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Half of the US government's financial assets are student loans

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Re: Half of the US government's financial assets are student loans

#11

Post by gesman »

Recent reports from the Treasury Department show that the US government owns nearly $1.5 trillion in student loans.

That’s pretty sad when you think about it: the US government’s #1 financial asset is debt owed by tens of millions of its young people for university education that didn’t even necessarily qualify them for a real career.

Millennials are the most educated generation in history. Yet there are record numbers of them working off student debts as waiters and bartenders, and supplementing their income on the side with ‘gigs’ (like being an Uber driver).

...

On top of all that, young people will spend their entire working lives paying into a pension system that likely won’t be there for them when it comes time to collect.

The Board of Trustees of Social Security tells us that the program is going to completely run out of money within the next 15 years. Millennials’ retirement horizon is far beyond that.

...

Miami-based homebuilder, Lennar Homes, recently announced it would pay a big chunk of a student loan for any borrower buying a home from them.

Through its subsidiary Eagle Home Mortgage, the company will make a payment to a buyer’s student loans of as much as 3% of the purchase price, up to $13,000.

Debt has become such a keystone of our society, that the only way we can afford something is to swap one type of debt they can’t afford with another type of debt.

-- Simon Black

Re: Half of the US government's financial assets are student loans

#13

Post by matte_black »

jjoonathan wrote: post #3

Oof. What happens when a huge chunk of these default because educating everyone doesn't magically create jobs for everyone?

The banks that loaned out all that money will need massive bailouts or else shut down.

Let’s be clear, students will NEVER be allowed to default these loans, nor should they. They must either pay it or take their debt to the grave and pass it down to their heirs.

Re: Half of the US government's financial assets are student loans

#16

Post by bradleyjg »

trsohmers wrote: post #6

I have been skeptical of the real "value" of cryptocurrencies (outside the technical ability to allow for value transfer, which does not necessitate the coins having value inthemselves), but assuming this is true I have a lot less faith in dollar bills and the fact that they are backed by the "full faith and credit" of the US government. If the student debt bubble really does pop, the government (and thus all of us t…

In what sense is it a bubble? What assets are being bid up by enthusiastic investors and could suddenly collapse in value?

Re: Half of the US government's financial assets are student loans

#17

Post by hidenotslide »

mxpxrocks10 wrote: post #2

is this for real? does anyone have any info that proves this right/wrong?

Almost assuredly false. The Federal Reserve balance sheet is US treasuries and mortgages, and Fannie Mae/Freddie Mac are mortgages as well. Probably not a complete data set.

Re: Half of the US government's financial assets are student loans

#18

Post by notyourwork »

trsohmers wrote: post #6

I have been skeptical of the real "value" of cryptocurrencies (outside the technical ability to allow for value transfer, which does not necessitate the coins having value inthemselves), but assuming this is true I have a lot less faith in dollar bills and the fact that they are backed by the "full faith and credit" of the US government. If the student debt bubble really does pop, the government (and thus all of us t…

Aren't they always the ones holding the bag? Auto industry bail out, bank bail out, insurance agency bail out from Katrina. This responsibility is what stabilizes the world's currencies I suppose.

Re: Half of the US government's financial assets are student loans

#19

Post by trsohmers »

fixermark wrote: post #5
jjoonathan wrote: post #3

Oof. What happens when a huge chunk of these default because educating everyone doesn't magically create jobs for everyone?

They're protected from defaulting by law, because they can't be divested by bankruptcy. ... which merely means you need to calculate where the knee in the curve of issuing them was, extrapolate to life expectancy, and know when to cash out. Convenient!

Most of the student loan debt is owed to private creditors and it is the federal government that insures these loans. If a student doesn't make payments, the lender gets a guaranteed bailout by the government (no need for congress to step in like they did for the banks and auto companies). Basically, all the lenders are incentivized to give out as much money as possible, which incentivizes universities to raise tuitions, all because the US government decided to give lenders free money to play with at the cost of those who take on the debt and the ones footing the bill, which are usually the same people.

Re: Half of the US government's financial assets are student loans

#20

Post by marcelluspye »

tboyd47 wrote: post #7
fixermark wrote: post #5

Earlier quoted context omitted.

They're protected from defaulting by law, because they can't be divested by bankruptcy. ... which merely means you need to calculate where the knee in the curve of issuing them was, extrapolate to life expectancy, and know when to cash out. Convenient!

> you need to calculate where the knee in the curve of issuing them was, extrapolate to life expectancy, and know when to cash out. Sorry, what does that mean?

I believe what they were implying was that such a bubble can only "pop" if a bunch of the debt is discharged at once, which in this case means a bunch of people who still owe student loans on their deathbed die with more debt than assets. The commenter suggested trying to figure out when this would happen, and making sure one is ahead of it.
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