
Half of the US government's financial assets are student loans - prostoalex
https://community.finimize.com/t/graphic-of-the-week/1044/25?u=anders_finimize
======
gesman
Recent reports from the Treasury Department show that the US government owns
nearly $1.5 trillion in student loans.

That’s pretty sad when you think about it: the US government’s #1 financial
asset is debt owed by tens of millions of its young people for university
education that didn’t even necessarily qualify them for a real career.

Millennials are the most educated generation in history. Yet there are record
numbers of them working off student debts as waiters and bartenders, and
supplementing their income on the side with ‘gigs’ (like being an Uber
driver).

...

On top of all that, young people will spend their entire working lives paying
into a pension system that likely won’t be there for them when it comes time
to collect.

The Board of Trustees of Social Security tells us that the program is going to
completely run out of money within the next 15 years. Millennials’ retirement
horizon is far beyond that.

...

Miami-based homebuilder, Lennar Homes, recently announced it would pay a big
chunk of a student loan for any borrower buying a home from them.

Through its subsidiary Eagle Home Mortgage, the company will make a payment to
a buyer’s student loans of as much as 3% of the purchase price, up to $13,000.

Debt has become such a keystone of our society, that the only way we can
afford something is to swap one type of debt they can’t afford with another
type of debt.

\-- Simon Black

~~~
adreamingsoul
Millennial here, thanks for the daily reminder of the future I have to deal
with.

Failing government systems, check. Unaffordable educational system, check.
Limited housing and land, check. Degrading climate, check.

Some days I believe I just may find a way out of it. But, for every day I
participate in the rat race is just another lost when I should be working on
building a better future for my family.

~~~
vminkov
Come to Eastern Europe, your student loan money is enough for a whole new life
here.

P.s. honestly, I don't understand how ppl who are so hoplessly indebted are
not migrating here. Bulgaria offers very cheap life with the opportunity of
doing business with the EU and the US. Why work 24/7 when you can enjoy a good
life in a place where the local people and economy need a foreigner to lead
them in the business and globalizing world?

~~~
godelski
Because 80% of people (at least Americans) live <50 miles from their
birthplace. People don't like to move. There's a lot of hurdles moving. I know
I moved across country (west coast to the south) and there is still a big
culture shock after a few years.

tldr: There's more to the equation than finance.

~~~
adreamingsoul
I'm considering moving to the east-coast near a mentor of mine. Land is
cheaper (when compared to the Northwest) and it's in Zone 5/6 which is pretty
good for growing.

~~~
godelski
From my experience, having some sort of a support structure to move into
greatly lessens some of the problems. One of the biggest challenges in moving
is finding that new support structure. And I guess this also is highly
dependent on how social you are to begin with.

------
cs702
This ignores $2.466 trillion of US treasuries and $1.771 trillion of Fannie
Mae, Freddie Mac, and Ginnie Mae mortgage-backed securities owned by the
Federal Reserve.[a] Although the Fed, as the US's central bank, operates
independently of the federal government, its balance sheet should properly be
consolidated. The largest financial assets owned by the US federal government
are therefore US treasuries and government-sponsored-entity mortgage
securities, not student debt.[b]

\--

[a] Figures are as of November 2017. See page 12 here:
[https://www.federalreserve.gov/monetarypolicy/files/quarterl...](https://www.federalreserve.gov/monetarypolicy/files/quarterly_balance_sheet_developments_report_201711.pdf)

[b] Many people don't realize or understand that the largest creditor of the
US federal government is the US federal government, through the Federal
reserve. The US federal government currently pays interest on $2.466 trillion
of treasuries to the Federal Reserve, which, at the end of each year, sends
all that interest back to the US Treasury.

------
jdoliner
Anytime the US wants the world to be a certain way but just can't quite get
reality to conform debt is our answer. Everyone should be a homeowner but for
some reason isn't? Simple, just give them cheap loans for houses. Everyone
should be educated but it doesn't seem to be happening? Debt time. Why do we
do this? Because it allows us to pretend that complicated long-term structural
problems are simple short-term capital problems. People just need some
activation energy to get over the hump, that's all. We're addicted to debt, if
we ever admitted that it's not solving these problems for us we'd have to
contend with reality, and who wants to do that? Especially a reality as dismal
as that of public education.

