American Colleges Are Over $205 Billion in Debt, Harvard is $6 Billion in Debt

December 23, 2012

(Daniel Greenfield) The Student Loan Bubble is bad, but interestingly enough, as this New York Times article points out, the loan problem extends all the way up the ladder to the institutions of higher education who never seem to have enough money.

Remember that our financial experts come out of a system that is this deep underwater and they have a heavy investment is bailing it out.

Overall debt levels more than doubled from 2000 to 2011 at the more than 500 institutions rated by Moody’s, according to inflation-adjusted data compiled for The New York Times by the credit rating agency. In the same time, the amount of cash, pledged gifts and investments that colleges maintain declined more than 40 percent relative to the amount they owe.
While Harvard is the wealthiest university in the country, it also has $6 billion in debt, the most of any private college, the data compiled by Moody’s shows.
At the Juilliard School, which completed a major renovation a few years ago, debt climbed to $195 million last year, from $6 million in inflation-adjusted dollars in 2002. At Miami University, a public institution in Ohio that is overhauling its dormitories and student union, debt rose to $326 million in 2011, from $66 million in 2002, and at New York University, which has embarked on an ambitious expansion, debt was $2.8 billion in 2011, up from $1.2 billion in 2002, according to the Moody’s data.
The pile of debt — $205 billion outstanding in 2011 at the colleges rated by Moody’s — comes at a time of increasing uncertainty in academia. After years of robust growth, enrollment is flat or declining at many institutions, particularly in the Northeast and Midwest. With outstanding student debt exceeding $1 trillion, students and their parents are questioning the cost and value of college. And online courses threaten to upend the traditional collegiate experience and payment model.

Student debt turns out to be only 5 times as high as the accumulated college debt, and that’s only at the colleges rated at Moody’s. What would happen if we added up the entire pile of debt for all institutions of higher education in the country? Somehow I think we would arrive at some very scary numbers.
The system is broken and spending its way deeper into debt. Tuition costs have risen dramatically and hardly made a dent in the tremendous piles of debt accumulated over the last decade.
It would seem as if Academia’s brokenness amplifies the brokenness of its graduates. It acts as a predictor for the entire broken system. Academia is a deadbeat metaphor turning out deadbeat students in a deadbeat nation.

Harvard borrowed $1.5 billion to pay its bills rather than selling off assets at a sharp discount. Its interest expense more than doubled from fiscal 2008 to fiscal 2011, to nearly $300 million.

“The financial crisis has acted like a tidal wave that, as it receded, exposed certain vulnerabilities with a new clarity,” Harvard officials said in the November annual report.

That’s a fancy way of saying, “We’re morons.”


Number of the Week: Student Loan Bubble – Real Time Economics – WSJ

May 21, 2012

368%: The jump since 2007 in the measure of consumer credit held by the government comprised primarily of student loans.
If a student loan bubble were to pop, the government, not private banks, would be the one standing around with gum in its hair.

Issuance of student loans has soared in recent years, hitting $867 billion at the end of 2011, according to an analysis from the Federal Reserve Bank of New York, more than credit cards or auto loans. The jump has led some to classify the student-lending market as a bubble, comparing it with the housing mess that nearly brought down the banking system in 2008.
But there are some big differences between student loans and housing. For starters, mortgage credit absolutely dwarfs lending for higher education — by nearly a 10-to-1 ratio. Troubles in an $8 trillion market pose a much higher systemic risk.
The other big difference is who holds the loans. Commercial banks and investment firms held the bulk of the mortgages that were going sour when the housing bubble burst. But that’s not the case with student loans. Despite some recent signals of banks getting back into the student-loan business, private lending has been pretty much stagnant since the recession hit. Since December 2007 nonrevolving consumer lending by commercial banks — a measure tracked by the Federal Reserve that includes student loans as well as auto and other personal credit — is up less than 11%. Over the same period, total consumer loans owned by the federal government — a measure that includes loans originated by the Department of Education under the Federal Direct Loan Program — has more than quadrupled.
The good news in all of this is that if a student loan bubble pops, there’s little chance of a systemic crisis similar to the one that hit in 2008. But there’s still a lot of bad news to go around.
For one, though banks likely wouldn’t take a big hit, the government — meaning the taxpayer — would. That’s not great news for the deficit, but the numbers aren’t large enough to be a huge concern. At the same time, it’s much harder for the borrower to discharge a student loan than a mortgage. You can’t get rid of student loans in bankruptcy, for example. So there’s a much higher chance that the government would get its money back eventually.
The bulk of any burden from a student-loan debt bubble bursting is likely to fall on the borrowers themselves. While that means the broader economy can avoid a systemic crisis, it will struggle with a younger generation whose spending power is constrained limiting growth for years.

