The next big bailout.
Taxpayers will be on the hook for all the student loans handed out by the government which cannot be repaid.
Take a look this from our friends at Zerohedge.
Back in late 2006 and early 2007 a few (soon to be very rich) people were warning anyone who cared to listen, about what cracks in the subprime facade meant for the housing sector and the credit bubble in general. They were largely ignored as none other than the Fed chairman promised that all is fine (see here). A few months later New Century collapsed and the rest is history: tens of trillions later we are still picking up the pieces and housing continues to collapse. Yet one bubble which the Federal Government managed to blow in the meantime to staggering proportions in virtually no time, for no other reason than to give the impression of consumer releveraging, was the student debt bubble, which at last check just surpassed $1 trillion, and is growing at $40-50 billion each month. However, just like subprime, the first cracks have now appeared. In a report set to convince borrowers that Student Loan ABS are still safe - of course they are - they are backed by all taxpayers after all in the form of the Family Federal Education Program - Fitch discloses something rather troubling, namely that of the $1 trillion + in student debt outstanding, "as many as 27% of all student loan borrowers are more than 30 days past due." In other words at least $270 billion in student loans are no longer current (extrapolating the delinquency rate into the total loans outstanding). That this is happening with interest rates at record lows is quite stunning and a loud wake up call that it is not rates that determine affordability and sustainability: it is general economic conditions, deplorable as they may be, which have made the popping of the student loan bubble inevitable. It also means that if the rise in interest rate continues, then the student loan bubble will pop that much faster, and bring another $1 trillion in unintended consequences on the shoulders of the US taxpayer who once again will be left footing the bill.Government backed student loans allowed college tuition to rise to ridiculous levels.
Students got the money, and in turn colleges continued to levy tuitions.
Students now basically come out of school with the equivalent of a mortgage... and no home to show for it, and often no real marketable skills either. The average outstanding student loan balance per borrower is $23,300... but chances are you know some kids that have much higher debt.
And now, with the job market in the toilet, they are lucky if they get a job working at the local mall. The unemployment for 18-24 year olds is 46%!
So it's not surprising that 27% of student loans are 30 days delinquent!
and the situation is bound to get worse.
Seems like the only way these kids will get out from under is through some sort of serf-like servitude to the government, since there are programs around which allow debt to be erased in return for government service. Sort of like a modern day indentured slave.
Read the article...
It's quite illuminating.