We all know about the $1.4 trillion US student loan bubble, but most people don't know that there is another bubble underneath it - the "student loan asset-backed securities" bubble.
SLABS are financial "derivatives," but unlike the derivatives that took a hit during the 2008 financial crisis, SLABS never "unwound" - in fact, they picked back up around 2011, and have been increasing ever since.
SLABS were based in large part on "junk data" from the Department of Education which hid the true rate of default/nonpayments.
To make matters worse, SLABS themselves have been used to back other derivatives (derivatives of derivatives) and in many cases "stepped in" to replace the junk derivatives that imploded in 2008/2009, and prop up the financial system.
The student debt bubble itself is increasingly unstable. It is becoming clear that much of it will never be repaid. By itself, it would be a difficult but manageable bubble-burst.
But with SLABS underneath it, the results are a lot more grim...
They're backed by the US Government now. They won't pop any time soon.
Connor Martin
These posts are made to destroy the abundant #pizzagate evidence.
Do not fall for them.
Nathaniel Wilson
Federally-backed student loans are nominally-backed by the US government. Nominal, because the bubble is a relatively recent trend, and the government has never actually been obligated to cover mass-defaults.
That is beginning to change, which will be politically-difficult.
If the students don't have the money, the next logical target would be the universities/university endowments that took the loan money in the form of tuitions - but there is no law yet to permit this.
There are also several hundred billion dollars in outstanding private student loans which are not backed by the feds.
We've really, really fucked up the higher-education financing system in the US, and it's going to fuck us up the ass relatively soon.
Sebastian Myers
>we've really fucked the higher ed financing system Preddy much. There's gonna be a poin a bubble burst when all the women's studies degrees just can't pay back their 50k loans because liberals aren't good at long term planning
Joseph Flores
Well OP
>>Pull yerself up by yer bootstraps boy
>> Boy goes to get a blue collar job, gets shit on by everyone in mainstream society because he'd rather build things than sit at a desk. Billionaires import Mexicans that depress wages..
>>HA HA BOY SHOULDA GONE TO COLLEGE HUH? HUE HUE SEE HOW YA DIDNT WORK HARD ENOUGH LIKE ME DID YA HUH? Better luck next time!
>>Sends kids to college, has no money to pay for their college but rich people tells them that's how you "succeed" in the system.
>>Rich people manipulate the loan system to hide their speculation and mass robbery of US tax payers
Tell me again OP why we shouldn't kill all the people on Wallstreet?
Charles Taylor
>double arrow for greentext >spaces aswell >spouting retarded debunked liberal memes
I reported you for being a shill
fuck off
Benjamin Collins
The problem here is that you think her degree is worth less than yours when, in fact, both are equally worthless financial liabilities from a business perspective. The point of a college isn't "going to work for others" because you have some certificate, it's to cultivate your mind.
Easton Ross
REEEEEE REPORTED BECAUSE YOU MADE ME MAD AND IM A 13 YO WHO GOT BUTTHURT WAAAAHHHHH
Have fun being a wage slave and sucking off wallstreet dick. You will NEVER be one of them you deluded piece of shit. Even if you were rich, which you will never be, they would still treat you like an outcast for coming from nothing.
Anthony Bennett
depends on what degree though degrees tied to professional bodies are always worth more than the others (law, medicine) degrees tied to internships are next, unless you dun goofed during college the rest... you'd better be working on that portfolio of yours, or it's equal to gender studies
Connor Hall
>I reported you for being a shill had to jump in on this.lol, report, to who?
William Allen
>Federally-backed student loans are nominally-backed by the US government. When a federally guaranteed student loan defaults, the banks are paid for the loan by the feds. Then the loan is subject to have the interest, principal AND a 25% collection fee all rolled into a new principal balance. This new balance can then be paid by garnishment of up to 25% of your wages AND/OR 100% of your federal income tax return.
Keep this in mind if you want to ignore your student loans because of your shit degree choices.
Another fun fact: Student loans DO NOT GO AWAY when you file for bankruptcy. There are very few ways to absolve a Student loan....Death or Total and permanent disability.....and don't you dare work again if you are claiming permanent disability.
I worked for 5 years at a student loan agency and was a title IV default collector.
I loved how conversations with debtors just went in circles. I frankly never cared if they wanted to pay or not. We were getting our money one way or another.
