student loans Archives - the patient investor

Professor Michael Hudson writes:

Student loan debt, now the second largest debt in the US at around $1 trillion, is the one kind of debt that has been growing since 2008. It is depriving new graduates of the ability to start families and buy new homes. This debt is partly a byproduct of cutbacks in federal and local aid to the universities, and partly of turning them into profit centers – financializing education to squeeze out an economic surplus to invest in real estate and financial holdings, to pay much higher salaries to upper management (but not to professors, who are being replaced by part-time, un-tenured help), and especially to create a thriving high-profit, zero-risk, government guaranteed loan business for banks.

This is not really “socializing” student loans. Its social effects are regressive and negative. It is a bank-friendly giveaway that is helping polarize the economy.

via Government Debt and Deficits Are Not the Problem. Private Debt Is. | Michael Hudson.

Take out government-owned student loans and there has been virtually no rebound in consumer credit since the Great Recession ended. Restated, the consumer has not been borrowing since the Great Recession has ended. Rather, students took advantage of below-market rates on loans provided by the government starting in 2009…….“Most of the improvement in credit is a function of the explosion student loan debt,” said Neil Dutta, an economist at Bank of America Corp. in New York. “The reason student loan debt is exploding? Because the youth population is having difficulty finding work. Hardly a good reason for credit extension.”

via Consumer Credit – Worse Than You Think | The Big Picture.