4 ms·

Can you provide evidence that it is a bubble? Can you provide evidence that it will burst, or a potential catalyst?

by HiLo 11y ago

codingbeer 11y ago
If one could do that, it wouldn't be a bubble.
- HiLo 11y ago
  More intellectual laziness in this thread. To start, what definition of bubble are you using? Where no plausible scenario can justify forward valuations? Where there is evidence people are doing transactions for the sole reason to flip the assets at a higher price? Because even if you don't think it's "likely," I can think of plenty of cases where student loan data makes "sense" or is "logical," and you've provided no evidence (of which there is usually at least online anecdotal evidence, see: Dotcom Crash, Bitcoin) that people are making these loans solely to flip them. If you try to argue that the Loan-to-Originate model leads to this behavior, you may have to reconcile a lot of things in this paper: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2700179 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2700179
  - SCAQTony 11y ago
    I am not debating this rather this is merely a contribution regarding tuition, room & board fees, from 1975-76 to 2014-15 adjusted for inflation: I averaged the cost out to 12.5% a year on average. http://trends.collegeboard.org/college-pricing/figures-tables/tuition-and-fees-and-room-and-board-over-time-1975-76-2015-16-selected-years http://trends.collegeboard.org/college-pricing/figures-table...
padobson 11y ago
I thought the article did a good job: Sofia is one of 7 million former students in default on a record $115 billion of federal loans Education Management settled with the government in November for almost $100 million over alleged illegal student-recruitment practices without admitting wrongdoing. Predatory lending. Sound familiar? FMS Investment Corp., a unit of Ceannate Corp. that tried to collect from Sofia, was paid $227 million by the Education Department from October 2011 through September of this year, the most of any debt-collection company under contract in that period, according to the agency. The biggest debt collector works for the Department of Education. The government has disbursed about $100 billion in education loans annually since the 2009-2010 school year, according to data compiled by the College Board. Just six years before that, the amount was almost half. The total has doubled since 2007 and is expected to double again in the next decade, as students and their parents borrow for college and graduate school. Despite the fact that defaults are on the rise, predatory lending is on the rise, lots of students who are unable to complete an education are taking out loans[1], AND a lot of people getting their degree aren't sure it's worth it[2], despite all of this, lending is going to double again. Bubbles aren't always clear, but this one is as clear as it gets. The only question is, who is the government going to bail out when the bubble bursts? [1]http://fivethirtyeight.com/features/half-of-people-who-went-to-college-in-the-recession-havent-graduated/ http://fivethirtyeight.com/features/half-of-people-who-went-... [2]http://www.gallup.com/opinion/gallup/185942/gallup-purdue-index-2015-report-available.aspx?g_source=college%20debt&g_medium=search&g_campaign=tiles http://www.gallup.com/opinion/gallup/185942/gallup-purdue-in...
- HiLo 11y ago
  No, you haven't really shown me how it's predatory, although I do know that does happen (as it does in all large lending markets). I'm not sure what your point is about the largest debt collector having contracts with the DOE. Of course they do, that's almost a definitional thing. Pretty much the largest of anything has some kind of government contract. Defaults are on the rise from a low base, and the securitized portfolios of these loans haven't really taken much of a hit, so it doesn't "sound familiar" because I don't see the same balance sheet risk as 2008 subprime, even though there are undoubtedly subprime elements to this. (For the sake of clarity, I'm referring to the subprime credit ratings and category, not the 2008 era). I guess what I'm asking is, from what base is all this happening? Predatory lending is on the rise... from .5% of loans to 1%? 1% to 5%? 5% to 10%? Same with the others. I guess what I'm trying to get out of this thread, is: 1. What novel insight is being presented here that invalidates huge amounts of sophisticated due diligence by incentivized, professional firms? 2. If none, what channel or mechanism is perpetuating something that everybody knows is a bad deal? 3. If everybody knows it's a bad deal, but there is something simply keeping it prodding along, this would not pass even the first level of risk management at these institutions, which really stresses the idea of #2.
  - padobson 11y ago
    2. If none, what channel or mechanism is perpetuating something that everybody knows is a bad deal? This. As I said in another reply to my OP, the government is backing these loans, which makes everyone think they're golden - and that might be true. Perhaps the government will allow the bubble to inflate forever, but the government stepped in in 2008, and there were still plenty of short opportunities available. But it's unquestionably a bubble if hundreds of billions of dollars (and rising) of loans are being made to people to buy something that A) has no collateral (making it worse than the subprime crisis) and B) the value of the service they're purchasing is, by all perceptions, dropping over time.
  - branchless 11y ago
    The whole thing is predatory. It's the classic monopoly system where you loose out if you play and if you don't. Think degrees are overpriced? Go live life as a labourer with no access to the top paying jobs. Or suck it up and hand over a large part of your labour to the gate-keeper. Available credit sets the price. Ramp it up and watch the tribute flow in.
randomname2 11y ago
Seven million people haven't made a single student loan payment in at least a year [1] and the overall delinquency rate of loans in repayment is about 30% [2]. With the figure of student loans held by the Federal government going up exponentially as of 2008 [3] (and with tuitions soaring by 6% a year) the chart certainly looks "bubbly". Investor Bill Ackman believes there will likely be some form of forgiveness as there is "no way students are going to pay it back": When asked if he was concerned about bubbles forming in debt markets as central banks around the world continue to keep interest rates near zero, Ackman cited student loans as his biggest concern. “If you think about the trillion dollars of student loans we have outstanding, there’s no way students are going to pay it back,” Ackman said. He foresees a future where debt-laden students protest government officials, leading to some form of forgiveness. [4] [1] http://www.wsj.com/articles/about-7-million-americans-havent-paid-federal-student-loans-in-at-least-a-year-1440175645 http://www.wsj.com/articles/about-7-million-americans-havent... [2] https://www.stlouisfed.org/on-the-economy/2015/april/delinquent-student-loan-borrowers-are-getting-further-behind https://www.stlouisfed.org/on-the-economy/2015/april/delinqu... [3] http://www.bloombergview.com/articles/2015-04-17/washington-may-not-want-to-get-out-of-student-debt http://www.bloombergview.com/articles/2015-04-17/washington-... [4] http://www.forbes.com/sites/antoinegara/2015/04/13/bill-ackman-herbalife-criminal-lawyers-student-loans-bubble/ http://www.forbes.com/sites/antoinegara/2015/04/13/bill-ackm...
- cryoshon 11y ago
  TBH we're well past the point where people should be in the streets protesting student loan payments. The entire economy is experiencing a lack of demand, partially as a result of young people being impoverished from a sycophantic education system. A repayment boycott would ruin a lot of credit scores, but bring the problem into focus... consider that a huge proportion of people are already in default.
- branchless 11y ago
  So what? It costs them nothing to create the money and if you don't pay it back they still get the economic boost. Yes it's a sham, yes there is a huge opportunity cost but that's because our current system is mad.
mbesto 11y ago
This is already happening for the for-profit education companies: https://www.google.com/finance?q=NASDAQ%3AAPOL&fstype=ii&ei=tLltVvi0C4TXiAKA-LdA https://www.google.com/finance?q=NASDAQ%3AAPOL&fstype=ii&ei=... (lost half of it's revenues in just 2 years) https://www.google.com/finance?q=NYSE%3ADV&fstype=ii&ei=9LltVqAf6p2KAqTymugJ https://www.google.com/finance?q=NYSE%3ADV&fstype=ii&ei=9Llt... (stagnate, revenues declining)

