Senator Warren’s proposal to make student loans available at just 0.75% actually exacerbates the problem. Cheap loans will increase the number of college applicants, allowing universities to raise prices, like builders did during the bubble because credit was easy. The underlying problem is the rising cost of tuition. A solution: force schools who accept cheap student loans to massively expand online course offerings and guarantee full credit transferability across schools.
Tag Archives: Student Loans
Gimme Credit
Consumer borrowing rose by $19.6 billion last month, substantially more than the $12.5 billion forecast by economists (big surprise there) and up from $10.9 billion in May. Non-revolving debt, which includes car loans, student loans and mobile homes loans increased by $13 billion – $9.2 billion excluding government guaranteed student loans. Credit card debt, which has been barely growing for years, jumped by $6.6 billion, the most in 12 months!
Student Defaults Rising
The default rate for all federal student loans rose to 13.8% from 11.8% for students beginning repayment in FY ‘08 compared with ‘07 according to the DOE. For public schools, the default rate is 10.8% while it is only 7.6% for private schools. For-profit colleges have the highest default rate at a whopping 25%! Can you imagine what the statistics for Fiscal ’09,’10 or ’11 are going to look like?
Student Loans Growing
There has been an incentive burst of auto buying recently but in reality the majority of credit growth can be found in student loans! It is worth noting that student loans are probably the only type of loan you can qualify for when you have no job (or prospects) and need to pay for room and board. In short, a return to consumer balance sheet expansion is not in the cards.