I’m fucked


So if college loan debt EXCEEDS credit card debt, and 45% aged 18-29 are not working…

December 30, 2011
The community activism worked out great… didn’t it? It’s kind of like Woodstock… er Woodstock 99. Thanks hippies. Thanks for taking the advice of Yoko Ono. Peace!
(h/t ibloga) CNN: In 2008, the youth vote helped sweep Barack Obama into office. Americans 18-29 spread the word on social media, energized fundraising and went to the polls. In 2012, the youth vote is moving on and throwing those omnipresent “Hope” bumper stickers and t-shirts in garbage bins.Not because of apathy. Not because another candidate generates more enthusiasm. Not because of his character. Not because they think voting is pointless. The 18-29 vote is up for grabs in 2012 because youth can’t afford cars to put bumper stickers on and those t-shirts are worn out from too many days sitting on the couch unemployed. The sobering reality: just 55.3 percent of Americans between 16 and 29 have jobs. And earlier this year, Americans’ student loan debt surpassed credit card debt for the first time ever. Rather than develop a lasting initiative to help young unemployed Americans, the President launched “Greater Together” – a campaign tool that offers community forums rather than jobs. Rather than provide a bailout to those crushed by the burden of educational loans, his student debt relief program was pathetic – only reducing interest rates by a measly 0.5 percent. No wonder less than half of Americans 18-29 approve of Obama.

.…yeah… thanks hippies. thanks for all the “Activism”. Thanks for keeping your youth occupied… might be nice to pay us or we will kill you. You want to know what youth do who have nothing but community activism? well… um… Hie Dee Ho! They start raping your daughters! oh… won’t the feminists on the left be pleased… and that will of course will lead to a Leftist Police state full of feminine hysteria. Oh,,, but the ladies are the one segment of the population who have jobs because of the service sector. The vaginas will be doing just fine… if they can make it to work without getting raped. Oh, and those police officers that they hire to keep the youth from raping the laides… oh… they are corrupt and cheat on you. sigh… it will make monogamy completely unsustainable… and that will lead to more panic… and fear. And of course you will blame a blogger like me and ship me off to Washington State for pointing out the reality here…. but nothing to see here. nothing at all. move along…


Obama To Announce Student Loan Relief Plan

October 26, 2011
Media_httpa57foxnewsc_qgvdp WASHINGTON – Millions of student loan borrowers will be eligible to lower their payments and consolidate their loans under a plan President Barack Obama intends to announce Wednesday, the White House said. Obama will use his executive authority to provide student loan relief in two ways.
First, he will accelerate a measure passed by Congress that reduces the maximum repayment on student loans from 15 percent of discretionary income annually to 10 percent. The White House wants it to go into effect in 2012, instead of 2014. In addition, the White House says the remaining debt would be forgiven after 20 years, instead of 25. About 1.6 million borrowers could be affected.
Second, he will allow borrowers who have loans from both the Family Education Loan Program and a direct loan from the government to consolidate them into one loan. The consolidated loan would be up to a half percentage point less. This could affect 5.8 million more borrowers.
Education Secretary Arne Duncan told reporters on a conference call that the changes could save some borrowers hundreds of dollars a month.
“These are real savings that will help these graduates get started in their careers and help them make ends meet,” Duncan said.
Obama is expected to unveil his plan at a stop in Denver. The White House said the changes will carry no additional costs to taxpayers.
Last year, the Democratic-controlled Congress passed a law that reduced the cap and moved all student loans to direct lending by eliminating banks as the middlemen. Before that, borrowers could get loans directly from the government or from government-backed loans in the Family Education Loan Program that were issued by private lenders but basically insured by the government. The law was passed along with health care overhaul with the anticipation that it could save about $60 billion over a decade.
Today, there are 23 million borrowers with $490 billion in loans under the Federal Family Education Loan Program. Last year, the Education Department made $102.2 billion in direct loans to 11.5 million recipients.
Outside of mortgages, student loans are the No. 1 source of household debt, the White House said.
Also on Tuesday, the Education Department and the Consumer Financial Protection Bureau announced a project to simplify the financial aid award letters that colleges mail out to students each spring. A common complaint is that colleges obscure the inclusion of student loans in financial aid packages to make their school appear more affordable, and the agencies hope families will more easily be able to compare the costs of colleges.
Separately, James Runcie, the Education Department’s federal student aid chief operating officer, told a congressional panel on Tuesday that the personal financial details of as many 5,000 college students were temporarily available for other students using the site to view on the Education Department’s direct loan website earlier this month. Runcie said site was shut down while the matter was resolved, and the affected students have been notified and offered credit monitoring.
via foxnews.com

As if I had a job to pay any loans I owe at all.


