College Bubble Update: Default Rates on Student
Loans Soar to 15%
by
Mac
Slavo
SHTF
Plan
Recently
by Mac Slavo: Celente
Forecasts Winter of Discontent; October Will Be Month of the Big
Unraveling
In 2010, as
the buzz of economic recovery swept over the nation, we were warning
of the unemployment crisis and how
it would affect college graduates who were told that once out
of college they’d be quickly absorbed into the job market where
they’d make all of their wildest financial dreams come true.
While unemployment
for college grads is 15% according to Bloomberg, we know for a
fact that the overall rate of unemployment, per economist John
Williams of Shadow States, is actually at around
22%.
It’s
not just college students, it’s everybody – one in five
able bodied Americans are out of work right now.
There
is a reason that these numbers, especially for college grads,
are peaking at levels we have never seen before: it’s because
our economy is shambles with no clear recovery in sight.
…
 For
college grads, it gets even worse. Not only can they not find
a job, but they are putting financial pressure on their parents,
who will now have to continue providing a home, food, and utilities
until such time that their boomerang kid can get some meaningful
work and contribute financially to the household. On top of that,
they are debt laden with an average debt of over $23,000 once
they graduate college
Those dreams
of white picket fence success are now turning into nightmares, as
massive default rates in the $1 Trillion college debt industry loom,
according
to a new report from the Department of Education:
The U.S.
Department of Education today released the official FY 2009 national
student loan cohort default rate, which has risen to 8.8 percent,
up from 7.0 percent in FY 2008. The cohort default rates increased
for all sectors: from 6.0 percent to 7.2 percent for public
institutions, from 4.0 percent to 4.6 percent for private institutions,
and from 11.6 percent to 15 percent at for-profit schools.
The millions
of students who graduated in 2008, 2009, 2010 and 2011 are now facing
the toughest job market in U.S. history, with unemployment by some
accounts equal to or exceeding the Great Depression. Some 85% of
college graduates have plans to move back in with mom and dad in
the hopes our economy will recover. But as we have seen over the
last year, there has been no such recovery, and without an income,
many college grads are finding it impossible to make good on their
loans. The most
recent data show that over 300,000 Americans from nearly 6,000
different schools defaulted on their loans in 2009.
We
seem to have entered an era of perpetual and unshakeable financial
bubbles and the next ripe bubble to burst is in the student loan
market. Student loan debt has become the fastest growing debt
sector throughout the economic recession. Growth at for-profit
colleges has been incredible and tactics used at these institutions
reflects patterns seen with the subprime mortgage operators. They
target low income markets and exploit government backed loans
and pump them through local area lenders. It is a bubble of mammoth
proportions and it is no surprise that data released by the Department
of Education only a few days ago reflects a default pattern reminiscent
of the subprime crisis. Default rates on student loans at for-profit
institutions are absolutely abysmal.
…
This rate
is horrifying. The ways these are measured are reflected by two-year
default cohorts so you have 15 percent of the entire group defaulting
within two-years! The real default rate is much worse if we tracked
these out for the life of the loan.
Source:
My
Budget 360
Reprinted
from SHTF Plan.
September
16, 2011
Mac
Slavo [send him mail] is a
small business owner and independent investor.
Copyright
© 2011 Mac Slavo
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