December 08, 2007
– Comments (13)
They have student loan bonds?
It appears that student loan default rates are increasing and now student loan bonds are being down graded...
This is your shortest write up ever? The link to Nouriel Roubini's Global EconoMonitor you posted yesterday was great. Even some of the comments by his followers were outstanding.
If your bored here is a Stock Screener site I like to get stock summaries from:
There are some other useful tools on the site. I am getting a little nervous about all my underperforms. Last time Helicopter Ben did a rate cut I got killed. I think it is to late and most of the damage has already taken place.
I did a longer post that got lost :(. I am not too happy with Fool today...
I figure my score will decline some through investment season, as I have thought things through further, I am strongly, very strongly, in the deflation camp and that means I just wait it out.
I think the exuberance from the rate cuts will be short lived because lenders have been forced to reprice the risk of lending into the rate spreads, basically negating any "benefit" from the cuts. What has happened in the past with rate cuts will not be happening now and when this sinks in, things will change.
They securitize pretty much everything these days. You think Sallie Mae keeps most loans on their balance sheet?
well, if nobody wants to put this stuff on their balance sheet, well it must be junk. all of it.
It's a shame students need a loan just to go to school. US education system is abismal...
Students are coming out of school saddled with loans so big... All the new teachers where I am have $40-60k of student loans and the rates are prime plus 2.5 for variable or prime plus 5 for fixed.
They've come north because wages where they are from start at around $35k/year. Amazing, when I first went to university I figured I could make $35k/year and buy and 3 bedroom townhome for $60k. Now they come out and start with a debt load in the range of what housing used to cost.
Good lord, prime + 5? I have a lot of education debt and it's sitting there perking away at 2.8%.
Prime + 5 is criminal. For teachers, too. We ought to be giving teachers daily massages and peeled grapes.
What is happening to civilization?
Since ikkyu2 showed up I am reminded about Ron Paul. When Dr Paul was in medical school at Duke, he had a student loan from the university at 1% interest.
With the endowments most universities have why not help the students a little and loan them a little money at a low rate so they can buy a little beer and have money left over for school books / cliff notes.
ikkyu2, I was quite shocked when I looked at how students are being gouged on the interest rate. Take an average 8% on say $50k, that's $4000/year interest, or about $333/month.
That in after tax dollars. In before tax dollars, at say 40%, which is low for Canada, it is $556. So close to $7k of wages is required just to pay the interest on the debt.
Keeping them on their balance sheet has nothing to do with the quality of the loans - it's a cycle. Borrow money at x, lend money to students at x + 2%, sell the loans into securitization, and use the proceeds to lend more money. It's also worth noting that the interest payments are tax deductable...
But it has a lot to do with the required reserves. It seems to me that they evade reserve requirements by selling them.
Yes, reserve requirements are another story - all of the GSE's would not be considered sufficiently capitalized if they were held to the same standards as banks...
or people could just live witin their means. I have a lot of friends who went to private colleges that cost 35K+ a year in tuition alone and they managed to get out with less than 20K + in student loans. They did not have many scholarships of financial aid. They are hard workers an saved cash at summer jobs and didn't go out all the time and blow money.