Student Loans part of Healthcare bill

March 31, 2010

I’m looking over the Student Loans part of Healthcare bill… and while I (unlike Fannie Mae) am not concerned about the loss of jobs due to this (it is worth losing some jobs if they can resolve the price of tuition), I am very concerned that this will actually increase the prices of schools. (and the Obama admin has confirmed my fears at the bottom of the article). Historically when you have government grants the price of school goes up because the schools are still trying to make a buck. The truth is that school loans are very profitable. This is the reason that Obama wants the government into this business. The people will fall for it thinking there isn’t any alternative to them being able to afford an education, but the denied correlative is now the price of tuition will go up and if the price of college is regulated then I suspect the colleges will move profitable campuses offshore to hostile Anti-Semitic nations that I can’t even go to… similar to what is happening in Qatar with my Alma Mater Carnegie Mellon and similar colleges like Cornell University.

The new law, part of a package that also includes fixes to the health-care overhaul, makes government the primary issuer of student loans.

It eliminates fees paid to private banks to act as intermediaries in providing student loans and will use much of the projected $68 billion in savings over 11 years to expand Pell Grants for low-income students and make it easier for students to repay loans after graduating.

The size of Pell Grants will increase along with inflation, and by 2017 should raise the maximum grant to $5,975 from $5,550, according to the White House.

The law will also provide 820,000 more grants by 2020.

Students who have low incomes or meet certain other eligibility requirements and who borrow money after July 1, 2014, will be allowed to cap their repayments at 10 percent of their income above basic living requirements, instead of 15 percent.

If they keep up their payments, they will have any remaining debt forgiven after 20 years instead of 25 years – or after 10 years if they are in a public service, such as teaching, nursing, or serving in the military.

Some of the money will address shortfalls in the Pell Grant program that have developed because students are qualifying for more and larger grants. More than six million students received such grants in the 2008-09 academic year, an increase of about 50 percent from a decade earlier, according to the College Board.

$2 billion will be invested in community colleges – which enroll six million students and are growing fast – over the next four years to provide education and career training programs to workers eligible for Trade Adjustment aid.

Institutions that serve mostly minority student bodies will share $2.55 billion in additional funding over the next decade.

Speaking to a cheering crowd at a community college in Washington’s Virgina suburbs, Obama yesterday portrayed the overhaul of the student-loan program as a triumph over an “army of lobbyists.”

He singled out Sallie Mae – the Reston, Va.-based lender SLM Corp. – which he said spent $3 million to try to stop the changes.

“For almost two decades, we’ve been trying to fix a sweetheart deal in federal law that essentially gave billions of dollars to banks,” he said. He said the money “was spent padding student lenders’ pockets.”

Including money from last year’s stimulus program and regular budget increases, the White House said the Obama administration has now doubled spending on Pell Grants.

But the law has detractors:

Sallie Mae said it will end up costing jobs. The loan company said it may have to eliminate a third of its 8,500 jobs nationwide.

A number of lawmakers opposed the health-care reconciliation bill in part because of the student-loan provisions.

Sen. Ben Nelson, Democrat of Nebraska, who voted in favor of the health-care legislation in December, voted against the reconciliation bill. Nelnet, one of the nation’s largest private student lenders, is headquartered in Nelson’s home state.

Sen. Lamar Alexander, Republican of Tennessee and a former education secretary, also spoke out angrily against the plan to end the subsidies to private banks.

Tennessee, too, is home to some big players in the private student-lending industry. In a statement yesterday, he lamented that the government was getting more deeply and directly into the student-loan business.

“The Obama administration’s motto is turning out to be: ‘If we can find it in the Yellow Pages, the government ought to try to do it,’ ” Alexander said.

if we can find it in the Yellow Pages, the government ought to try to do it? so then farms that provide food for possible hungry people should be part of government according to that logic. Are they go to socialize food as well?

