WSJ -- 40 percent of Federal student loans behind in payments

More Than 40% of Student Borrowers Aren’t Making Payments

More than 40 percent of people with Federal student loans are in default.

What a waste. Free markets calibrate risk. Government-rigged markets create huge messes like this one. More than a trillion dollars of debt, much of which will never be repaid and sits on the country's balance sheet -- even with the Federal Reserve rigging rates artificially low to try to monetize as much debt as possible, 40 percent of these loans are still in default. And all we have to show for it are mostly worthless degrees being held by people who can't find anything except low-paying service sector jobs -- which is why they can't afford to pay back what they borrowed. At the same time, the market for higher education has seen costs skyrocket as a result of the artificial demand the guaranteed loans created.

I knew the raw dollar amounts -- more than a trillion dollars -- and I knew that eventually it is going to implode -- along with a bunch of other debt bubbles we have created. But I was surprised at how far along the defaults already were.

 

I don't see it as a credibility issue. We don't have millions of people who want to be deadbeats. We have millions of people who availed themselves of a fantasy -- that led to billions of dollars being lent to people a free market would have never lent to without collateral. It was actually a bad use of capital, because the return on investment is proving to have been near worthless for the majority of those people.

Not sure how old you are. Or where you went to school. But for a lot of people who had a chance to pay their way through college when I went 30 years ago, it wouldn't be happening today.

 

In an ideal world, that money wouldn't be available so easily. Lenders would utilize lending criteria that are commensurate with the risk of the loan. If that was the case, we wouldn't be where we are. To the extent anyone could secure a loan, though, I still think the most sane behavior is to defer on borrowing for something if you aren't likely to pay back what you borrowed.