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Archive for the ‘Student loans’ Category

When listening to The Big Short, I didn’t fully understand the brief mention re: Steve Eisman that he thought for-profit colleges were the next bubble.  The below chart helps explain why (from the College Board, through Wonkblog):

That is some serious cost increase.  Combined with recent default rates approaching credit card default rates (see chart below from the New York Fed’s Quarterly Report on Consumer Credit, from Rortybomb), and it appears that more pain, for both financial institutions and borrowers, will be coming.

Furthermore, from Mike Konczal (emphasis added):

It is good to see President Obama, as part of his “We Can’t Wait” campaign, pushing to get some fencing around the rules for future student loan debtors through an executive order. According to this press release, the government will accelerate the implementation of laws “to limit loan payments to 10 percent of their discretionary income starting in 2012 [instead of 2014]. In addition, the debt would be forgiven after 20 years instead of 25, as current law allows.” However, according to an early analysis of this move, ”[b]orrowers with loans from 2007 and earlier will not be eligible. Likewise, borrowers who don’t have at least one loan from 2012 or later, like students who graduated in 2011 or earlier, also won’t be eligible. Borrowers who are already in repayment will not be eligible.” So the problem remains for now.

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