Talk About Chutzpah

George Yacik - Contributor - Fed & Interest Rates

If you’ve ever wondered why so many of today’s American college students seem to live in a self-delusional world where they take little personal responsibility for anything that goes wrong in their lives, you don’t have to look any further than the professors who teach them.

In a recent op-ed column in the New York Times, Susan M. Dynarski, a professor of education, public policy and economics at the University of Michigan, takes the Trump Administration to task for its failure to take the proper steps, in Ms. Dynarski’s eyes, to fix the student debt problem, as if Donald Trump himself caused the crisis.

Nowhere in her lengthy critique does she ever address head-on the real culprits in the student debt crisis: the government agency that made these loans in the first place, and the colleges and universities that have exploited these loans in order to drive up the price of higher education, forcing millions of students and their parents into debt if they want to attend college.

First, she says, “the Education Department has weakened accountability for the companies that administer student loans,” specifically calling out Navient, formerly a part of Sallie Mae. Now privatized, Navient is the largest servicer of government student loans. As such, Dynarski says, “companies like Navient are the face of the student loan system, and often the source of enormous frustration for borrowers.” Continue reading "Talk About Chutzpah"

Want A Federal Student Loan? Just Shake My Hand

George Yacik - Contributor - Fed & Interest Rates

Fans of the 1970s classic sitcom “The Odd Couple” might remember the episode in which Oscar Madison introduces his roommate Felix Unger to his sleazy insurance agent from Lloyd’s of Lubbock, whose come-on is that he offers you a policy just by shaking your hand. It appears that Lloyd is back in business, only now he’s working for the federal government. Or at least his underwriting guidelines have been adopted by the U.S. Department of Education.

The Wall Street Journal published a long story on Monday about the federal Parent Plus loan program, which it says “asks almost nothing about its borrowers’ incomes, existing debts, savings, credit scores or ability to repay. Then it extends loans that are nearly impossible to extinguish in bankruptcy if borrowers fall on hard times.”

And lots of them have. As of September 2015, 11% of Parent Plus borrowers hadn’t made a payment on their loans in at least a year, which “exceeds the default rate on U.S. mortgages at the peak of the housing crisis.” And the problem is only going to get worse. The number of families with Parent Plus loans has jumped more than 60% since 2005, the Journal reports, to 3.5 million at the end of last year. They owe a combined $77.5 billion, or an average $22,000. Continue reading "Want A Federal Student Loan? Just Shake My Hand"

Investors Bet On Housing Again (Just In Time For Another Implosion?)

By Elliott Wave International

The U.S. housing market may be about to implode -- again.

Before I get into the "why," know that the residential real estate market never fully recovered.

Annualized new home sales this past July stood at 507,000, vs. the July 2005 peak of 1.39 million. The chart and commentary from the August Elliott Wave Theorist offer:

The percentage of Americans who own a home is still plummeting despite the partial recovery in real estate prices. Today, the percentage of families owning homes in America has plunged to its lowest level in 48 years, nearly half a century. ... By saddling home-buyers with massive debts, the government has done the opposite of what it promised; it has ruined the American Dream for tens of millions of families. Now it's doing the same thing to education ... .

Yes, U.S. student loans amount to some $1.2 trillion. Yet the new on-campus trend is luxury student housing. Continue reading "Investors Bet On Housing Again (Just In Time For Another Implosion?)"