Pssst…Hey Buddy, You Want A Student Loan?

By | April 13, 2016

Summary: Like in the ‘good old days’ of the housing market when for some borrowers to qualify for a loan they needed to show a pulse…Has the same thing occurred in the student loan market?

After examining used car leasing, mortgage markets and the potentially poor lending practices that could lead to a meltdown…

The student loan market is another key sector of lending that certainly can’t be ignored either!

In the article ‘Pssst…You Want To Buy A Car?‘ some of the issues percolating under the surface of the loans made for car leases and mortgages only eight or so years after the meltdown that led to the making of ‘The Big Short‘ were examined.

But could there be an even bigger issue that’s at and above the surface of the $1 trillion-plus student loan market?

The charts below from the article ‘Student Loans: No Credit? No Collateral? No Problem!‘ provide evidence, barring some kind of federal bailout, that may unfortunately be the case!

…The statistics are harrowing. Per the Education Department and the New York Fed, 43 percent of federal student loans are in postponement, delinquency, or default. And, while credit card and mortgage debt have fallen since the peak of the housing boom, student and auto loans have soared.

Student loan delinquency rates have surpassed the 2010 peak mortgage delinquency rate of the housing bubble and credit card delinquency in 2012…

…Of course, all of this is reminiscent of a ballooning housing bubble. Instead of climbing home prices, we have climbing tuition. Instead of declining lending standards for home loans, we have the same for student loans. Instead of mountains of mortgage debt, we have an ever increasing amount of student debt. A cultural mandate that everyone deserves to go, should go or has a “right” to go to college has replaced a similar mandate about home ownership.

The biggest difference, however, is that there is no collateral for student loans. With mortgages in default, the lender can at least recover the house that served as collateral for the loan…

Visual Evidence Of A Pending Crisis From Student Loans

student loan delinquency rate student loan default rate

Michael Haltman is President of Hallmark Abstract Service in New York. He can be reached at mhaltman@hallmarkabstractllc.com

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