Published on October 15, 2014
1. THE HOUSING BUBBLE REINCARNATED The Student Loan Bubble by Dr. Alessio Lidozzi
2. Question: Is the United States’ student loan debt bubble headed towards the same burst that the housing bubble experienced in the last ten years?
3. In an interview with CNBC, Mark Cuban echoed a widespread sentiment that there is virtually no difference in the two bubbles.
4. THE HOUSING BUBBLE Many will remember how the United States government took a big turn in mortgage lending in the mid-1990s, telling government-backed firms Fannie Mae and Freddie Mac that 40% of their loans had to go to low-income borrowers. On top of this requirement, the government issued tax breaks and the Federal Reserve dropped interest rates to historically low levels, increasing the “affordability” of these mortgages.
5. THE HOUSING BUBBLE Because the government was essentially taking on the risk for the housing loans, mortgage lenders were not cautioned by the potential risk of these low-income borrowers defaulting and approved loans to more people than ever before. This surge in funds caused housing prices to skyrocket, which then increased the size of the mortgages being issued and made it more difficult for low-income borrowers to pay off debt or spend their money anywhere else. The rest is history.
6. THE EDUCATION BUBBLE Student loans are headed in the same direction, perhaps to a more debilitating end. To put things in perspective: home prices rose 400% in the last 40 years…
7. THE EDUCATION BUBBLE In the same time span, the price of a private education has launched into orbit, increasing by over 1,000%.
8. THE LOGIC The argument is that the two bubbles are the same because the government’s policy to provide low-interest loans to students increases tuition just as housing loans wound up increasing the price of a home. If students’ purchasing power is crippled by onerous debt, they cannot participate in the economy, which effectively holds it back.
9. PROBLEMS. Another problem is that these increased tuitions serve the administration of a university rather than the quality of education. It’s for the same reason that the donation of a wing or building serves little to no philanthropic purpose: the administration feels a release from the pressure to use school funds to recruit better faculty or invest in more resources for students.
10. PROBLEMS. Instead, the administration winds up reallocating the funds to themselves, another enormous issue. As Cuban said, you know there’s something not quite right when there are more administrators than professors pulling in over $200k per year.
11. SOLUTION? A potential solution to this problem would be to put a limit on the amount of the loan guaranteed by the government. ! However, any trade off at the expense of greater access to higher education will certainly be a difficult one to promote.
12. THANK YOU FOR VIEWING! To Learn more about Alessio Lidozzi, please visit ! AlessioLidozzi.com
Rapport Bale III - le texte en français - Comité de Bâle sur le contrôle bancaire
La economía española tiene problemas de 1. productividad del trabajo y 2. de aprov...
El presente trabajo realizará un análisis comparativo del sector de bienes de equi...
- Η προβληματική κατάσταση της ευρωζώνης - ABS -αγορά “τιτλοποιημένων απαιτήσεων...
This presentation gives a short and simple description of the Ponzi Scheme and the...
Student loans are a growing concern in the United States. Students are being crushed by payments and higher education institutions are raising their prices ...
View Alessio Lidozzi’s professional profile on LinkedIn. LinkedIn is the world's largest business network, helping professionals like Alessio Lidozzi ...
Board Member - Senior Executive ... Das Profilbild sehen Sie, wenn Sie sich bei XING einloggen.
Alessio Lidozzi is the President of Bellerophon Capital Partners. Alessio has worked in finance, real estate and investing since 2000. He enjoys sailing ...
Alessio Lidozzi, Investment Management: The authoritative source of Alessio Lidozzi's personal information, links, and social activity.
The Burst Of The Housing Bubblehttp://refinanceunderwatermortgagehelp.com is the only program that can help homeownerswith an ... Alessio Lidozzi
Visualizza il profilo professionale di Alessio Lidozzi su LinkedIn. LinkedIn è la rete professionale più grande al mondo utilizzata dai professionisti ...
Alessio Lidozzi Board Member - Senior Executive roma Markus Sauerbruch Executive Vice President Div. Switzerland, Member of the Group Executive ...