Posted on 01/07/2020 11:06:41 AM PST by karpov
Julie Chinnock is 50 years old and owes about $250,000 in student loans. She was happy to get a new payment plan that lowered her monthly bill, but the holders of two bonds backed by her loans were probably less cheerful.
The two bonds were due in 2043 and 2054, but Ms. Chinnock and other borrowers were paying less each month under a new government plan that tied debt payments to income. Because borrowers were taking longer to pay off their loans, there was a risk the bonds backed by the loans wouldn’t be paid off in time. Bond-rating firms were watching and getting ready to downgrade the highly rated bonds, potentially causing losses for investors.
The issuer of the bonds and the investors who owned them hatched a plan to avoid the downgrades. Their solution: make sure bonds were paid off in time by extending their maturity dates by decades. The bonds that include a big chunk of Ms. Chinnock’s loans now mature in 2083, when she will turn 114.
Today, the bonds are rated triple-A. Altogether, issuers have extended maturities on about $11.5 billion of outstanding bonds backed by mostly older-vintage student loans, extending maturity dates by as much as 54 years.
...
Altogether, Americans owe about $1.5 trillion in student loans, a small slice of which is held by investors who bought bonds backed by the loan payments. The standoff between investors and ratings firms over the bonds’ potential defaults shows how long it will take some borrowers to pay off their debt. It also shows the potential burden faced by the federal government, which guarantees most of the investor-held loans and owns the majority of the remainder.
(Excerpt) Read more at wsj.com ...
You can’t get blood out of a turnip, but it looks like people’s estates will take a hit, assuming they have anything.
I have to admit it would be kinda fun to die with no estate but owing millions to scoundrels. :)
How do you get $250k in student loans?
No sympathy.
They are starting to get as creative playing “let’s pretend” with the student loan ratings as they were with the mortgage loan ratings during the mortgage crisis. Have they gone to a “tranching” scheme without default protection yet?
Should we bet against it???
Who then are getting screwed?
I'm having a hard time giving a damn here. Sucks for them.
Perhaps bonds backed by these loans, are not such a great investment? If so, and the bonds are downgraded, well , that simply would reflect the risk of these loans not getting paid, wouldn’t it?
i wonder how many climate hypers have long term bonds
I could not read the article, but did she get 250k in loans for “Lesbian Dance Theory”? While I agree that academia and the government have enabled this behavior, there is still some culpability with the borrower.
>>Perhaps bonds backed by these loans, are not such a great investment? If so, and the bonds are downgraded, well , that simply would reflect the risk of these loans not getting paid, wouldn’t it?
If they were fairly rated, you’d have a point. But deliberately misrepresenting the risk of these loans should constitute fraud.
Julie Chinnock is 50 years old and owes about $250,000 in student loans.
At 50 you should be well on your way of planning your retirement. She will die in debt.
Student loans are evil.
No. Quoting the article:
'“I certainly wish that there was a better system for affording education in this country,” says Ms. Chinnock, a nurse anesthetist in Seattle who sold her house to help pay down her student loans.'
...
None of the drama over the bonds’ struggles did anything to change Ms. Chinnock’s plight. Ms. Chinnock earned two bachelor’s degrees, two masters and a doctorate. She says she kept going back to school to boost her income to pay off her accumulated debt. In 2017, she sold her house in Portland, Ore., and used about $185,000 to pay down her student loans. She now rents and has deferred saving for retirement and buying a new car to make ends meet while servicing her student debt.
If you put up articles behind a paywall, can you at least excerpt a larger portion?
I excerpted close to the 300-word limit imposed by FR.
This is entirely due to several government programs and liberal cultural revolutions.
One, tell everyone that getting a college degree is the path to the middle/upper class. Now people who aren’t capable of earning the challenging degrees get easy liberal arts / social justice degrees. That inflates the number of liberal activists. Others attend college and drop out, working in jobs that don’t require a college degree, but they are eager for government loan forgiveness. Both result in more people voting for liberal policies.
Two, add social justice to the program. Add social justice classes to the core curriculum, inflating hours. Increase diversity bureaucracy and increase the costs of college to pay for the new political officers / checkists.
Third, increase the costs on “privileged” students to help pay for the “oppressed”. The illegal immigrant goes for free, while the second generation college student pays several thousand dollars more. The perpetual activist gets a free ride, while the engineers and nurses pay an extra premium per class because they have “profitable” degrees.
The first step is to not send your kids to rubber stamping liberal arts schools or programs. The second is to fight the institutional rot.
Loosening Social Justice’s Iron Grip on Academia
https://www.jamesgmartin.center/2020/01/loosening-social-justices-iron-grip-on-academia/
Who are the fools who buy these bonds?
Pension funds?
“If so, and the bonds are downgraded”
The principal goal of all concerned is to ensure no downgrade, by hook or by crook.
If such bonds ever become less than AAA there will be no market for them and the trillion dollar education complex collapses. As does state and municipal pension funds.
"Free money" Right.....Here's a novelty. I save, don't buy new cars, don't take vacations, and pay my kids own damn college tuition, artificially inflated from "Free Money" idiots.
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