September 30, 2012

THE NEXT SUBPRIME: Over $120 Billion In Federal Student Loans In Default.

Who could have seen this coming?

Related: Student Debt Malinvestment. “This presents a bigger problem than simply sending people to college who end up unemployed or underemployed. It means that capital is being misallocated. If debt for education cannot simply be discharged through bankruptcy, as other debt can be, private lenders will tend toward offering much more of the nondischargeable debt, and less of dischargeable debt. This means that there is less capital available for other uses — like starting or expanding a business.”

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