U.S. Credit Crunch Hits Education as Banks Abandon Student Loans
April 1st, 2008WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
I wonder what will happen to Apple’s stock price with so many students unable to buy those shiny Powerbooks and iPods with borrowed money…
Ok, that may seem flippant, but I can’t really muster up too many good things to say about going deeply into debt to pay for college. Not at this late stage of the game.
Here’s something from Smoking Mirrors that might interest the kids:
You’re being squeezed by these same money men so that life will become so intolerable that you’ll be glad to run through the bloody trenches and razor wire to free yourself from the conditions created by the people who sent you running in the first place.
There’s too many of you. You’re taking up too much space. Over here and over there people are breeding like rabbits because that is what people do when they are starving and short of resources, shelter, food, opportunity and the value of their labor has disappeared because they already dug up and sold everything they had to the people who bought off their leaders and created the unbearable debt they find themselves in.
(Thanks, by the way, to the person who bought their new Mac mini via Cryptogon.)
Via: Times Online:
One of America’s leading banking associations has given warning that the United States faces a growing educational apartheid as some lenders withdraw from student loans amid new evidence that the credit crisis has spread across all types of borrowing.
In the past fortnight, some banks, including HSBC, have pulled out of the $85 billion (£42 billion) a year US student loans market, fuelling anxiety that the turmoil that hit debt markets on Wall Street last summer is spilling over into the wider economy and making credit more difficult to secure for ordinary American households.
In the US, many undergraduates take out a federal guaranteed loan and top up their financial needs with a private loan from lenders such as Bank of America, JPMorgan Chase and Citi-group. In the academic year 2005-06, $17 billion in private student loans was used to finance higher education.
Banks have become reluctant to offer private student loans because worsening credit conditions have meant that they cannot package up the loans and sell them on.
Although the brightest students who win places at America’s rich Ivy League universities will be affected less because of generous bursaries – which do not have to be repaid – less able students applying to other institutions are expected to face difficulty in securing private loans to fund their study. At one end of the field is Harvard University, with $34 billion of endowments, and at the other are many community colleges and low-tier universities with limited resources.
Joe Belew, president of the Consumer Bankers’ Association, said: “Some of the banks are getting out. Part of the reason is that Congress has cut the fees they could charge, making some loans pretty much unprofitable. But part of the reason is that they can’t securitise the debt. The problems they have had with mortgage-backed debt – it’s the same thing at play in student lending.
The stratification intensifies. You want fries with that?
anothernut:
I’ve been asking “Would you like paper or plastic?” for so many years now that it doesn’t even phase that this is where I am in my life anymore. (Some of it is my fault to be sure, but not all of it.)
There was a young man who used to work at the grocery store where I work who was (is) by no stretch of the imagination the screw-up I was at his age. When he left the grocery store after graduating from high school, he was headed to a prestigious engineering school to which he had a scholarship, and I’m sure he’s doing very well as a student there.
The thing is, you really have to hit the books to be able to make it as an engineer, and I wonder how he’ll react when he graduates and finds that there are precious few engineering jobs left out there thanks to outsourcing, after he buckled down and did all that work to become an engineer? Will he blame “liberals, Jews, and fags” and put on a pair of jackboots to join the torchlight parade of the ignorant disaffected?
The really sad thing is, most of these students are NOT buying IPODS and laptops with those student loans. The average student is barely hanging on. They’re paying tuition, books, rent, and praying there’s enough left for ramen noodles to last the semester. And then they depend on their grants (if they’re lucky) or their job(s) to pay utilities, gas, etc. The image of the indolent student spending all this cash is mostly a thing of the past except for the rare few who’s parents pay for everything.
Then you get out, with this huge student loan debt that they want paid back immediately, and discover that the only jobs out there involve flipping burgers or stuffing envelopes for $8 an hour.
The game is rigged from the get-go.