Student Debt Bubble Officially Pops As 90+ Day Delinquency Rate Goes Parabolic

[roo_ster]

Very few combinations of college majors & institutions are worth going into debt.  An example of this would be going to a private university for a social work degree.  That there is "shoot me in the head before I breed" level stupid.

To see how that whole college loan market is going , take a gander over here:
The Scariest Chart Of The Quarter: Student Debt Bubble Officially Pops As 90+ Day Delinquency Rate Goes Parabolic
http://www.zerohedge.com/news/2012-11-27/scariest-chart-quarter-student-debt-bubble-officially-pops-90-day-delinquency-rate-g

We'll let readers calculate on their own what a surge in 90+ day delinquency from 9% to 11% (or as footnote 2 explains: 22%) in one quarter on $1 trillion in student debt means. For those confused, read all about it in this September article: "The Next Subprime Crisis Is Here: Over $120 Billion In Federal Student Loans In Default" which predicted just this.

* * *

And so it's official: Pop goes the student loan bubble, as just confirmed by the Fed.

Luckily student debt is dischargeable in bankruptcy. Oh wait. It isn't.

[Jamisjockey]

Everyone should go to college, they said.  You'll all have jobs, they said.   

[T.O.M.]

Part of the problem with student loans is that so many people use the availability of money as a private bank account, so to speak.  When I was in law school, my goal was to escape with as little debt as possible.  So I worked (secretly during first year as students were prohibited from being employed), I lived as cheaply as possible, sold some things to help pay bills (including some guns I miss), and kept driving my beat up car until after graduating/passing the bar/getting full time work/getting post-probationary period pay raise at the end of one year as a prosecutor.  So many of the kids I went to school with maxed out their student loans to live well, to buy high-end interview suits, buy cars, etc.  One guy used student loans to buy himself a new BMW as a graduation gift to himself.  I graduated with around $60,000 in debt, which I will pay off next year.  I can only imagine that some of these guys ame out with over $100,000 in debt, only to find that those associate jobs in law firms paying $100,000+ a year are damn rare and hard to come by.

I have a woman that comes into court on a child support case who has been living on student loans for two years now.  She uses the loans to pay for cosmetology school, pay her bills, and now to pay off the arrearages she owes in child support.  Just plain dumb.

[Fitz]

I'm so glad I'm in the situation i'm in.

5k of loan debt. That's all. And i'm almost done with grad school.



One of the big problems is what Chris describes. You can get an INSANE amount of money above and beyond tuition and fees. It's ridiculous.

[HankB]

. . .  I worked (secretly during first year as students were prohibited from being employed),  . . .

Say WHAT? I've never heard of such a thing - did the school somehow think that the students were all independently wealthy, or was the dean getting an under-the-table kickback from the student loan people?

[AmbulanceDriver]

or was the dean getting an under-the-table kickback from the student loan people?

FTFY

I am not too proud to admit that I have way more student loan debt than I should.  I went back to school to attempt to get into med school, and borrowed the max.   Long story short, ended up not going to med school...   Still have about 25k in student debt to pay off.  

I am greatly annoyed with myself for putting myself in that situation.   I wasn't altogether gormless though, I did plan on doign the .mil route to pay for med school.  Most likely Navy, in the hopes of not getting put anywhere too....  explody.  (ok, some people may consider that beign completely gormless, but....)  Essentially they pay for med school, plus a small living stipend, and then you work it off at basically a year of service (which you get paid for) for every year of med school they put you through.  Since my plan was to be an ER or General Practice doc, likelihood of being put somewhere... explody was less than if I'd planned on being a trauma or thoracic surgeon.

[Boomhauer]

I've repeatedly said before that I fell for the whole "you gotta have a four year degree to have a job better than working for McDonald's" BS and I ended up with a nigh worthless history degree (and I'm sick and tired of people telling me that "it shows you will work hard for something). Thank God I only have about 8k in student loans that I am paying off. I am going back to school to learn some useful skills that will hopefully translate into a better job but I will be doing my best to pay that entirely in cash.