~~~
eemax
Well, it does actually solve the problem in the sense that it actually causes
houses to be built and students to go to college. Probably this indicates the
real problem is more about bad monetary policy and bad tax policy, not a
fundamental shortage of resources.

Of course, it would be better to improve monetary policy rather than just
making a bunch of dumb, risky loans leading to a dramatic boom and bust.

But that would require policymakers understanding basic macroeconomics, so
don't hold your breath...

~~~
aggronn
Okay you piqued my interest... "bad monetary policy" usually means we should
be on the gold standard, but I've never heard that before as a solution for
student loans. What are you proposing is the monetary fix?

~~~
eemax
A gold standard is terrible monetary policy, even worse than the status quo.

Good monetary policy would be the fed doing NGDP level targeting a la Scott
Sumner:
[https://www.mercatus.org/system/files/NGDP_Sumner_v-10%20cop...](https://www.mercatus.org/system/files/NGDP_Sumner_v-10%20copy.pdf)

Monetary policy only goes so far though, if you actually want to distribute
resources in an equitable way, you probably also need good tax policy.

Good tax policy would be taxes which decrease wealth inequality (e.g. luxury
consumption taxes, land value taxes).

~~~
adamson
I don't think the Mercatus Center is the best place to look for good or
sincere ideas on how to distribute resources in an equitable way

------
MollyR
US government backed student loans were a huge mistake.

We needed something like rent control enforced on public universities, for
government backed loans. But we didn't.

So it created a situation that caused an enormous amount of millennials to be
taken advantage of by universities and colleges. Those universities and
colleges pumped full of government loan cash became increasingly predatory.
They increased their administrative costs, they increased their tuition costs,
and they lured unsuspecting teenagers into taking enormous debt for worthless
degrees like gender studies over engineering.

This has been a catastrophe, that will be used as a case study of unintended
consequences.

The extreme amount of student loans has lead to extreme unrest, unless action
is taken quickly it will only get worse. We see it in the rise of the alt-left
and alt-right fueled by extreme fanatics in desperate and angry situations.

~~~
bluntfang
>worthless degrees like gender studies

Worthless eh? I bet if companies Uber hired some of these gender studies
majors they might not have fucked up?

~~~
MollyR
I can't tell if you are joking, so I'm taking it seriously.

Uber's human resources and or lawyers should have caught many of its missteps.
Common undergrad degrees for HR being in management, business administration,
and related business degrees. Lawyers are well lawyers.

Gender Studies doesn't prepare you for business as well as an actual business
related degree, it prepares you for a mostly academic career which has limited
spots.

That being said, even STEM and business degrees are worth less and less as
competition increases. You now need a degree and often years of experience for
jobs.

The only thing that really angers me is charging 60,000 dollars for a gender
studies degree, and having a student take loans for it. 1/100 might get lucky
and work at a big tech company as a tech evangelist, but it's not sustainable.

We need universities to be far more accountable about what degrees actually
lead to jobs.

~~~
adamson
I feel like you're missing their point. You can make the case that a gender
studies degree prepares you for a mostly academic career only insofar as
companies aren't creative enough to find a way to use the unique skills that
someone with a gender studies degree has developed.

Maybe Uber wouldn't have had the toxic culture they ended up with if they had
hired conscientious people who have spent time studying things like how gender
power dynamics play out in the small - and empowered them to speak - instead
of relying solely on business graduates.

------
evanpw
Notwithstanding entirely valid concerns about student loans, this is pure
clickbait. The feds also own 30% of the nation's land (640M acres), and have
the exclusive right to collect $3T+ per year in taxes (not to mention they can
literally print dollars).

~~~
fixermark
What is the impact to the American economy when the Federal government has to
write down the value of over half its assets as the average lendee dies
without paying?

