Street Speculator

The housing crisis is not a distant memory but I will bet that the common man on the street recognizes the industry problems.

The SPECULATORS believe the Student Loan market is next bubble to burst. Student Loans can be securitized as were mortgages, credit card loans, and auto loans.

The premise in the U.S. is that a college education is the tool necessary for financial independence, and there may justifiably be some truth to that.

However, the job market remains challenged. Translation, new graduates will have a difficult time making monthly student loan payments if they are unable to find employment. Translation #2, the student loan portfolios will diminish in value. Translation #3, these securities will be written down in value and the companies holding student loan debt will need to find additional capital. (Same story with Bear Sterns, Citigroup,  and Lehman Brothers, just a different industry).

This leads to our consumer analysis on college affordability. We always stress the need to conserve cash. However, the U.S. savings rate is low and continues on a downward spiral. But, the costs of college continues to increase. This will make college unaffordable for many potential students.

Some schools do have billion dollar endowments (Princeton, Yale, Harvard, Stanford, University of Virginia), but the competition for these dollars will be intense.

College affordability, we imagine, will become a political issue by next summer. It’s probably too late to arrive as an issue now with the presidential election only a few months away.