Student Loans On The Move
Throughout this Great Recession one thing has been certain, we all have to change the way we live our lives. We can no longer afford to not be marketable to potential employers, buy a new car every two years, and max out our credit cards without falling behind. So we’ve cut down on auto debt, quit frivolous spending on credit cards, and racked up thousands of student loan debt dollars.
Companies such as SLM Corporation (NYSE:SLM), better known as Sallie Mae, is a government sponsored entity (NYSE:GSE) giving student loans by the billions out to those trying to find fundingfor college. The big problem is, once these students are graduating, there is no jobs for them to get. They may be more capable than ever to excel at a job, but if the economy isn’t creating real jobs, then they are going to find it hard to pay back there student loan debt. Are companies such as SLM Corporation (SLM) poised for big losses if this economy continues to produce no new jobs?
Student Loan Debt Now Larger Than Credit Card Debt
According to FinAid.org, student loan debt is now surpassing credit card debt. College graduates no owe $850 billion in student loans versus the $828 billion consumers owe credit card companies. This number is staggering. We’ll have to look it up, but it seems like this is the first time in history, given the short history of student loans, that credit card debt is less than student loan debt in the United States.
Moving forward, we will need to keep our eyes on two key metrics. First, we want to watch the number of defaults on student debt. Student debt is the only debt in our legal system that cannot be ‘forgiven’ during a personal bankruptcy. We could seriously find a generation without a job, without capabilities to pay the debt, and with no choice but to be servants to the banks to some degree. Although a “Lost Generation” is very unlikely, it is still a very small possibility. Secondly, we want to watch the employment rate. If employment does not improve, all of these new graduates will face uncertain futures moving forward. Some schools require students to take out six figures of debt which they could be paying on until the day they die. This grim future could be a reality for many. Could Sallie Mae (SLM) be the new owner of a slave generation induced by student debt?
Continue reading Student Loans The Next Debt Bubble? Part 2 of 2.
Disclosure: No positions