As Chris noted, students treat loans and grants as private bank accounts (the main student pasttime at my old school was to enroll in a full semester of classes, get the loan and grant money, and then immediately drop to halftime status after the money had been disbursed. The colleges looked the other way because the class got paid for and the student got their party money- the money that was meant for them to pay books, commute, etc.

The college structure is completely *expletive deleted*ed up. There is no program outside of something very critical that is worth $40k a year...certainly not the standard liberal arts degree bullshit. The colleges get away with it because of the plethora of cash being thrown at them by state and federal. If that was not happening, college would be a reasonable price affordable by a student who works.

[makattak]

If that was not happening, college would be a reasonable price affordable by a student who works.

Like it was before the spigot of Federal money was turned on...

[longeyes]

Just give everyone a free PhD at birth.  Save time and money.  Keep the self-esteem up.  Address everyone as "Doctor."   Issue free rimless spectacles to all, especially angry minorities. 

[brimic]

Issue free rimless spectacles to all, especially angry minorities. 

They prefer square black rims....

[roo_ster]

As Chris noted, students treat loans and grants as private bank accounts (the main student pasttime at my old school was to enroll in a full semester of classes, get the loan and grant money, and then immediately drop to halftime status after the money had been disbursed. The colleges looked the other way because the class got paid for and the student got their party money- the money that was meant for them to pay books, commute, etc.

I would support legislation requiring schools to co-sign student loans.  It is the schools that benefit most from student loans, they ought to bear some of the risk (not the taxpayers).

[T.O.M.]

Say WHAT? I've never heard of such a thing - did the school somehow think that the students were all independently wealthy, or was the dean getting an under-the-table kickback from the student loan people?

the claim was that students needed to focus entirely on their studies, and not be distracted by employment.  Even with working and studying, I had plenty of time 1L year for shooting, drinking, and skirt chasing...

[41magsnub]

I would support legislation requiring schools to co-sign student loans.  It is the schools that benefit most from student loans, they ought to bear some of the risk (not the taxpayers).

I'm conceptually on board with this.

[charby]

Watch this to see part of the problem with increased student loan amounts, some of it is tied to state funding being cut to public universities.

http://www.theatlantic.com/national/archive/2012/11/our-college-crisis-a-powerpoint-presentation-by-bill-gates/265283/?goback=.gde_1297607_member_187115997

[RevDisk]

I walked away from school with $0 in debt. Thankfully. Best part of student debt is that it will NEVER go away. Bankruptcy, no bankruptcy. Even defaulting can lead to garnishment of wages and tax refunds. And the cost of schooling has drastically exploded. Partly due to more professors working less hours in classrooms (more on other activities, mostly relating to grants), expanded luxury services, expanded bureaucracy of administrators and wider than necessary assortment of activities (sports programs rarely pay for themselves, unless you're the highest tier).

I was at a Kaplan University campus last night in Harrisburg. In my opinion, it's basically a legal fraud mill. The students were shocking abysmal. A good number would not, and SHOULD not, be allowed into any real school. While unprepared and not up to entry standards of real colleges, most of them are actually trying to improve their lives. It kinda hurts to see the earnestness of some of the students, knowing that a Kaplan degree is locally seen as vastly less useful then a certificate from any trade school. Virtually none of the students would be there if it was not for federal loans. Only a handful will benefit from this "school".

Most of the students were from fairly low socioeconomic origins. I cringed at the fact that their "degree" will be four lost years in exchange for a nearly worthless piece of paper, a mount of debt and virtually no education. Further dragging them into crushing debt.

I would support legislation requiring schools to co-sign student loans.  It is the schools that benefit most from student loans, they ought to bear some of the risk (not the taxpayers).

I have been to some excellent colleges. But none of them have an administration that wants ANYTHING to do with reality. They would go bonkers and marshal any possible resource in fighting this. Schools have the perfect setup. They get paid, no matter what and with no risk.

[longeyes]

They prefer square black rims....