~~~
hidenotslide
Nothing? That person was also collecting social security and medicare if they
were old enough.

~~~
koolba
And if they weren’t they don’t have to account for that unfunded mandate.

------
thinkloop
One thing to keep in mind is that "assets" are far from "spending".
Governments generally do not accumulate assets, everything they collect is
reserved for spending (besides some operational accounts and things like
foreign reserves). The student loan program is an exception and so figures
heavily in this stat.

~~~
d--b
Yes, the title makes it sound like the US government is in a dire situation
because it has its solvency tied to students paying back their loans...

But mostly the government is a borrower of cash and not a lender.

Here the government is indirectly financing people's education by offering
cheaper loans than the market would give. There is not much to talk about...

~~~
prostoalex
The rate that the government can borrow at is determined by the quality of
underlying assets.

US 10-year note is 2.58% at the moment, but Argentina's is 7%.

~~~
marshray
Well the US is somewhat special in that the dollar (or currencies tied to it)
is used by 70% of all global transactions.

The other day a minister in China floated the idea of buying less US
Treasuries. It became apparent that there just weren't a lot of other
instruments available with which to invest that sheer volume of money.

------
tvural
Healthcare is a much bigger problem for the government than student loans. The
federal government spends about 1 trillion per year on healthcare, while the
total of all student debt in the U.S. is around 1 trillion. This is true on a
societal level too. U.S. healthcare spending is 17% of GDP, up from 5% in the
1960s. The problem with student loans is that the burden falls mostly on the
least financially secure people. This is as opposed to Medicare/Medicaid where
the government tries to foot the bill rather than allow people to get in
massive debt.

------
CodeSheikh
Thanks to baby boomers for depleting resources of this nation and now younger
generations are stuck in this financial mess. Had they been more visionary
with better overlook then today there would have been better opportunities for
younger generation to earn and pay back those loans.

[https://www.vox.com/2017/12/20/16772670/baby-boomers-
millenn...](https://www.vox.com/2017/12/20/16772670/baby-boomers-millennials-
congress-debt)

~~~
dnautics
Let's not be too harsh on the baby boomers, they were trying to create a
better world for the next generation, they chose chose to do it via an
unsustainable system that relies on top-down direction of the economy using
inappropriate tools. Can you blame them for that? Top down worked great at
things like rebuilding europe after a war (admittedly an eminently
unfalsifiable task)...

True, there were minority voices clamoring that this would result in ruin, but
to be fair there are still well regarded "smart" people who argue that the
problem for millennials is that those people in charge just didn't do it
ENOUGH.

~~~
marshray
> they were trying to create a better world for the next generation

I don't see a lot of evidence for this, except perhaps Reagan's program of
deficit spending on an arms race to bankrupt the 'evil empire'. Maybe people
should be forgiven for believing in the trickle-down lie once, but it's now
simply a transfer of wealth scam.

~~~
dnautics
Well the current neoliberal program of low or negative interest rates to
stimulate economic growth and 'reinvestment' is basically trickle-down, too,
just in a less direct fashion plus actively impoverishing the poor (instead of
merely taking less from the rich). So it's basically still believed - just as
a more obfuscated scam.

------
rgbrenner
So here's the US financial accounts report from the Fed (the source listed):
[https://www.federalreserve.gov/releases/z1/current/html/defa...](https://www.federalreserve.gov/releases/z1/current/html/default.htm)

I don't see anything in that report that confirms this.. did I just miss it?
where did the data come from?

~~~
1986
I was able to get similar numbers from:
[https://fred.stlouisfed.org/series/FGCCSAQ027S](https://fred.stlouisfed.org/series/FGCCSAQ027S)
and
[https://fred.stlouisfed.org/series/FGTFASA027N](https://fred.stlouisfed.org/series/FGTFASA027N)

------
lewis500
Would it be better if banks owned all the debt? I think the really bad
statistic is just how much student debt there is.

