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[marketmaven]

STUDENT LOANS SCANDAL:YOUR MISERY I$ THEIR PROFIT

Posted By: FinancialEdEconomica <Send E-Mail>
Date: Saturday, 6 November 2004, 7:01 a.m.

Ever wonder why College tuitions go up every year? How easy for universities to constantly increase them when students can access loans, guaranteed by the State, so easily.



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Generation Debt: The New Economics of Being Young
by Amy Guthrie
Your Mi$ery I$ Their Profit
Up to your ear$ in $tudent loan$? That'$ good new$ for the bond trader$
November 2nd, 2004 10:35 AM
Next time you sit down to sign your monthly student loan check, consider this: Somebody out there is trading bonds made up of thousands of loans like yours, profiting off your inability to pay for college. And it's not just the guy that lives in a way nicer apartment across the street and dons spiffy suits on his way downtown every day. It's also high rollers like him in Chicago, London, and Tokyo.

Sound ugly? Well, that's the way the student loan business works. Private lenders like Sallie Mae, and even state agencies, are increasingly funding college loans through capital markets. The bonds are an easy sell because most student loans are 98 percent guaranteed by the U.S. government. If Joe College decides to move to Sweden and never pay a dime on his debt, Uncle Sam picks up the tab. Plus interest.

What investor could refuse an offer like that? "You put it out there, and people eat it up," said one veteran banker.

Congress is presently considering whether the government should, if not end the party, at least turn down the music and raise the lights. It's been one big bacchanal so far. Last month, the Senate passed a bill that would limit the growth of loans qualifying for one generous federal subsidy, but left other substantial handouts in place......

Bankers argue that further cutting lender subsidies and perks could push more small players out of the market. Lots of lenders exited the business when the Clinton administration launched the direct-loan program in 1993. Bankers warn that lower subsidies and more support for the direct-loan program could push interest rates up for students.

"No bank in their right mind is going to lend money at this rate to students," said Matt Snowling, a stock analyst with Friedman, Billings, Ramsey who has covered Sallie Mae for six years...... LONG

AND: FROM THE SAME "GENERATION DEBT" SERIES
The Ambition Tax Why America's young are being crushed by debt—and why no one seems to care — Student loans in six figures. Credit card sharks in cahoots with your college. Mortgages you'll finally pay off—from the grave. For ambitious people between 18 and 35, reaching the middle class today means taking on unprecedented debt. Brendan I. Koerner examines how the young are being crushed by money woes—the first in an occasional series of election-year reports on the economy and what it's doing to our youth.
http://www.villagevoice.com/issues/0411/fkoerner.php

AND
One Sick Fall With health insurance out of reach, a generation braces itself for the worst — Solana Pyne looks at the complicated factors that keep so many young people uninsured and without a safety net
http://www.villagevoice.com/issues/0428/pyne.php