He said that 31,000 private sector workers would be out of jobs and students would be forced to rely on four federal call centers instead of more than 2,000 community and nonprofit lenders.

The health-care portion of the bill Obama signed yesterday eliminates provisions in the Senate version of legislation that benefited specific states and other special-interest items.

The House passed that version on March 21 with the understanding that the companion measure making changes to it would become law.

Republicans say they will move to repeal the overhaul package and replace it with a less ambitious program.

Private lenders can still make student loans that are not backed by the government, and they will continue to have contracts to service some federal loans. But the new law represents a significant change in what has been a multibillion-dollar business for the banking industry.

Under the new law, all colleges and universities must switch to the direct lending program by July 1.

Will the changes bring down college costs?

Sorry, no. Obama acknowledged as much before signing the bill when he urged colleges and universities to “do their part” to hold down costs.

via philly.com

…as I was saying. This is just a grab for power. the only benefit to these programs will be special interests. the price of school will be more expensive.


Obama to Nationalize Student Lending with Pending Budget Bill

January 20, 2010

There is a silver lining here: Obama wants government to take this business… it tells me something good. It tells me that he “believes” I will be able to pay my loans back because work will come. The same way he tried to nationalize the banks… because the reality was that they knew they could further the hand of government over the private sector. I may not like his motives, but you can read his inside knowledge in this move… and it is a very good thing that he thinks he can profit off of student loans.

A bill currently before the Senate would empower the Obama administration to nationalize the student lending industry, eliminating the federally subsidized private loans millions of university students rely on to finance their educations.

The Student Aid and Fiscal Responsibility Act – currently being considered by the Senate Health, Education, Labor, and Pensions (HELP) Committee – would eliminate the Federal Family Education Loan (FFEL) program. FFEL loans are federally subsidized and make up approximately 80 percent of the student lending industry.

According to the Department of Education, 14.3 million of the 17.5 million student loans were federally subsidized for the 2009-2010 fiscal year. Under Obama’s plan, the government would consume the entirety of this industry – a total of $103 billion in 2009-2010.

Under the current system, the federal government subsidizes private financial institutions in order to entice those institutions to provide low-interest loans to students.

Under this arrangement the government sets the interest rates lenders may charge students. In return, the government reimburses lenders if market interest rates rise above the interest rates on the loans – in essence, the government reimburses private lenders if they begin losing money on the loans.

In return, the lenders agree to return any windfall profits made from the loans to the government. In other words, if market interest rates fall below the interest rates of the loans, the lenders pay the government the difference.

The government also agrees to reimburse the lenders should a student default.

Under the system proposed by Obama, the government would cut private lenders out of the picture entirely, setting the interest rates and collecting payments directly for all student lending.

Whether or not the government saw a profit or a loss from the new, federal loans would depend on the rate at which the government borrows money. For instance, the law currently sets the interest rate for direct loans at a maximum of 6.8 percent.

Under Obama’s proposal, if the government can borrow money at a rate lower than 6.8 percent, it would realize the difference as profit. If the government’s borrowing rate were to fall in the future, its profit on student loans would grow.

The idea to nationalize student lending was first put forth in President Obama’s fiscal-year 2010 budget and marketed as a way to save the government billions of dollars. According to a CBO estimate, the proposal would save the government $87 billion over 10 years.

The savings estimate results from the fact that the government believes it will collect more in interest payments from students than it would otherwise have to pay in fees to lenders.

The plan has met Republican opposition, passing the House on a party-line vote in September – 253-171 – and has stalled in the Senate, where HELP Chairman Sen. Tom Harkin (D-Iowa) has said he plans to pass the measure using budget reconciliation.

“We’ve already been instructed by the Budget Committee to do this, so we’re going to do it,” Harkin told The Hill Oct. 19 when asked about using the controversial budget maneuver. Reconciliation allows budget-related items to be passed with a 51-vote majority, eliminating the threat of a filibuster.

The government’s savings estimates have also come into question. In a July 27 letter to Sen. Judd Gregg (R-N.H.), the Congressional Budget Office admitted that its original figure of $87 billion in savings over 10 years did not include an estimate of losses the government would incur from defaults. When that risk was added in, the estimated savings dropped to $47 billion.

The original estimate “does not include the cost to the government stemming from the risk that cash flows may be less than the amount projected (that is, that defaults could be higher than projected).

