See my blog The Student-loan Bubble and Bailout. From CBS News:
The number of people who are at least 90 days late on student loan payments has jumped 3.2 percent in only two years, rising from 8.5 percent in 2011 to 11.7 percent today, according to a recent study by the New York Federal Reserve.We have a bursting student loan bubble. That's what a default rate of 11% means. With $1.2 TRILLION in student loans outstanding, a 10% default rate is already $120 billion in losses and rising (guaranteed by the Federal Government who will cover these loses). Meanwhile, the American sheeple snooze as the government never fixes it's debt problem.
On July 1, student loan rates are supposedly set to double to 6.8% from 3.4%. The House Republicans passed a bill to link the student loan rate to the 10 year government bond yield; which is 2.5% at the moment. Another variant proposal is to use the 10 year bond rate plus 2%, or 4.5% currently. Democrats, being even more idiotic than Republicans, want the rate lower than 3.4%. Wrong, wrong, wrong!
Both political parties have it all wrong. Because of default rates now north of 10%, the student loan rate SHOULD be 12.5% or more now. This is because, if priced in a private loan market, the market interest rate would include the cost to cover their losses plus the cost of their money: 10% plus 2.5% equals 12.5%. (Like credit card rates are priced) Yes, it would be a shock now to jump to a market rate but the rate would have ramped up slowly in recent years as as default rates have risen over the past several years.
A market interest rate is the only thing that will slow the building amount of loans outstanding and halt the rise in delinquencies!! Almost everything the US Government does ends in disaster. Even when things are way off and broken, your stupid politicians can't fix anything! While nothing is being managed well, nothing is being properly fixed but the Democrats want even more programs! Wonderful.
So, we will continue to under-price student loans with too low interest rates, therefore the taxpayers will continue to subsidize student loans, feed this debt bubble to even larger levels, feed the astronomically rising college tuition inflation, enslave millions of young students forever, and guarantee larger and larger losses to the US taxpayer.