Progressives in Oakland want the city to create a municipal bank. If they do,
maybe progressives will then complain "Y% of Oakland's assets are mortgages
and small business loans."

For any level of student debt, I think it is obviously better that the
government own a lot of it, as the payments the government receives can be
used for spending. The payments banks receive go to shareholders. In fact,
given the government can borrow money at 2% while student loan rates are like
4-8%, it might not even be a bad idea to have the government issue treasuries
and buy more student loans. Administratively, perhaps this would be bad for
reasons I can't guess ex ante, but off the cuff I can't see why it's bad for
the government to own lots of student debt, especially when government is what
enforces the debt contracts (siphoning off your wages in the event of default,
etc).

One could argue that the government should just cancel all or most of that
student debt. Maybe so, but if that would cause the government to forgo $X
billion in revenue every year, I think it would be better to just have another
$X billion in spending. However, if the $X billion would just go to more tax
cuts for the super-wealthy then perhaps it would be a good idea.

~~~
Turing_Machine
>In fact, given the government can borrow money at 2% while student loan rates
are like 4-8%, it might not even be a bad idea to have the government issue
treasuries and buy more student loans.

If 40% of the loans are in default and/or the borrowers aren't making payments
for some other reason (which is the actual case) it would be a very bad idea.

~~~
lewis500
It is possible to choose the loans. The default rate for for profit colleges
is high, but you don’t need to buy those loans.
[https://www.brookings.edu/research/the-looming-student-
loan-...](https://www.brookings.edu/research/the-looming-student-loan-default-
crisis-is-worse-than-we-thought/)

------
nickysielicki
This is such a huge problem and it's so easy to see the collapse over the
horizon.

There are just a few _small_ differences between education today and education
30 years ago. Off the top of my head, you can go online today and see lectures
for upper level MIT courses for free... Literally, the best university in the
world has lectures available for free. And instead of learning the dewey
decmial system and taking 10 books and flipping through looking for a specific
answer, you can google any specific topic and immediately get relevant
information. And you can go on reddit.com/r/askscience and ask questions to
experts in any field. Just a few _small_ differences.

What the hell are people paying for, then? The _" college experience"_? Does
it really cost tens of thousands of dollars to validate that someone has
adequately learned from consuming educational material? Schools today have
dorms that look like luxury hotels and the best gyms in the country; what the
_fuck_ is going on?

Meanwhile, primary education hasn't fundamentally changed in 100 years,
outside of a select few schoolboards adding iPads to the classroom and
thinking to themselves, "Yes, _now_ we're modern." Nevermind that we still
exclusively group children by their age group rather than their educational
progress until they're 18. Nevermind that we have never questioned the idea of
teaching children 7 different topics every single day, wasting extraordinary
amounts of time with context switching, instead of focusing on a topic for
longer periods (as it works in the real world.)

I just do not understand how this debt is going to be managed when _(not
"if")_ the education system is fundamentally disrupted. Economists more or
less universally agree that federally guaranteed student loans are
unsustainable and make education more expensive. So what's taking so long?

~~~
snarfy
Position Requirements

* Bachelor's degree in CS

As someone without a degree, there are quite a few positions unavailable to
me. Some positions state a degree is required even though they would take an
exceptional developer, but many others are very strict and require the degree.
The pedigree of the employees can be important when the company is in the
market to be bought or sold.

~~~
fjsolwmv
The bachelors isn't important for it's inherent value, only as an arbitrary
way of ranking people in a rat race.

------
jdoliner
Debt is the American way, it has been since the very beginning. When George
Washington was elected President he was so broke he need a loan to get from
Mount Vernon to NYC for his own inauguration.

------
jjoonathan
Oof. What happens when a huge chunk of these default because educating
everyone doesn't magically create jobs for everyone?

~~~
matte_black
The banks that loaned out all that money will need massive bailouts or else
shut down.

Let’s be clear, students will NEVER be allowed to default these loans, nor
should they. They must either pay it or take their debt to the grave and pass
it down to their heirs.

