Texas, Oklahoma supposedly interested in joining SEC

[tbonesays]

That would require underwriting as any co-signer fully expects the actual borrower to be able to pay. They’re not co-signing in anticipation of being tapped for repayment but only because the lender requires additional security.

But then, how could the government even begin to underwrite this? On the basis of a student’s projected future earnings? A student who hasn’t even chosen a major or who may not even know the first thing about business or credit?

I thought the federal government already does underwrite the student loans. the banks are only lending all this money, knowing many of them will never be repaid, because the feds underwrite them.

 

[4-4-3]

If these kids are so bright why did they go into hock to attend schools they couldn't afford ?

What exact caliber of weapon was held to their heads to make them take out these loans ?

Any young person who goes into debt to get a BA degree in the environment of today is anything but bright IMO.

They’re bright but unwise. And they’re inexperienced. And they were never taught – or didn’t learn – the law of compound interest. They can only see COLLEGE in bright lights ahead of them – like a tacky set design on Broadway. They don’t think for a moment how hard and long they’ll need to work to repay that debt. And they have no idea how it will wreak havoc with their FREE CASH FLOW.

Plus, it’s now a totally debt-based economy. The Fed and its banks LEND MONEY INTO EXISTENCE in ever greater amounts while people borrow not only for college tuition but also to buy cars, homes, boats, whatever – as well as overspending on credit cards or even using credit cards to pay off other credit cards. Some even use credit cards to pay for normal household expenses.

We didn’t have credit cards in the 60’s and early 70’s. We didn’t need them. WE GOT RAISES. CREDIT SCORES? What’s a credit score? You certainly didn’t need one to live. You met your obligations as they came due. Also, the spoils were more equitably distributed, and you didn’t need an advanced degree from a fancy school to become a capital markets banker. But then, you didn’t get to be a predator either.

With the coming of the cash flows from debt-based securities in the 80’s, it all began to change. And the inventor/collectors of those securities began operating as a RENTIER CLASS. And that tendency only blossomed over time, so that we now have such a yawning income gap in this country that many don’t even question it except maybe around election time. And for the little that's worth.

For those who get to join the RENTIER CLASS, life can be very good, and if they have any college debt, it’s a cinch they can repay it. But for the average student destined for a humbler, more prosaic life, there’s no reason on earth to take on that kind of debt. So, you’re right. To do so MAKES NO SENSE. But then to assume that kids raised in this environment won’t do it anyway is to miss WHAT’S GOING ON HERE.

 

[4-4-3]

I thought the federal government already does underwrite the student loans. the banks are only lending all this money, knowing many of them will never be repaid, because the feds underwrite them.

There are three potential governmental roles, I believe:

Co-signing on behalf of the student-borrower.
Being the actual lender.
Being the lender’s guarantor as opposed to the student-borrower’s.

The poster I responded to suggested that the government act as co-signer for the borrower. But it doesn’t do that. The borrower alone is on the hook. And his or her obligation remains even in the event of bankruptcy even though there is no other credit obligation that I’m aware of that doesn’t have a bankruptcy relief option. And, of course, under this scenario, the government couldn’t be both lender and co-signer.

In those cases where the government is the actual lender it’s taking on direct credit risk and, IN THEORY, should underwrite that risk. But, apparently, it doesn’t as it would be too cumbersome and, if it weren’t, it would weed out too many potential borrowers as student loans have a very high default rate of almost 10%. But in these cases, where the government is the ACTUAL CREDITOR it can't also be a GUARANTOR.

Also, as straight credit, this is a far cry from simply printing money to keep a financialized economy booming. It’s actual risk transfer where the government itself is not both debt issuer and debtor and, hence, not outright MONETIZATION with no end in sight. But it does reflect poor credit practice.

But then, there are cases where the government simply backstops other private or semi-private lenders and, in those instances, you’re right – it's an actual lender’s guarantor. But, again, it’s never the borrower’s guarantor which was what I was arguing against it becoming, even though I neglected to mention those cases where it winds up as lender’s guarantor on the back end. MY OVERSIGHT.

Still, my underlying point stands, viz. that the government should not need to serve as guarantor of anything to anyone under any circumstances as these loans in the amounts that they are issued result in an exorbitant privilege for the higher education CARTEL. Instead, college of some sort should be affordable for any and all who wish to attend.