Can you provide evidence that it is a bubble? Can you provide evidence that it will burst, or a potential catalyst?

by HiLo 11y ago

Can you provide evidence that it is a bubble? Can you provide evidence that it will burst, or a potential catalyst?

codingbeer 11y ago

If one could do that, it wouldn't be a bubble.

HiLo 11y ago
More intellectual laziness in this thread. To start, what definition of bubble are you using? Where no plausible scenario can justify forward valuations? Where there is evidence people are doing transactions for the sole reason to flip the assets at a higher price? Because even if you don't think it's "likely," I can think of plenty of cases where student loan data makes "sense" or is "logical," and you've provided no evidence (of which there is usually at least online anecdotal evidence, see: Dotcom Crash, Bitcoin) that people are making these loans solely to flip them. If you try to argue that the Loan-to-Originate model leads to this behavior, you may have to reconcile a lot of things in this paper: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2700179 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2700179
- SCAQTony 11y ago
  I am not debating this rather this is merely a contribution regarding tuition, room & board fees, from 1975-76 to 2014-15 adjusted for inflation: I averaged the cost out to 12.5% a year on average. http://trends.collegeboard.org/college-pricing/figures-tables/tuition-and-fees-and-room-and-board-over-time-1975-76-2015-16-selected-years http://trends.collegeboard.org/college-pricing/figures-table...

padobson 11y ago

I thought the article did a good job: Sofia is one of 7 million former students in default on a record $115 billion of federal loans Education Management settled with the government in November for almost $100 million over alleged illegal student-recruitment practices without admitting wrongdoing. Predatory lending. Sound familiar? FMS Investment Corp., a unit of Ceannate Corp. that tried to collect from Sofia, was paid $227 million by the Education Department from October 2011 through September of this year, the most of any debt-collection company under contract in that period, according to the agency. The biggest debt collector works for the Department of Education. The government has disbursed about $100 billion in education loans annually since the 2009-2010 school year, according to data compiled by the College Board. Just six years before that, the amount was almost half. The total has doubled since 2007 and is expected to double again in the next decade, as students and their parents borrow for college and graduate school. Despite the fact that defaults are on the rise, predatory lending is on the rise, lots of students who are unable to complete an education are taking out loans[1], AND a lot of people getting their degree aren't sure it's worth it[2], despite all of this, lending is going to double again. Bubbles aren't always clear, but this one is as clear as it gets. The only question is, who is the government going to bail out when the bubble bursts? [1]http://fivethirtyeight.com/features/half-of-people-who-went-to-college-in-the-recession-havent-graduated/ http://fivethirtyeight.com/features/half-of-people-who-went-... [2]http://www.gallup.com/opinion/gallup/185942/gallup-purdue-index-2015-report-available.aspx?g_source=college%20debt&g_medium=search&g_campaign=tiles http://www.gallup.com/opinion/gallup/185942/gallup-purdue-in...

