Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Next Big Shoe to Drop – Student Loans

Interest-Rates / Student Finances Oct 27, 2016 - 05:46 PM GMT

By: Dr_Jeff_Lewis

Interest-Rates

More than 40 million young Americans carry federal and private student loan debt – amounting to over $1 trillion. Defaults are on the rise and the issue has grown to become a nasty wealth transfer mechanism, as well as sad example of the failure of finance in general.

This week, President Obama announced a new initiative framed as a way of addressing the issue. Sadly, it is far from the mark, and just one more indication that monetary masters are the real puppeteers.


Many have pointed out that the student loan debt bubble could be the next subprime crisis.

Perhaps so, but it is potentially much worse, acting as an anvil when considered in the context of other consumer debt like car loans and credit cards.

The student debt debacle has the potential of corrupting not only education, but a generation as well.

It risks becoming the blight on a generation of would-be productive and innovative work force.

Furthermore, the workforce declines, and falls behind, as more students return home to live with parents. And the extra burden on multi-generational households adds yet another deflationary force to the natural trend.

From the perspective of bankers, policy makers, and the propaganda machine, college loan programs have been a tremendous success, providing access for students who would otherwise not be able to afford the privilege.

It is about threading a narrow political path.

Defaults are on the rise and the notional value of student loans went north of $1 trillion.

Servicers must be getting nervous; the lobbyists are circling the wagons.

There is no clear indication of who will pay for it – or how.

Defaults on the rise; one in seven currently default.

The news of doing something comes around to yet another intervention with all the familiar signs that it is meant to save the financiers and has very little to do with helping students.

The problem is that this is too little too late.

Student loan debt is a trillion dollar reality in the context of a major, ongoing depression.

We are a Nanny state – with almost 50 million on food stamps and more on some sort of assistance. Labor force participation is at 40 year lows.

There is already a major dis-incentive to work. If you take a horrible minimum wage job, you lose valuable benefits, entitlements.

Which, incidentally, also explains why while it took the U.S. economy 6 years to recover all the job losses since Lehman. This took place at the expense of 13 million Americans leaving the labor force for good even as the U.S. population rose by 15 million.

It also means that using a historical average participation rate, U.S. unemployment is over 11%, while underemployment is currently well in the 20% range – a far more realistic assessment of where the U.S. economy really is.

People on assistance programs are literally paid to stay home – think of the cultural implications.

It’s almost a conspiracy. You have a massive class of under the table people with no voice. Give them bread and circuses.

The student loan debacle is another story.

For the parents, the typical situation is framed by skyrocketing tuition; and little help from scholarships become fractions in the face of rising tuition.

The income cut-off for need-based financial aid is low.

Parents are expected to contribute 25% of pre-tax income to the cost of tuition.

If you earn $80K a year and your child’s college tuition is $20K, you get nothing in terms of need-based financial aid. And that 25% doesn’t count room & board, books, etc.

So, it’s basically impossible for middle-class families to send their kids to college without taking out student loans. In fact, the entire higher-education system is built to force people into debt if they want to send their kids to college.

And it has a sinister underlying theme…

It’s always about the “irresponsible student” or the “hairdresser subprime loan borrower” who “should have known better”.

They should have known that housing prices eventually fall, even though “everyone” in the mainstream, including the chairman of the Federal Reserve said they would not. They should have read carefully the fine print instead of trusting the fancy loan officer.

And everyone knows that without a college education you will not succeed, so “borrow whatever it takes”. You’ll pay it back.

Two decades of further tweaks to the bankruptcy code ensued until 2005, when Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. This Act made it so that no student loan — federal or private — could be discharged in bankruptcy unless the borrower can prove repaying the loan would cause “undue hardship,” a condition that is incredibly difficult to demonstrate unless the person has a severe disability. It essentially lumps student loan debt in with child support and criminal fines — other types of debt that can’t be discharged.

But our system is perfectly fine going after the invisible – those without a political voice – whether the poor or elderly who get crushed by inflation, or the 18 year olds who get out with $100K in debt and an art appreciation degree.

But the price of education should tell an even deeper story….

Quality of Education Suffers

The compounding irony is that not only does the price of education go up, but the quality goes down. Institutions become entrenched. There is little incentive evolve, tenure runs rampant. And the curriculum declines.

Higher education becomes both a commodity and a spectacle. Not a vehicle for progress or a reflection of the needs of the culture or the economy.

That may not be hyperinflation…but it’s very sad. College education quality has not risen proportionately with price.

Student loan debt is out of control by any and all measures. It’s a debacle that benefits no one besides the banker and the servicers. The schools lose by making themselves unviable in the long run.

The students come away with non-dischargeable student loans and enter a world without, for the most part, having any marketable skills.

Sadly, the student loans are just one more politically untouchable issue providing yet another source of highly flammable fuel that will result in more gasoline when the Fed is called in.

1. To receive early notification for new articles, click here. 

2. Or to view all of our products and services, click here. 

3. Or...support the cause, and buy me a cold one! 

By Dr. Jeff Lewis

    Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com

    Copyright © 2015 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Dr. Jeff Lewis Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in