Ian Nelson
The thing is, most older people (which means most politicians) don't see it that way.
In fact, they are almost incapable of system-level thinking, which is why this crisis has gotten so bad in the first place.
I don't even bother talking to them about this stuff, because the conversation usually goes like this:
>ME: The student debt bubble is a problem. We need to pop it immediately before it gets any worse. >BABY BOOMER: They should pay their debts! >ME: Ideally. But with what money? >BOOMER: Well... um... that's THEIR problem! >ME: No; I just explained that it's a bubble. It's a systemic problem. We need a system-wide response. Yelling at individuals for being retards with debt isn't a systemic solution. >BOOMER: THEY SHOULD PAY THEIR DEBTS REEEEEE!!!
They don't seem capable of understanding this stuff.
Jayden Rogers
That worked when the defaults were limited and the people defaulting had wage income that could be garnished, or assets that could be attached.
The problem now is that many debtors don't have W2 income. Many are being hidden for now by the IBR/PAYE programs which limit mandatory payments to a percentage of income, but they really don't have any income to speak of, even if the government DID want to collect.
Blake Torres
>They don't seem capable of understanding this stuff. They should pay their debts. They should get multiple jobs. They should own up to their shit degree.
When I worked as a collector, The biggest excuse pile I got was that "I am not working in the field I went to school for". My response was simple: "We do not guarantee post education employment, only funding for your education." When people would cry about how they couldn't find a job, I was authorized to suggest "avenues of repayment" including application as management at local fast food restaurants.
If you do not work to pay this type of debt, it will follow you to the grave. In my 5 years of collecting, I have had 2 debtors become an hero. I had to get their death certs. One guy did the toaster in the bathtub, and the other was a short rope. I have had shrinks call in and threaten me for how far back I put their client, and I was authorized to advise them that they were about to get hung up on.....*click*
My alltime favorite call was a woman from Florida who called to advise me that we were not taking her tax return (contrary to the fact we were) because she promised her kids a trip to Disney world. Myself and my "monitoring" manager never laughed so hard. 2 hour long phone call with so much sobbing....Oh it was funny.
I don't miss it. I quit in 2003 because I was moving onto better things. Life is funny that way.
Austin Baker
>The problem now is that many debtors don't have W2 income. Its ok. If they want to be poor and work like a mexican with their fancy 4 year degree, Ill pay for that. They can be uppity with Juan about how smart they are when they are carrying a 6 gallon bucket of mulch up the 2 acre hill leading to my house.
Hudson Reed
how's that a liberal meme retard? he makes sense, unlike you
Matthew Sullivan
You don't seem to get it. We have a $1.4 trillion bubble in student debt alone, along with the SLABS I talked about.
Telling debtors to pay their debts and work harder is something everyone already does, and has been doing for years.
That strategy failed, obviously, since the bubble keeps getting bigger.
The question is, what do we do at the policy level?
Adam Green
STOP LOANING SO MUCH GOD DAMNED MONEY, CUT OFF THE LIBERAL-BRAINWASHING FACTORIES FROM THE FEDERAL CASH FLOW
Austin Anderson
Do what every non-meme country does Require reporting of employment rate (any job/ job matching course) 2 years after graduating course Courses under 80%/ 66% are ax'ed with college departments getting sued
Isaiah Ross
That would be a good start, but it wouldn't alleviate the existing bubble.
We're going to have to face up to it fairly soon one way or another.
And though I don't like being such a downer, this is one big reason that Betsy DeVos may not have been the best Education Secretary pick - she's a billionaire. What the fuck does she know about the predatory nature of the student loan system or the bubble it created?
We needed someone in that position who would take a machete to the existing system and aim his swings at the right targets.
Justin Adams
The purpose of federally backed student loans was not to educate students, it was to fund the left.
Asher Rodriguez
BAN JEWISH LOANS.
Brandon Nguyen
Arn't debts forgiven after a set amount of time. If they can't pay their debt, it just means wage garnishment until that time is up right?
Adrian Adams
You're pretty stupid.
Christopher Jones
We don't really know how that will work. Under PAYE/IBR (two related income-based repayment programs), the loan balance is supposedly written off after 25 years.
But those terms were only introduced within the past decade, and weren't expected to be used by so many borrowers.