~~~
r00fus
> Let’s be clear, students will NEVER be allowed to default these loans, nor
> should they.

Why not?

~~~
matte_black
Because that was the deal.

~~~
jackstraw14
I agreed to this deal and I feel like I do need to pay off the debt, but I'm
lucky in that I have a job that will allow me to do it the normal way if the
crypto market crashes (heaven forbid, plz). What about the 18 year olds whose
helicopter parents never allowed them to imagine a filthy reality like failing
to go to college?

Regardless of whether that kid should have been free-thinking enough to see
outside their existence's bubble, it's irresponsible to exploit their
ignorance for profit. Most of these kids haven't ever seen a debt-ridden life
like they're signing up for. I grew up with parents who ranted and raged about
debt, and I still did it. Are you sure the problem lies with the kids signing
the papers (I guess clicking the "Get your loan here!" button these days)?

~~~
IncRnd
The deal is that student loans in chapter 7 bankruptcy can only be discharged
for undue hardship. Chapter 13 can't discharge student loans according to my
understanding.

------
njarboe
The number one asset is the ability to tax an economy of $20 trillion(ie. 320
million Americans) to extract $3.7 trillion annually(2016). Holding the
equivalent in 3% 30yr US bonds to give you that income would be about $125
trillion dollars. So this asset is 100 times the student debt one.

------
mxpxrocks10
is this for real? does anyone have any info that proves this right/wrong?

~~~
hidenotslide
Almost assuredly false. The Federal Reserve balance sheet is US treasuries and
mortgages, and Fannie Mae/Freddie Mac are mortgages as well. Probably not a
complete data set.

~~~
noobermin
If that's the case, shouldn't this be flagged?

Also, you mentioned the Fed, which isn't the same thing as the US gov't,
right?

~~~
hidenotslide
I don't really want to go down the conspiracy theory rabbit hole of who does
what at the Fed but it's main decision makers are government appointees, it
was established by an act of Congress, and it remits its profits to the
Treasury.

Ginnie Mae is part of the government as well (also mortgages). Fannie/Freddie
are GSE's but currently under directly government control since the financial
crisis.

I'm not sure how the accounting works, but they are somewhat autonomous and
have their own balance sheets.

~~~
tanderson92
It's fascinating accounting-wise. Matt Levine has a good write-up here:
[https://www.bloomberg.com/view/articles/2016-08-08/fannie-
an...](https://www.bloomberg.com/view/articles/2016-08-08/fannie-and-freddie-
will-be-profitable-after-their-next-bailouts-too)

The interaction of the accounting rules and the new tax plan was fascinating
too because the value of their deferred tax asset changed:

> “A reduction in corporate tax rates would require us to measure our net
> deferred tax asset using the new rate in the period in which the rate change
> is enacted, resulting in a one-time charge through the tax provision in the
> period the tax rate was changed, ...”

More here: [https://www.housingwire.com/articles/42130-trump-to-sign-
tax...](https://www.housingwire.com/articles/42130-trump-to-sign-tax-reform-
into-law-that-will-trigger-fannie-freddie-treasury-draw)

------
krsdcbl
This might be a bit idealistic and not align with US principles - but doesn't
this actually show it would be much smarter to keep education free for
everyone and just straight up pay for it with a higher taxation?

These numbers look to me a bit as if gov is paying anyway, but with the
current model it gets the money back only (eventually) after the citizens
education, and pushes a lot of people into debt.

All of that for essentially avoiding that one person might add a few $$$ to
the pot that could benefit another...

I know US policy sees the self-responsibility of the individual completely
differently, but having grown up in Austria and profited from top education
that is _naturally_ free for everyone, all of this student debt stuff looks
like madness to me.

------
gumby
Trivially solved by magically declaring it off the books as was done with
mortgages.

This isn’t actually a meaningful number, The far more important number is the
converse: what percentage of total student debt (and total residential
mortgage debt) is held by the US government? Almost all of it.

Those “markets” only exist because the government _is_ the industry, and
everybody would save money if the govt cut out the intermediaries (banks) who
are collecting huge fees for nothing.

------
trsohmers
I have been skeptical of the real "value" of cryptocurrencies (outside the
technical ability to allow for value transfer, which does not necessitate the
coins having value inthemselves), but assuming this is true I have a lot less
faith in dollar bills and the fact that they are backed by the "full faith and
credit" of the US government. If the student debt bubble really does pop, the
government (and thus all of us tax payers) are going to be the ones holding
the bag.