HiLo 11y ago
No, you haven't really shown me how it's predatory, although I do know that does happen (as it does in all large lending markets). I'm not sure what your point is about the largest debt collector having contracts with the DOE. Of course they do, that's almost a definitional thing. Pretty much the largest of anything has some kind of government contract. Defaults are on the rise from a low base, and the securitized portfolios of these loans haven't really taken much of a hit, so it doesn't "sound familiar" because I don't see the same balance sheet risk as 2008 subprime, even though there are undoubtedly subprime elements to this. (For the sake of clarity, I'm referring to the subprime credit ratings and category, not the 2008 era). I guess what I'm asking is, from what base is all this happening? Predatory lending is on the rise... from .5% of loans to 1%? 1% to 5%? 5% to 10%? Same with the others. I guess what I'm trying to get out of this thread, is: 1. What novel insight is being presented here that invalidates huge amounts of sophisticated due diligence by incentivized, professional firms? 2. If none, what channel or mechanism is perpetuating something that everybody knows is a bad deal? 3. If everybody knows it's a bad deal, but there is something simply keeping it prodding along, this would not pass even the first level of risk management at these institutions, which really stresses the idea of #2.
- padobson 11y ago
  2. If none, what channel or mechanism is perpetuating something that everybody knows is a bad deal? This. As I said in another reply to my OP, the government is backing these loans, which makes everyone think they're golden - and that might be true. Perhaps the government will allow the bubble to inflate forever, but the government stepped in in 2008, and there were still plenty of short opportunities available. But it's unquestionably a bubble if hundreds of billions of dollars (and rising) of loans are being made to people to buy something that A) has no collateral (making it worse than the subprime crisis) and B) the value of the service they're purchasing is, by all perceptions, dropping over time.
- branchless 11y ago
  The whole thing is predatory. It's the classic monopoly system where you loose out if you play and if you don't. Think degrees are overpriced? Go live life as a labourer with no access to the top paying jobs. Or suck it up and hand over a large part of your labour to the gate-keeper. Available credit sets the price. Ramp it up and watch the tribute flow in.

randomname2 11y ago

Seven million people haven't made a single student loan payment in at least a year [1] and the overall delinquency rate of loans in repayment is about 30% [2]. With the figure of student loans held by the Federal government going up exponentially as of 2008 [3] (and with tuitions soaring by 6% a year) the chart certainly looks "bubbly". Investor Bill Ackman believes there will likely be some form of forgiveness as there is "no way students are going to pay it back": When asked if he was concerned about bubbles forming in debt markets as central banks around the world continue to keep interest rates near zero, Ackman cited student loans as his biggest concern. “If you think about the trillion dollars of student loans we have outstanding, there’s no way students are going to pay it back,” Ackman said. He foresees a future where debt-laden students protest government officials, leading to some form of forgiveness. [4] [1] http://www.wsj.com/articles/about-7-million-americans-havent-paid-federal-student-loans-in-at-least-a-year-1440175645 http://www.wsj.com/articles/about-7-million-americans-havent... [2] https://www.stlouisfed.org/on-the-economy/2015/april/delinquent-student-loan-borrowers-are-getting-further-behind https://www.stlouisfed.org/on-the-economy/2015/april/delinqu... [3] http://www.bloombergview.com/articles/2015-04-17/washington-may-not-want-to-get-out-of-student-debt http://www.bloombergview.com/articles/2015-04-17/washington-... [4] http://www.forbes.com/sites/antoinegara/2015/04/13/bill-ackman-herbalife-criminal-lawyers-student-loans-bubble/ http://www.forbes.com/sites/antoinegara/2015/04/13/bill-ackm...

cryoshon 11y ago
TBH we're well past the point where people should be in the streets protesting student loan payments. The entire economy is experiencing a lack of demand, partially as a result of young people being impoverished from a sycophantic education system. A repayment boycott would ruin a lot of credit scores, but bring the problem into focus... consider that a huge proportion of people are already in default.
branchless 11y ago
So what? It costs them nothing to create the money and if you don't pay it back they still get the economic boost. Yes it's a sham, yes there is a huge opportunity cost but that's because our current system is mad.

mbesto 11y ago

This is already happening for the for-profit education companies: https://www.google.com/finance?q=NASDAQ%3AAPOL&fstype=ii&ei=tLltVvi0C4TXiAKA-LdA https://www.google.com/finance?q=NASDAQ%3AAPOL&fstype=ii&ei=... (lost half of it's revenues in just 2 years) https://www.google.com/finance?q=NYSE%3ADV&fstype=ii&ei=9LltVqAf6p2KAqTymugJ https://www.google.com/finance?q=NYSE%3ADV&fstype=ii&ei=9Llt... (stagnate, revenues declining)