The College Bubble
Can’t say I’m not pleased to see this happen. This is also a prime victim of the “deregulation” of the college loan sector. Bank of America and their ilk managed to find a way (err lobbied their way) to get into the college money action years ago. Christ, and why wouldn’t they. What better a deal than to be able to loan money to students at 18% and have the loan guaranteed by the government. You can’t file bankruptcy on student loans. Such a racket, I blame the poor people that the Democrats wanted to go to college.
So, geeeee, guess what happens when you get greedy private banks lending money that is gauranteed to be paid back in spades? A bubble in the College market…
I’m just glad my daughters have a few more years before they go to college.
Home builders and banks aren’t the only ones facing economic headwinds these days. America’s undercapitalized independent colleges are staring at a spiral of major threats to solvency as penny-pinching students and parents consider cheaper options, and funding sources dry up. As a result, they could be the next bubble industry to pop. blockquote>
dv
You’re partly right for the wrong reasons–neither you nor the writer of the MSNBC piece actually seems to understand how college lending works, and the extent to which the colleges and universities themselves have played the same game with those loans as real estate speculators, or the interplay between grants-in-aid, need-based scholarships, athletic scholarships, and at least four different categories of student loans.
This will be interesting to see. I’ve seen that college tuition has increased at a very high rate. It will be interesting to see what happens. There will be a tension because when economic times are tough more people go to school or stay in school longer but college is getting increasingly unaffordable. There’s also a lot of universities sitting on huge endowments, which they haven’t used to lower tuition.
I simplified it Steve.
College loans are guaranteed my friend and are not able to be put in into a BK. They used to be handled by the government until co’s like BofA got their hands on them.
the colleges have played the same game b/c the BofA’s of the country went to them just like the Pharma companies went to the Physicians.
don’t tell me I don’t know what I’m talking about Steve. I do.
dv
Get me a break–you get judged on what you actually post, and what you posted was not even 50% of the way toward effectively explaining the the issue at hand.
Your post makes BofA the heavy against those poor independent colleges. Which is utter BS. Those colleges have been using the cheap availability of student loans for the past decade to pull in financially qualified but educationally hopeless students for a semester or so to get the money, and then kicking them free on grades.
Then they use enrollment guarantees and the loan money as security to float bond issues to build all the neat stadiums and rec centers they figure will bring in the upscale students they really want to graduate. But those bond issues and loans are inevitably tied to enrollment increases, and the colleges have to promise to give the bond creditors first call on regular operating funds if the increased tuition revenue doesn’t cover debt service.
Most of those independent colleges lobbied heavily for private lenders like BofA to be involved in the process because of the relaxed financial requirements for the loans would give them access to more speculative capital.
Now they’re whining about the situation like it was the evil banks what did it to them.
So yes, if I don’t think you have it right I will call you on it–same as you do with me.
Steve has it correct. Also, our youngest is in College and we have gotten the warning shot from school about lines of credit and reassessment of school loans and grants. because of external factors.
Not a good thing for parent to hear when your son is attending partially because of a 50% scholarship which may evaporate.
Boy, aren’t you proud if the the two democrat Senators from Delaware who lobbied for the Bankruptcy Bill?
Finally, something I agree with Mike P. about – the bankruptcy bill was extremely bad legislation. I hope it gets fixed in the next Congress.