~~~
bradleyjg
In what sense is it a bubble? What assets are being bid up by enthusiastic
investors and could suddenly collapse in value?

~~~
trsohmers
The fact that private lenders are incentivized to give out more and more leads
to universities charging more and more. Even with all the money being spent,
the same (or in some cases less) level of education is being provided. On top
of that, how do you repossess someones education in the case of default? You
can't, so the government can do one of three things:

1.Pay off the loan holders (by printing money, huge inflation) 2.Allowing
indentured servitude 3.Debt forgiveness (now all the lenders are out of money)

Sadly, I think the 3rd option is the best one, but is by no means actually a
good one.

~~~
bradleyjg
Private lenders are tiny part of the market in student loan originations, even
a smaller part in undergradatute loans.

The federal government is the overwhelmingly dominant player and they set the
terms by fiat rather than any kind of market.

The “lenders” are the USG, and the cost of capital is only the imputed
inflationary effect of transforming a loan into spending. Given the experience
of the last decade those inflationary pressures may well be smaller than we
had thought.

------
joshuaheard
That looks like just intangible assets. It doesn't seem to include land,
buildings, vehicles, vessels, etc. The US Government is the largest landholder
in the Western states. A single aircraft carrier is worth billions. Also, back
when I took out a student loan, the government was merely a guarantor, which
would be a liability. I wonder if they offset that. I think they need a more
precise source citation.

------
wavesound
This chart is very informative. It looked a bit familiar to me and it reminded
me of this link:
[https://www.advisorperspectives.com/dshort/commentaries/2017...](https://www.advisorperspectives.com/dshort/commentaries/2017/12/07/the-
fed-s-financial-accounts-what-is-uncle-sam-s-largest-asset)

The charts look a bit too similar...

------
ceedan
Found posted earlier here

[https://www.advisorperspectives.com/dshort/commentaries/2017...](https://www.advisorperspectives.com/dshort/commentaries/2017/12/07/the-
fed-s-financial-accounts-what-is-uncle-sam-s-largest-asset)

Other charts as well

------
yorby
Seems like a fairly safe investment since even bankruptcy doesn't take care of
them... Until the Government will have to forgive all of those loans...

------
mylons
how does this bubble pop? isn't this debt something you can't default on?

~~~
chatmasta
Just because someone can’t default on their loan doesn’t mean they can pay it.

It’s also not hard for me to imagine, in the near future, a social media
movement like “don’t pay back your loans.”

~~~
mylons
ya, I had this thought as well, but then the IRS garnishes your wages until
you die. So how does it pop? Seems like a lot of people would have to go to
jail or something along those lines for it to actually happen?

~~~
chatmasta
They can only garnish your wages if you’re a W2 employee, or use the banking
system. Contractors need to pay their own taxes, and the IRS can’t garnish
what it can’t see.

Gig economy + cryptocurrency + social media + student loan debt could lead to
some very interesting times.

~~~
JumpCrisscross
“Interesting time” as in jail time for money laundering and wilful tax fraud?

~~~
chatmasta
If 80% of millennials collectively decided not to repay their student loans,
there would not be enough space in prison for all of them.

~~~
WrtCdEvrydy
Prison stocks up 80%, overcrowding of scum in prisons unaddressed by current
Congress.

------
Keisha22
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outlook(.) com )

------
tzahola
buy gold now. you’ll thank me later

~~~
nkrisc
Delicious, nutritious gold.

------
dmix
Administrative bloat feeding into administrative bloat.

