Phi Beta Cons

Student Loans: The Next Debt Bubble

S&P downgraded the USA’s credit rating. Now Moody’s, S&P’s rival ratings agency, has “downgraded” the student-loan market. Here’s an excerpt from my op-ed on the issue in the New York Post:

Total student debt is at an all-time high — and may top $1 trillion this year. Meanwhile, default rates are rising alarmingly. Skyrocketing tuition, lax lending standards and high rates of unemployment have created the perfect financial storm.

Some advice to college students: Learn from our government’s mistakes and avoid borrowing your way into a hole.

Tuition costs have more than doubled since 2000, far outpacing the inflation rate — even surpassing the bubble-fueled growth in real-estate prices.

Tighter lending standards for auto loans and mortgages have vastly improved loan performance. Yet student-loan-default rates are getting worse, not better.

For 2008, the most recent year for which data is available, the default rate was 7 percent, up from 4.6 percent in 2005. Among students who attend for-profit institutions, the default rate is nearly 12 percent.

Despite high default rates, lenders have had little incentive to curtail the amount of money they loan to students because the federal government guarantees most student loans. Yet, for borrowers, the consequences of default are severe.

Unlike most debt, student loans are almost impossible to dispose of through bankruptcy. If students fail to repay, their tax refunds can be withheld and wages and Social Security payments can be garnished.

President Obama’s takeover of the student-loan industry last year means the government no longer backs private loans, and most students now borrow directly from the government. But unless the government improves underwriting standards, we’ll have an ever-growing portfolio of bad loans on the federal books, and all taxpayers will pay for it…

Read the rest here.

Most Popular

White House

The Problem Isn’t Just the GOP, Mr. Comey

During a CNN town hall on Wednesday night, James Comey alleged that the Republican party allows President Trump to get away with making inappropriate statements without holding him accountable. “If the Republicans, if they just close their eyes and imagine Barack Obama waking up in the morning saying someone ... Read More
Law & the Courts

‘Judges for the #Resistance’

At Politico, I wrote today about the judiciary’s activism against Trump on immigration: There is a lawlessness rampant in the land, but it isn’t emanating from the Trump administration. The source is the federal judges who are making a mockery of their profession by twisting the law to block the Trump ... Read More
White House

Trump’s Friendships Are America’s Asset

The stale, clichéd conceptions of Donald Trump held by both Left and Right — a man either utterly useless or only rigidly, transactionally tolerable — conceal the fact that the president does possess redeeming talents that are uniquely his, and deserve praise on their own merit. One is personal friendliness ... Read More

Columbia 1968: Another Untold Story

Fifty years ago this week, Columbia students riding the combined wave of the civil-rights and anti-war movements went on strike, occupied buildings across campus, and shut the university down. As you revisit that episode of the larger drama that was the annus horribilis 1968, bear in mind that the past isn’t ... Read More

Only the Strident Survive

‘I am not prone to anxiety,” historian Niall Ferguson wrote in the Times of London on April 22. “Last week, however, for the first time since I went through the emotional trauma of divorce, I experienced an uncontrollable panic attack.” The cause? “A few intemperate emails, inadvertently forwarded ... Read More