So we have no idea if the feds will try and reverse course after the scale of the cost becomes more apparent.
Wage garnishment is not going to be enough to cover this kind of debt, especially considering how little a lot of debtors make.
Putting financial strain on younger people also suppresses the educated (ie, disproportionately-white) birth rate, which is another aspect of the loan system that no one talks about.
Brody Walker
financial retard here (history major). what will exactly happen when the bubble bursts? total US economic meltdown?
Bentley Gomez
How badly is this going to perforate the global financial anus when this bubble bursts? I'm not a finance guy, but usually when something goes nuclear in the US it ends up fucking up all our days.
Ryder Morgan
think 2008 but worse.
Jack Rogers
2008 didnt affect me much. I was in high school and my adopted family werent complete financial retards
Isaiah Ramirez
Holy shit. There's backed securities for college loans?
Jesus that's like $5tril+ in losses. Another proof big govt always backfires
Tyler Watson
>college debts are driving people to suicide >(((bankers))) think they can keep repeating "muh capitalist principles" over and over >don't realize there's more people in debt than there are (((loaners)))
I wonder what will happen when someone who offers a better future than a life of debt comes along. Will these people follow you, or them?
Hunter Kelly
You can't compare this to 2008. In 2008 there was 14,000,000,000,000,000,000 in outstanding mortgage debt. You're talking about a tiny tiny fraction of that
Nathan Nguyen
So people taking meme degrees is going to cause a global financial meltdown? Why do we put up with this fucked system?
Mason Baker
Remember, it's not the fault of the universities, or the predatory loan sharks, or Wall Street.
It's the fault of the individual who was trying to improve themselves in the only way they were told how.
I think it won't affect foreign markets that much considering the college loan bubble is exclusively American.
Different from multinational banks which Cdo market rivaled the music industry in terms of size
Parker Fisher
Because colleges are liberal factories and they need their dem voters.
Jordan Green
It's unclear and is subject to a lot of debate. At the least, it will destroy a lot of the value of secondary instruments like SLABS which are BASED on student loan payments, unless the government steps in with a rather large bailout.
We don't actually have a clear idea of what the SLABS implosion would do, because the market for those things is very "opaque." All we know is that possibly a trillion dollars worth of them have flooded into various crevices of the financial system, particularly since the mid-2000's.
Will it set off a chain reaction like the mortgage bubble? It might.
But whatever happens, it only gets worse as the size of the current bubble increases. Which is why the Trump administration really needs to lance this bubble NOW, and get it over with.
There is no clear data on the ratio of SLABS that were sold to US agencies/companies and those sold overseas, but it was a mix of both. I would expect at least some non-US banks and hedge funds, for example, to have noticeable assets tied up in SLABS.
Mason Hughes
Most mortgage debt didn't default. Only a fairly small percentage of mortgages did, which was all it took to set off a financial avalanche of interlocking instruments.
Lucas Campbell
No. it is 14,000,000,000,000, which is about 10x the amount OP listed for student loans
John Long
Yeah, but most student loan debt doesnt either. Drawing comparisons between these two markets seems pretty ridiculous
Nathan Flores
Yeah because slabs are from the government and not Wall Street. I like you. Enjoy wall.
Liam Cook
Thank you. So it still seems like a stretch to compare this to 2008
Anthony Brown
the us is so entwined with international finance, that a problem in the us sends shock waves throughout the world.
Gotta love how it is suddenly a major problem now that the banks stand to lose money. It was no big deal when millions of people had to live their entire lives in debt, or when people were killing themselves over it. It was no big deal when half of young adults in the US would never be able to own a home or have children due to financial instability.
They have even trained you to only start caring now. How can you claim to be populist if you hate your fellow countrymen?
Really makes you think.
James Rodriguez
The non-repayment rate is MUCH, MUCH higher for student loans that it ever was for mortgages. This information was only revealed within the past month:
>Report: Obama Department Of Education Drastically Underestimated Student-Loan Debt
> According to the report, on January 13 (just one week before the outgoing administration up and went), the Obama Department of Education dropped a memorandum confessing that it had “overstated student loan repayment rates at most colleges and trade schools.” The “updated numbers” provided by the Department were analyzed by the Journal’s staff, who found that the new data “revealed that the Department previously had inflated the repayment rates for 99.8% of all colleges and trade schools in the country.” ...
