The next big bubble to burst?
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27-12-2012, 09:39 PM
RE: The next big bubble to burst?
Ben Bernanke walking out of his office crying.

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28-12-2012, 10:13 AM
RE: The next big bubble to burst?
(11-12-2012 09:07 PM)germanyt Wrote:  Student loans.
Student loans is the popular target for the next bubble, but I'm not convinced it will be. It certainly has many of the same attributes that previous bubbles have had - cheap money, securitization, high profits for lenders and investors that drive down lending standards, etc.. But, unlike the housing market and the tech crash, borrowers can't just walk away from their obligations. I'm not sure what a mass default on student loans will look like. You can't get rid of student debt via bankruptcy and you can't turn your education back over to the bank. Eventually, they are going to collect the debt from you even if it means having your wages garnished.

I guess maybe if enough people stop paying their loans the securities built on them could collapse, but I'm not sure what that does to the student loans in general. Maybe it brings back some sanity in lending standards? But, then you still have entities like Sallie Mae who back the loans, ala Freddie and Fannie in the housing industry, who make cheap money loans possible and ongoing.

It will be interesting to see how it plays out. I have two sons, aged 9 and 11, and we are already thinking about college costs for them and how we are going to pay for it. I make a pretty good living (I also live in a really expensive part of the US which offsets my pretty good living) but my wife and I have a combined income that is well above the national average. And, we have no idea how we are going to do this. A 4 year degree can cost in excess of $125,000 and that is with a state school. I have two kids so I'm looking at $250,000. How do people swing that? I have no idea, but I guess I have to figure it out.

If I had to bet on a bubble to pop, I think student loans is as good as any but I'm not convinced.

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28-12-2012, 10:21 PM
RE: The next big bubble to burst?
$125,000 for a fucking degree!! WTF! You sending them to Harvard to learn law for 8 years or something!?

My 3 year degree is gonna cost me about $30,000NZ (about $25K US). And that's interest free.

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30-12-2012, 06:48 PM
RE: The next big bubble to burst?
(28-12-2012 10:21 PM)earmuffs Wrote:  $125,000 for a fucking degree!! WTF! You sending them to Harvard to learn law for 8 years or something!?

My 3 year degree is gonna cost me about $30,000NZ (about $25K US). And that's interest free.
Cost of college in the US is out of control. A private school will cost you $50k annually. Most state schools will cost you $25k and there are always "extras" you get stuck with. Those numbers include books, room and board, but it all needs to be factored in.

Funny you mention Harvard. The Ivy's have a policy that no one will leave in debt so they help you out. I know someone who's son rows for Princeton. With the "assistance", he still pays $30,000 a year. Princeton won't let you take out student loans so he's borrowing from elsewhere. It's crazy money though.

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01-01-2013, 09:27 AM (This post was last modified: 01-01-2013 09:39 AM by Diablo.)
RE: The next big bubble to burst?
(28-12-2012 10:21 PM)earmuffs Wrote:  $125,000 for a fucking degree!! WTF! You sending them to Harvard to learn law for 8 years or something!?

My 3 year degree is gonna cost me about $30,000NZ (about $25K US). And that's interest free.
An ivy league school like Harvard in the US is 50k a year.
A good public school like University of Virginia or University of California in Berkeley is 25k per year for in state students, 50k per year for students out of state.
http://www.virginia.edu/financialaid/estimated.php

An associates degree, 2 year degree, in the US is about as useful as toilet paper.
A Bachelors degree, 4 year degree, is what most people go to college to acquire. (Note some programs such as engineering can take up to 5 years)

So $125,000 is about right for a Backelors degree. However, most people will also qualify for at least some financial aid, such as grants, that they don't have to pay back.


There are two types of student loans.
Stafford Subsidized loans

Stafford Subsidized Loans are federally guaranteed loans based on financial need. Interest does not accrue on the loan while you are in school at least half time, or during any future deferment periods. The federal government "subsidizes" (or pays) the interest during these times. Additionally, there are maximum amounts you can receive per school year.


Stafford Unsubsidized loans

Stafford Unsubsidized Loans are federally guaranteed loans that are not based on financial need. Interest does accrue from the time the loan is disbursed to the school. Additionally, there are maximum amounts you can receive per school year for dependent and independent students.


Most people get out of school with what amounts to a household mortgage. Then we wonder why 85% of kids graduate and return home.
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01-01-2013, 09:46 AM
RE: The next big bubble to burst?
(28-12-2012 10:13 AM)BnW Wrote:  
(11-12-2012 09:07 PM)germanyt Wrote:  Student loans.
Student loans is the popular target for the next bubble, but I'm not convinced it will be. It certainly has many of the same attributes that previous bubbles have had - cheap money, securitization, high profits for lenders and investors that drive down lending standards, etc.. But, unlike the housing market and the tech crash, borrowers can't just walk away from their obligations. I'm not sure what a mass default on student loans will look like. You can't get rid of student debt via bankruptcy and you can't turn your education back over to the bank. Eventually, they are going to collect the debt from you even if it means having your wages garnished.

I guess maybe if enough people stop paying their loans the securities built on them could collapse, but I'm not sure what that does to the student loans in general. Maybe it brings back some sanity in lending standards? But, then you still have entities like Sallie Mae who back the loans, ala Freddie and Fannie in the housing industry, who make cheap money loans possible and ongoing.

It will be interesting to see how it plays out. I have two sons, aged 9 and 11, and we are already thinking about college costs for them and how we are going to pay for it. I make a pretty good living (I also live in a really expensive part of the US which offsets my pretty good living) but my wife and I have a combined income that is well above the national average. And, we have no idea how we are going to do this. A 4 year degree can cost in excess of $125,000 and that is with a state school. I have two kids so I'm looking at $250,000. How do people swing that? I have no idea, but I guess I have to figure it out.

If I had to bet on a bubble to pop, I think student loans is as good as any but I'm not convinced.
My advice to you would be community college. It is much cheaper, free for most, and the general education credits are just as good as the ones at any 4 year school.

PS: I also agree that Student loan debt is a bubble that is not likely to burst.
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01-01-2013, 11:28 AM
RE: The next big bubble to burst?
(01-01-2013 09:46 AM)Diablo Wrote:  PS: I also agree that Student loan debt is a bubble that is not likely to burst.
It burst my enthusiasm bubble about going to University. Tongue Everything is way too expensive, and I've been working full time and saving for the past 2 years to go to school. Insanity.

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