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FBN’s Gerri Willis on the factors driving the growth in student loan debt.
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All right -- thank you.
Well.
You know what it's beginning to feel just a little bit like 2007.
The year before the great crash set in motion by -- housing bubble the -- we were just talking about.
This time it's not housing that's growing and control Blake -- student loan debt.
We told you last week about how students have more debt now than ever and how increasingly they just can't seem to pay it down.
Check out these numbers in case you missed it.
31%.
31% nearly a third of people paying back student loans were at least ninety days late at the end of the fourth quarter.
That's up from 24% in the fourth quarter of 2008.
And that's astonishing.
And it wouldn't be possible except for the fact that investors are desperate for higher rates of return in this market and student loans.
Well a gift than that here's how.
-- loans are -- almost exactly like mortgages before the crash what we were just talking about with Peter Barnes.
They were then sold to investors.
These days investors are hungry for risky loans because with rates so low it's difficult to find higher yields.
The highest yields are found on the riskiest loans and last week Sallie Mae that's the largest US student lender sold more than a billion dollars worth of securities backed by student loan debt.
Demand was the highest for the riskiest of the much those it will lose money first at the loans go bad in fact.
It was fifteen times greater supply so what do you think the lenders do when they see that.
They create more of that and this is exactly what happened during the housing crisis and an insatiable demand from professional investors for package mortgage debt.
Ultimately led to booming loans to people who simply couldn't afford them sub prime loans so called ninja loans to people with.
No income no jobs will do what she did decide to pay only interest in no principal crazy loans.
That'd work out so well for main street or Wall Street.
And it's my -- won't work out too well either are ready students are graduating with average debt levels of 27000.
Dollars.
Colleges and universities continue to raise prices student loan debt near nearly totals one trillion dollars.
And it's only gonna get higher that's because demand for this sort of investment will drive more loans to more and more potential students.
It's more important than ever for students to make sure they will all only take on debt they are able to repay.
Understand just how much you -- likely to -- in those first college years and limit your loans it's up to students and parents to make the right choices.