>The new data show that “at more than 1,000 colleges and trade schools, or about a quarter of the total, at least half the students had defaulted or failed to pay down at least $1 on their debt within seven years.”
Brayden Roberts
Yes...
If banks call up govt, everything else will be unfunded >riots and meltdown If the banks start suing everyone >riots and meltdown
If govt tells banks to fuck themselves they will tank the economy >riots and meltdown
What a meme of a country
Cooper Morgan
It is a self inflicted problem if you went into debt to study a meme degree with no job prospects. The travesty is that the public may end up having to bail the banks out. Capitalized gains, socialized losses.
Logan Lopez
About to file bankruptcy and have >50k loans and credit cards >50k student loans Erased
Ryan Sanders
Try removing that 'm.'? You're requesting the mobile version of a redirect page, which they didn't expect anyone to do, so it doesn't direct to anything.
Nathan Hill
Way to place words on my mouth like a good libcuck.
Big govt sneak their noses on college loans disallowing banks and other financial institutions to do so. Slabs is just a by product of crony government irresponsibility
>but it would be shittier if the banks gave out the loans!
No considering most of these cucks with shitty degrees would pay their loans instead of defaulting almost all at once and said instruments would represent a very low percentage of the banks' utilities
William Williams
There is something to that. The student loan issue should have been decisively confronted and dealt with back during the W. Bush administration.
But Republican politicians back then were strongly ANTI-populist. Their biggest change to the rules was the 2005 bankruptcy reform act which made it almost impossible for students to discharge PRIVATE (non-federally-backed) student loans in bankruptcy.
And of course, the Democrats mainly want to finance the university-industrial complex, so, they have no concern about the bubble.
Luke Wilson
Student debt normally cannot be discharged via bankruptcy. The standards for discharge are very high, and usually involve convincing a court that you will never be able to work again in your life.
Benjamin Lopez
I cared before now too user. But what could I do? Encourage people not to get meme degrees? They don't listen and do it anyways because every authority figure tells them "go ahead, you'll be fine". A ton of people were mad last time te banks fucked up. No politician would hold the bankers accountable though. People care though user, they just don't have a say in society.
Jonathan Hill
I honestly don't understand derivatives even a tiny bit.
Isaiah Carter
I'm sure they were warned that their degree had zero job prospects.
Surely nobody would just lie and say that they did have prospects, right? Not a single person ever said "if you don't go to college, you will never make more than minimum wage."
t. STEM graduate defaulting on debts
Jackson Rivera
Interesting. Is there a dollar amount listed anywhere? I believe 25% of all mortgages were extremely delinquent or in forclosure at the peak of the 2008 crisis, that would be $3.5 trillion wiped out, but of course the house still exists as capital. There's fuck all backing student loans
Jack Anderson
Why didn't you research it? That's what I did.
What field did you study? You're in a union of 50 states, you couldn't migrate to meet demand in a STEM field somewhere?
Josiah Watson
its just a bet on a bet. like the core bet is one student loan defaulting. a derivative bet can be that loan not defaulting, or a pool of loans defaulting
Jordan James
You could say that the spirits of strong black women count as capital
Samuel Jenkins
What if they wiped a magic wand absolving all current student debt, but attached federal "work hours" needed to be done in return at no pay -- accounting, administration, etc. A $40k debt to be paid off in say 1000 hours of work over a few years. It sounds like gommunism in one sense but could redpill people by taking pride in their country through service. Could also shrink the overall glut of federal employees who require Healthcare and pensions.
Isaiah Anderson
Are you mad that your government issues countless H1B visas to half price 3rd worlders to ensure you'll never find a job?
Joseph Rivera
I'm going die of laughter if the most affected by this nu bubble are stem autists
Jaxon Sanders
this is the best solution really. Sadly, administrative departments in education would keep it stuck in litigation for decades.
Christian Ramirez
no money + no car = no migration
Henry Davis
Damn right I am. I just want to work and live my life, American citizens should always have priority in America.
>P2P platforms increasingly are bundling loans together and selling them off to institutional investors as "asset-backed securities." >If that term is familiar, it's because the practice was at the center of the financial crisis, where Wall Street combined loans — often mortgages — into exotic packages and then shipped them off to yield-hungry investors. They became an ugly symbol of the worst economic downturn since the Great Depression, but asset-backed securities (ABS) never went away, and the instrument, part of an industry practice known as securitization, is now proving valuable for the P2P industry.