You're right but the rimless are less threatening.  :)

[MicroBalrog]

A history degree is, as I said a thousand times, only worthless if you don't know how to apply the writing/critical reading skills practically (technical writer? translator? content manager? here we go!).

But of course many people (and I don't mean anyone in this thread) go into these degrees so they will 'have a degree', or worse, to justify four years of 'being in college' and not doing any work - which would be cool, if they at least admitted it to themselves.

[drewtam]

A history degree is, as I said a thousand times, only worthless if you don't know how to apply the writing/critical reading skills practically (technical writer? translator? content manager? here we go!).

But of course many people (and I don't mean anyone in this thread) go into these degrees so they will 'have a degree', or worse, to justify four years of 'being in college' and not doing any work - which would be cool, if they at least admitted it to themselves.

If that was true then is would be no problem for colleges to become partial cosigners on student debt. They would be taking on no additional risk, regardless of the major. The risk tables would be the same for ChemE, MechE, Pre-Med, Business & Finance, and History and colleges would accept student loans in these fields all the same.

But if it is not true, then colleges would fight this rule change tooth and nail. Because if implemented they would have to rescale the student body size per degree according to the job market demands (except for the students who pay cash up front, they will always be able to do whatever they want).

[Jamisjockey]

No matter what happens with student debt, you can't ignore that the debts are being unpaid.

Prediciton time!

The president will propose, and push, within this term, forgiveness of all government held student debts. 

[Boomhauer]

A history degree is, as I said a thousand times, only worthless if you don't know how to apply the writing/critical reading skills practically (technical writer? translator? content manager? here we go!).

But of course many people (and I don't mean anyone in this thread) go into these degrees so they will 'have a degree', or worse, to justify four years of 'being in college' and not doing any work - which would be cool, if they at least admitted it to themselves.

In my neck of the woods, a history degree is worthless except to check the box of "got a college degree". That is reality. The only reason I actually have a job is I have infinitely more useful skills.

[Boomhauer]

No matter what happens with student debt, you can't ignore that the debts are being unpaid.

Prediciton time!

The president will propose, and push, within this term, forgiveness of all government held student debts.

The college students and graduates with tremendous debt have long been screaming for it. Time to give that part of the FSA what it wants!

Why do you think the feds took over the administration of student loans?

[Fitz]

No matter what happens with student debt, you can't ignore that the debts are being unpaid.

Prediciton time!

The president will propose, and push, within this term, forgiveness of all government held student debts. 

ANd I say EVERY ONE OF US who can take advantage of such a disaster do so, if for no other reason than to break it.

[Tallpine]

A history degree is, as I said a thousand times, only worthless if you don't know how to apply the writing/critical reading skills practically (technical writer? translator? content manager? here we go!).

But of course many people (and I don't mean anyone in this thread) go into these degrees so they will 'have a degree', or worse, to justify four years of 'being in college' and not doing any work - which would be cool, if they at least admitted it to themselves.

I have an accounting/business degree, and work in aerospace software development. 

It depends a lot more on the person than the degree 

[CAnnoneer]

The college situation is a consequence of bigger problems - fiat currency, fiat economy, and overgrown government. If the gov behaved like an individual, i.e. one responsible for his debts, it would not have the money to back the losses from the loan service. That would make loans much harder to get, so only qualified students would get them. Then the students would press the colleges to provide them with education that would get them jobs. If the entire system is based on sound economic principles, it would work. Instead it is based on lies and politics, so it does not.

The real losers in the long run will be all those naive people out there that put their money in financial institutions that loan it to the US gov. As the gov devalues its debts by inflation, the investors will be the ones ultimately taking the hit. It is a giant theft perpetrated before everybody's eyes over decades. So, our gov is the ultimate world swindler. It will destroy the world economically in the next couple of decades at most.

[longeyes]

Student debt Of this magnitude exists because government throws billions of dollars at the academic system.  Stop that and you will lower costs and that will reduce the debt load.

As for the current levels of debt I say let the colleges and universities eat the majority of it.