CBO found that after accounting for the cost of such risk, as discussed below, the proposal to replace new guaranteed [subsidized] loans with direct loans would lead to estimated savings of about $47 billion over the 2010-2019 period,” CBO reported.

The plan’s fate, however, is determined largely by Obama’s other major initiative – health care reform. Because reconciliation may only be used on one bill per year, Democrats must wait to see if it is needed to pass health care reform. If it is, they will have to combine both the student loan and health care proposals into one bill before using reconciliation to bypass an inevitable Republican filibuster.


Obama to Nationalize Student Lending with Pending Budget Bill

January 20, 2010

There is a silver lining here: Obama wants government to take this business… it tells me something good. It tells me that he “believes” I will be able to pay my loans back because work will come. The same way he tried to nationalize the banks… because the reality was that they knew they could further the hand of government over the private sector. I may not like his motives, but you can read his inside knowledge in this move… and it is a very good thing that he thinks he can profit off of student loans.

A bill currently before the Senate would empower the Obama administration to nationalize the student lending industry, eliminating the federally subsidized private loans millions of university students rely on to finance their educations.
The Student Aid and Fiscal Responsibility Act – currently being considered by the Senate Health, Education, Labor, and Pensions (HELP) Committee – would eliminate the Federal Family Education Loan (FFEL) program. FFEL loans are federally subsidized and make up approximately 80 percent of the student lending industry.
According to the Department of Education, 14.3 million of the 17.5 million student loans were federally subsidized for the 2009-2010 fiscal year. Under Obama’s plan, the government would consume the entirety of this industry – a total of $103 billion in 2009-2010.
Under the current system, the federal government subsidizes private financial institutions in order to entice those institutions to provide low-interest loans to students.
Under this arrangement the government sets the interest rates lenders may charge students. In return, the government reimburses lenders if market interest rates rise above the interest rates on the loans – in essence, the government reimburses private lenders if they begin losing money on the loans.
In return, the lenders agree to return any windfall profits made from the loans to the government. In other words, if market interest rates fall below the interest rates of the loans, the lenders pay the government the difference.
The government also agrees to reimburse the lenders should a student default.
Under the system proposed by Obama, the government would cut private lenders out of the picture entirely, setting the interest rates and collecting payments directly for all student lending.
Whether or not the government saw a profit or a loss from the new, federal loans would depend on the rate at which the government borrows money. For instance, the law currently sets the interest rate for direct loans at a maximum of 6.8 percent.
Under Obama’s proposal, if the government can borrow money at a rate lower than 6.8 percent, it would realize the difference as profit. If the government’s borrowing rate were to fall in the future, its profit on student loans would grow.
The idea to nationalize student lending was first put forth in President Obama’s fiscal-year 2010 budget and marketed as a way to save the government billions of dollars. According to a CBO estimate, the proposal would save the government $87 billion over 10 years.
The savings estimate results from the fact that the government believes it will collect more in interest payments from students than it would otherwise have to pay in fees to lenders.
The plan has met Republican opposition, passing the House on a party-line vote in September – 253-171 – and has stalled in the Senate, where HELP Chairman Sen. Tom Harkin (D-Iowa) has said he plans to pass the measure using budget reconciliation.
“We’ve already been instructed by the Budget Committee to do this, so we’re going to do it,” Harkin told The Hill Oct. 19 when asked about using the controversial budget maneuver. Reconciliation allows budget-related items to be passed with a 51-vote majority, eliminating the threat of a filibuster.
The government’s savings estimates have also come into question. In a July 27 letter to Sen. Judd Gregg (R-N.H.), the Congressional Budget Office admitted that its original figure of $87 billion in savings over 10 years did not include an estimate of losses the government would incur from defaults. When that risk was added in, the estimated savings dropped to $47 billion.
The original estimate “does not include the cost to the government stemming from the risk that cash flows may be less than the amount projected (that is, that defaults could be higher than projected).
CBO found that after accounting for the cost of such risk, as discussed below, the proposal to replace new guaranteed [subsidized] loans with direct loans would lead to estimated savings of about $47 billion over the 2010-2019 period,” CBO reported.
The plan’s fate, however, is determined largely by Obama’s other major initiative – health care reform. Because reconciliation may only be used on one bill per year, Democrats must wait to see if it is needed to pass health care reform. If it is, they will have to combine both the student loan and health care proposals into one bill before using reconciliation to bypass an inevitable Republican filibuster.