>Total ABS issuance for 2016 in peer lending came to $7.62 billion, according to S&P Global Market Intelligence analyst Eric Turner. In the grand scheme of things, the figure doesn't sound like much for a banking industry that has $16 trillion in total assets. >However, the practice of ABS issuance in the marketplace lending arena began only around 2013, when the total was a meager $257.1 million. That means issuance is about 30 times what it was just four years ago. The 2016 total also represented a 72.4 percent increase over the previous year. >As the industry expands, so will loan securitization.
Brandon Flores
Nobody knows. It depends on how much is tied up in SLABS and how much of that is defaulted on at once.
What makes it worse is that securities trading was reformed after 2008 but most of the reforms were either repealed quietly or are ignored entirely.
An economy based on buying an increasing amount of debt while wages stagnate is literally unsustainable by definition.
2008 would be a drop in the bucket compared to this. This is bigger, way bigger, and the Feds aren't going to shell out over a trillion dollars to bail out a failing sector. We're talking about the collapse of American higher education and every single market that depends on that sector. (Hint: that's most of them)
Ayden Baker
SLAB UP
SLOW LOUD AND BANGIN
Charles Miller
The early 2016 estimate before the new information released in January was that 43% of borrowers were in some form of severe nonpayment. But that doesn't cover the the total, since the other income-based payment programs consider payments "fulfilled" even if the raw dollar amounts are underneath the amount that would be demanded in the absence of the program.
In terms of a raw dollar amount, it's a moving target since payments fall and rise as borrowers change jobs, but I'd estimate that at least a trillion of the $1.4 trillion is as good as junk and will never be collected from borrowers due to incapacity to pay.
Tyler James
Total defaults were less than a trillion, and mortgages are covered under bankruptcy protection. Student loans are not.
Adrian Wood
Damn. Hope it improves for you user.
Wait do universities actually lie about graduation statistics there? Here the records are mandated and monitored by the government, they even have to break down how many go into the field and how many go into unrelated fields, with average salaries involved. They're not required to advertise it, but you can find the information easily.
Ethan Evans
CNBC says 8b
Retail will probably prevail, turning Amazon into a massive monopoly. So will entertainment but those with art degrees will probably be hanging on welfare.
The rise of Automation couldn't come at a better time.
Leo Gomez
They mush what "graduation" means
>go to school for a BA but drop out at 3 years? >congratulations! You successfully graduated with an Associate's!
Shit like that.
Anthony Cox
Universities have been caught lying about those kinds of statistics, and some have been sued. But judges generally throw those sorts of lawsuits out.
Law schools in the US were especially bad with this kind of thing. They'd tout stats like "98% employed in law" when the actual numbers were much worse.
And these were schools that cost $60,000/year or more for three years.
Higher education in the US has become an absolutely monstrous and deplorable scam. It's time to blow the bubble and blow down the current system.
Jaxon Taylor
You're blowing this way out of proportion. There's no catalyst to inflate the bubble like 2008. The real estate bubble grew because of speculators buying houses and selling them 2 months later. College debt securities dont appreciate like houses so there is no bubble by definition.
Robert Richardson
Not the derivatives though. I think that's what OP is trying to say where the problem lies.
Ian Wilson
It would destroy the existing paid market for those jobs, and in any case, I don't think there is nearly that amount of work in those fields which actually needs to be done.
Aaron Perry
I can't understand how a business can deliberately deceive customers and escape liability. Is this some sort of corruption or just a result of poor students who bother to fight it not being able to afford good lawyers?
You're right in any case, sounds completely fucked.
Jack Foster
College debt SECURITIES are derivatives, with all the usual properties and drawbacks of derivatives.
University debt IS a bubble, but the manner in which it will pop is different from a bunch of mortgage-holders flooding into bankruptcy court or walking away from houses.
Once the underlying security for the SLABS is no longer workable as a security, the SLABS lose their value, which will have unknown effects since we don't actually know to what extent the SLABS have been pledged themselves as securities for other financial schemes.
Liam Perry
Ask half of this thread, they will tell you it's the fault of the individual, not the fault of the government, the banks, or the universities.
