. One is now a lawyer, and the other a self-employed massage therapist. Both are doing well. Both paid for post-graduate studies with money they made speculating in condos before the big crash.

SJHiggins Wrote: Feb 12, 2012 12:17 PM

As a college prof and a recently former College President I agree with you! The bubble is real and will break. Aside from my roll as president I saw that it was key to my task to reduce the number of loans and reduce the amount of the loan. MANY students are allowed to take (I mean take) more than the cost of college by in some cases 60% above every semester. We always counseled against it and pointed out the horrible down side. Now that the government runs the show (last 2 years) it is almost impossible to know till afterwards what they took out as a loan. I believe the system needs to collapse to some level so a restructure can take place and allow for real on-line instruction to dominate. Part 2 following

Dark Archer Wrote: Feb 12, 2012 12:09 PM

ITS AN EASY FIX ...EVERYONE STOP PAYING TAXS

MadMtnScot Wrote: Feb 12, 2012 10:58 AM

Thots: I wonder how the masses of college student who voted for this socialist think of him now? I also wonder what the liberal professors who will soon be out a job think of their ideology once it collides with reality? I even wonder if anyone who ever got a worthless degree in "woman's studies" or "urban studies" ever realized how scammed they were by those liberal professors? Hmmm.

vietnamvet Wrote: Feb 12, 2012 11:54 AM

The lberal administrators of those liberal universities use the liberal professors to further the liberal indoctrination impressed on students while in the lower educational levels. In elementary school and high school, the students are young and inexperienced enough to mold with words, alone.

By the time they have reached college, more control is required to keep them from seeing past the facade, so a student loan program which makes them eternally beholden to a socialistic government is the current answer.

Dancing Bear Wrote: Feb 12, 2012 2:53 PM

You gotta admit they are pretty good at the swindle though . . . . ; )

James1386 Wrote: Feb 12, 2012 10:23 AM

HEY, NO PROBLEM. OBAMA WILL COME UP WITH A PLAN FOR TAX PAYERS TO BAIL OUT THE STUDENT LOAN DEFAULTERS.

Merrie Wrote: Feb 12, 2012 10:21 AM

The real problem isn't being $25,000 in debt. The real problem is being $25000 in debt and being unable to make even minimum payments on it. I was in this situation when I graduated about 25 years ago. When I first graduated, I got a job and was paying my loans. Then, I lost my job. The student loan people aren't really pursuing payments. They'll let you defer for pretty much any reason. But the interest never stops. I spent years sending them my tax returns and getting deferred for another year. For a long time, I was barely making minimum wage. After about a decade of deferment, I started paying $50 a month. Then $100. Now, I'm finally paying more than the minimum they expect. But now my debt has ballooned to almost $50000.

Sid14 Wrote: Feb 12, 2012 12:04 PM

This is EXACTLY the reason that "higher education" has become one of the biggest scams in America. What you mentioned is NOT accidental, IT"S THE PLAN. The whole idea is to get all of our kids (who don't know better) onto the perpetual treadmill of debt for the rest of their lives. FORGET COLLEGE, but if you must, PAY AS YOU GO, never take out a loan.

Dancing Bear Wrote: Feb 12, 2012 2:44 PM

Sid14, it is SO big a scam you cannot believe it. I hold three graduate degrees and can tell you that you are being fleeced. These professors though will write the new bailout plan and come out even more ahead! Because in this Banana Republic that is how God Obamus works. He gives pay offs to his supporters by letting them write the bailout plans that then get them more money (but the average mortal is working too hard to figure this out). Hail Caesar! He is an incredible ripoff artiste!

Vince194 Wrote: Feb 12, 2012 3:31 PM

This is how it used to be Sid, but now the tuition costs are so high, ordinary people cannot afford to pay-their-way, even with a second job.
We have to get rid of this scam and stop making the money so easy to get. Once that happens, the universities have no alternative but to drop their prices; just like any other free market allowed to work.

Greg1084 Wrote: Feb 12, 2012 9:40 AM

The federal government can control the cost of education the same way it has affected medical care. It can mandate that all colleges and universities that receive federal funds via any federal program, directly or indirectly, to offer and accredit online courses that end in a degree, with the only parts that require on-campus presence be labs. The labs themselves can easily be regionalized, resulting in a dispersal of campus facilities, and these can be in leased quarters, relieving the institution of the need to maintain a large campus.

Greg1084 Wrote: Feb 12, 2012 9:44 AM

The loan problem can be taken care of by placing the burden on the institutions that facilitated the making of bad loans themselves. Following the lead of Henry VIII, we rob the monastic lands. The loans can be paid out of university endowments, fifty cents on the dollar, with the dun going to the university that got the money from the loan. This is only fair.

wiseone Wrote: Feb 12, 2012 10:24 AM

Wrong. Completely.

The federal government CANNOT control the cost of education. The cost of education, like the cost of everything else, is determined by supply and demand.

Your use of the phrase "The federal government can control..." disqualifies your opinion.

You are seeing right now what happens when it tries; a "bubble". And instead of learning from this you stubbornly, stupidly insist that it will work if only it's done the right way.

You are a glittering jewel of colossal ignorance.; a perfect example of what Rush Limbaugh means when he says liberals think the only reason communism has NEVER worked is because the right people haven't been in charge of it.

Greg1084 Wrote: Feb 12, 2012 9:05 PM

Wrong: the feds control the cost of medical care by setting prices (I know this, I'm a doctor), and because it has a strong hand in tertiary education, it can do the same there. You, Mr. Idiot, assume that no one can affect a market, and that they all act according to laws of nature outside human influence. While conservatives and libertarians agree that the best market is one in which the government doesn't meddle, it also does not make sense to assume that we shouldn't try to influence things positively when we are already in knee deep. JERK.

jmg11 Wrote: Feb 13, 2012 1:40 AM

"Doctor" Greg,

Not sure I believe you are a doctor. No matter -- you have dealt yourself a tough break by fumbling simple economic concepts. Specific problem = you do not know cost from price.

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