
Subprime goes to college - robg
http://www.nypost.com/p/news/opinion/opedcolumnists/subprime_goes_to_college_FeiheNJfGYtoSwmtl5etJP
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TomOfTTB
I don’t see this as that big a deal. It’s bad but it’s the bad part of a good
cycle. Essentially the traditional University system didn’t bother to adjust
it’s curriculum to the real life needs of students. So a bunch of private
companies rushed in to fill that void.

These people (ITT Tech, Devry, University of Phoenix) are the startups in many
ways. They were willing to take a risk when no one knew if there was any
profit in private education and as a reward for that they’re making a big
return on investment. But now that the doors are open to private endeavors and
it’s clear you can make money there’s going to be competition and that makes
everything better. You already see signs of this (Most notably in the
incredible achievement that is Western Governors University:
<http://en.wikipedia.org/wiki/Western_Governors_University>)

Right now there’s an artificial stigma that’s still keeping a lot of the
internet based competition down but as that begins to fade there will be no
way for companies like ITT Tech to maintain their huge profit margins.

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spamizbad
Education quality is a red herring: the real concern is the abnormally large
amount of student debt tied to these schools. When the student loan bubble
burst (and believe me, it will), these schools are going to suffer as their
customers opt for more affordable learning at community colleges and state
universities which are increasingly offering distance-learning programs. But
that's not even the bad part.

The bad part: like the subprime mortgage crisis, when enough people default on
loans, and lending standards tighten, it will send ripples through the credit
market impacting the entire economy. And like the subprime crisis you can
anticipate a government bailout towards the student loan industry as so few
people can afford to out-of-pocket their education in the United States.

It's going to be messy.

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cma
You can't default on a student loan (unless you die or something).

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gojomo
I think you mean: you can't discharge a student loan through bankruptcy.
You're in default the moment you miss a payment.

And if the problem comes at the scale this theory is suggesting, then like
mortgage defaults, people may just ignore the collection notices until they
get special accommodations.

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gersh
They can mess up your credit, sue you, and seize the money from your bank
account, or get the money the witheld from your paycheck.

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gojomo
Theoretically, yes. But practically, if too many people default, they can't.
As with recent home mortgage default levels.

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Retric
If you default on home mortgage they don't get to _sue you, and seize the
money from your bank account_. Also if you die, the government does not pay
off that debt.

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gojomo
A foreclosure is in many jurisdiction an expedited lawsuit.

And some mortgage loans, in some states, are full recourse -- they can go
after other assets (including bank balances) and paychecks. That they often
don't reinforces my original point: there are plenty of levers creditors
theoretically have that can't practically be employed against mass defaults
and poor/unemployed people.

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maukdaddy
An opinion article in the NY Post? Really HN? This is what we've come to?!

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Unseelie
Post something better, then.