We should have been able to see through all the lies we were told from childhood. They sure pranked us good.
In large part because most universities are "non-profits," and are not regarded legally as "businesses." Also because, as it turns out, there is no actual legal "warranty" of truthfulness in such matters, because such laws were never implemented.
And THAT comes from the old era in which universities were more like finishing-schools for the elites instead of stepping-stone institutions into "normal" jobs.
Universities in the US are an extremely powerful political lobby due to their wealth and size. Former politicians often leave for top university posts, and these are considered some of the most desirable jobs among the elite classes.
Jace Morgan
Hopefully Trump can stop the inflating bubble before it gets any bigger. Attacking the increasing costs in colleges is how you start and it's getting rid of all of the administration people and useless perks that colleges try to offer.
Daniel Jackson
given the time available for repayment and the rampant fraud, I doubt you'll ever see a burst bubble moment.
the larger economy will stall and more immediate shocks will destroy less insular credit systems before this one
Jacob Nguyen
No, it's not a bubble. I get it, it's a bad situation that will have to be fixed, but that's not a bubble. Those securities don't "grow" in artificial value. The housing bubble grew because the securities' values were based on more mortgages being written. Once no one could get a mortgage to essentially pay off the existing ones, it popped. A bubble has to build upon itself
Austin Foster
...
Nicholas Gray
Thanks for shedding some light on the whole situation. What do you think the future holds? Supposedly another bailout if/when the bubble bursts - but what about reform? Will anything change? What should change? Or is it just going to be another endless cycle of shit?
Xavier Stewart
there is no fucking bubble, the global derivatives market is ~700 trillion USD, most of those are based on riskier assets than student loans backed by the most powerful government on the planet
Samuel Phillips
It won't burst cause it's not a bubble () The system will have to be reformed though, or just turn into another endless moneypit for Democrats to throw taxes into.
Nicholas Anderson
the issue is our definition of adult-level thinking expecting 18-24 year olds to do the right thing/ be well informed has always been a dice roll now that the indoctrination starts at what, 3? it's getting incredibly hard to be well-adjusted and see through the lies
Dylan Young
Just put the faggots with art degrees in a workkampf
So, what are some potential moves here? I'm on the ed side, and one thing I saw floated was different loan conditions based on major. That triggered the fuck out of the humanities people hardcore.
>Betsy DeVos may not have been the best Education Secretary pick - she's a billionaire.
She has a biz background. at least BS level. She might be more qualified in this area than all the other Dept. Ed candidates ever.
These follow different rules.
Probably something similar to the banking crisis. It will be harder to get financial aid in the future.
I'm no finance expert, but I suspect the real property value is much more stable than the future earning potential of garbage degree holders.
Cameron Robinson
It's a bubble because it IS going to burst, through the burst is taking a different form from other financial bursts.
What is happening is that nonpayments are rising and rising. The Department of Education is eating those costs, which before recently were actually an asset, since the bubble was much smaller, and a higher percentage of debtors were repaying in full.
Now it is becoming a liability for the federal budget, and is in fact on the verge of a gaping hole in nonpayment.
This creates a political crisis. The natural reaction of the current political class will be to cut back on the programs which allow for nonpayment, and seek to collect the money.
But the money is not there to be collected, because the debtors are poor and are working shitty jobs. The ones who CAN afford to repay already are.
Now at this point, the government will either have to take it, and eat the costs, devouring money from other sectors of federal spending, or there will be some form of cost-adjustment in which the government goes after other parties like universities for that money.
The money waterfall into federally-backed loans will almost certainly be reined back, if for no other reason than sheer necessity.
During this process, the SLABS will collapse in value due to the uncertainty regarding the situation, which will trigger whatever losses are triggered when the value of those SLABS has to be written down.
Oliver Green
We need rules regarding degree employability and tie the loan limits to field of degree wage range, at least to get a government backed loan.
You don't understand what a bubble is. This isn't a good situation for the government, but what else is new
Caleb Lewis
>student loans are under $10k, Which america are you from?
James Ross
>2013 article using 2012 data >Before the default explosion
The trends I am talking about are manifesting/intensifying NOW. This isn't 2012, when there was "only" a bit less than a trillion in student loan debt. The acceleration in total debt and nonpayment rates have been rapid since that time.
