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Overdue student loans reached an all-time high of 11% during Q3 of last year, according to the...

Overdue student loans reached an all-time high of 11% during Q3 of last year, according to the DOE. The news comes just as the House approved a Republican-led proposal to allow interest rates on student loans to float. Still up for debate is whether or not a two-year extension of the 3.4% rate for subsidized Stafford loans will be legislated. Sector watch: APEI, APOL, CECO, COCO, ESI, STRA, LINC, LOPE, BPI, DV, CPLA, EDMC, NAUH.
Comments (3)
  • Ron Myers
    , contributor
    Comments (254) | Send Message
     
    On one side we have massive QE to push rates down to the bone, explicitly to pump up housing and the stock market - which almost solely benefits the rich. On the other we are raising rates on liabilities which are almost 100% held by the poor and lower middle class.

     

    I don't even understand the need to do this from an economic standpoint. As QE has proven the cost of funds is ~0 for the government and they certainly face no interest rate and almost no credit risk. The way I see it, they collect 3.4% in carry, fund it at 1% (say average duration of 7 years), servicing costs maybe 0.5%, almost no losses (they will garnish your wages for life), and they can leverage these up at least 15 times from a "basel III" standpoint. That's an over 30% ROE...is there really a need to double the rate to make an 80+% ROE on the backs of the most struggling generation since the 1930's? These are higher returns than even the subprime and pawn shop lenders so hated these days.
    23 May 2013, 01:36 PM Reply Like
  • davidingeorgia
    , contributor
    Comments (2713) | Send Message
     
    Perhaps you should take to task the bloated administrative staffs at the colleges which are charging the ridiculous tuition rates (that require the ridiculous amounts of debt) for kids to go to them?

     

    Always lots of good info and links re: the "Higher Education Bubble" at Instapundit's web site:

     

    http://bit.ly/10P7pis
    23 May 2013, 03:26 PM Reply Like
  • Insider-Alerts
    , contributor
    Comments (584) | Send Message
     
    It goes well beyond just administrative staffs. The problem is that these institutions have become country clubs and resorts. They went on building binges, "investing" in infrastructure projects, modernizing their campuses, etc.

     

    I visited my alma mater a couple years ago and spoke with the registrar who is an old friend of mine. I asked her why they were doing all of this? A small, well respected engineering school that went on this binge...even building a football stadium and athletic village...this is a tiny college for geeks - they need to have a stadium for their Division III team? It really got to ridiculous proportions where the president sports a million dollar salary, plus benefits, and so on. Students are now paying annual tuition of roughly $50,000 a year (before room + board + books + fees). The registrar answered "we have to do it because the competition is...". Where have we heard this story before - doing it because the Jones's are doing it.

     

    Personally I'm disgusted with it - you go to college to immerse yourself in 4 years of higher education, it's not a 4 year vacation at a resort. They say that taking more than 4 years to finish an undergrad degree is now the norm...is there any misunderstanding why that's the case?
    24 May 2013, 07:45 PM Reply Like
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