The key event in the area of Student Loans in the United States ... the game changer ... was the passing of The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), which ended the ability to discharge of Student Loans under bankruptcy. This turned Student Loans into an ersatz secured debt, like a home mortgage. What was the benefit of this? Well, to Wall Street it meant this debt was safe to securitize and slice up into derivatives for reinvestment in the markets. If you notice the rise in college costs, it resembles the rise in the housing bubble that subprime mortgages caused. For Wall Street, the larger the debt the greater the reinvestment value. I'm sure that Sallie Mae is operating in the same capacity with Student Loans for the Financial Sector as Fannie and Freddie did with mortgages in the lead up to the subprime crisis.
The overhang of Student Loan Debt, as a front-end for yet another Financial Sector fraud bubble, is untenable, impacting access to education and the ability of these colleges and universities to be financially viable in the future. It would be nice if Congress would do something about it before the next crash, but I won't hold my breath.
Read the Article at HuffingtonPost
No comments:
Post a Comment