Shahien Nasiripour and Counterparties (Shane Ferro & Ryan McCarthy) had great pieces recently about the latest trends in student lending and their potential wider implications for the economy. We also recommend this explainer from Dylan Matthews about the new jump in rates for certain kinds of student loans.
Our own view has been that the ongoing growth of student lending is unlikely to represent a systemic financial risk, but it’s hard to imagine that it doesn’t have some damaging macroeconomic effects in the short- to medium-term. Read more
It’s the kind of motto one sees on a T-shirt in a shop in the touristy part of town, but over the last few years it’s had a particularly painful ring of truth to it. Students in America are staying in education longer and are struggling to obtain full, gainful employment once they leave. This, combined with the rising costs of tuition, has seen the outstanding balance of student debt go past the one trillion mark and delinquency rates increase.
Talk is in the air of a bubble, as pundits point to student loans themselves and to the securities that are built from them. But is what’s going on “a bubble” in the usual sense? And more importantly, what does this say about college education in America? Read more
Alright, we put our hands up, we’ve been reading Zero Hedge.
His Anonymous Handsome Midriffness is busy being his usual self, and on this topic he’s made us go hmmm about a certain Wall Street Journal story concerning SecondMarket Holdings, Inc. The platform is launching a service that will allow lenders to sell exposure in student loans to (accredited) investors. The WSJ describes it thus (emphasis ours): Read more
Evidently it’s time to get very excited about the risks posed by increasing student debt in the US, particularly as rates of delinquency are on the rise. Pretty graphs first, details follow…
Holy household debt, Batman! Student loan balances have surpassed credit card use and are still growing! Read more
As the topic of student loans has been gaining momentum this election year, it might be worth taking a moment to examine some not-so-rosy points about the whole business.
First some background. In the world of US student loans, Uncle Sam reigns supreme. A recent research note by Credit Suisse noted that since the abolition of the Federal Family Education Loan Program (FFELP) in 2010, the government has become owner of an estimated 88% of total outstanding student debt. Read more
The potential contents of a firesale if there is a downgrade of the US’s AAA rating are receiving a fair bit of attention, as investment funds weigh up what they can and should do in the event.
Defeased or prefunded securities are uniquely vulnerable and, according to a note out Thursday by Citigroup’s securitised products team, so are the $250bn of asset backed securities linked to the Federal Family Education Loan Program (FFELP). Read more
This is what a collective sigh of relief in the for-profit college sector looks like:
For the commute home, where you always over-deliver on expectations,
- Google misses earnings expectations. Read more
And we’re not just talking about national zookeepers.
Here’s a Steve Eisman-friendly tidbit from the government shutdown negotiations, courtesy of the Higher Ed Watch blog on Saturday: Read more
The Everest for-profit education network says of a decision to attend one of its colleges: “It’s a decision that deserves respect.”
Perhaps — but it’s definitely risky. Read more
“Hello, my name is Steven Eisman.”
“Hi Steve, we loved the Big Short. Thanks for your email — yes, let’s grab a coffee and discuss why you’re shorting the for-profit college industry.”* (*FT Alphaville translation.) Read more