What’s bad for students has been good for Wall Street. The Wall Street Journal reports this morning that “Student-Loan Securities Stay Hot” even as student default rates climb. “Demand for the riskiest bunch” of student-loan backed securities sold last week by SLM Corp, formerly known as Sallie Mae, “was 15 times greater than the supply.” The riskiest securities have the highest yields, but investors don’t have to care, given the special impossibility of defaulting or erasing student loan debt. Meanwhile, the New York Fed reports that 90-day delinquency rates have risen from 24 to 31 percent since 2008, and that student debt nearly tripled in the last eight years. When the Fed breaks out the numbers for Intern Nation–graduates of the past eight years–they found that “the delinquency rate jumped to 35% last quarter from 26% in 2008.”
“The Current Cost Debate Will Do Nothing Except Hurt Students,” Remaking the University
The beauty of capitalism is that it can make money out of anything. The horror of capitalism is that it can make money out of anything. The student debt bubble won’t become a problem until the default rate begins to threaten the solvency of a few large banks, just as the housing bubble wasn’t a problem until it threatened the solvency of a few huge banks. Meanwhile, tuition continues to rise and the speculators keep the betting tables lively.