[lisper]

> But I can't think of a way that the bubble could actually pop. Or what it would look like if it did.

It would look like a social movement. It would look like tens of millions of young people realizing that they have fallen under the yoke of life-long indentured servitude to the older generation, and either 1) getting organized enough to get the law changed or, 2) saying "fuck it, I've got nothing left to lose" and rioting in the streets.

[hiram112]

The government will eventually realize that the defaulted loans, together with penalties and fees, can never be paid back - no different than the typical house flippers of 2008 who leveraged themselves to the hilt with multiple properties.

The banks and funds that own these defaulted loans will threaten to take down the whole system, including Main Street's pension and IRA savings, unless they're bailed out. The Fed's printing machine will come to the rescue.

Loans won't be 'forgiven' per se, but just like many defaulted mortgages, the debt will simply not be enforced for those that have the balls to simply stop paying, though life will be a PITA for a while as their credit takes a huge hit for the next decade.

Those that do continue to pay will feel like suckers. The rest of us will curse the lazy bums who got off without paying. Wall Street execs will be handsomely rewarded for having saved their firms from catastrophe, while politicians will preach of reform, only to pass watered-down laws to appear proactive.

Due to the money printing, the average American will see his quality of life decrease relative to the rest of the world; meanwhile, Wall Street will begin moving money into the next hot idea that can be leveraged with no risk to themselves.

[eli_gottlieb]

> The government will eventually realize that the defaulted loans, together with penalties and fees, can never be paid back - no different than the typical house flippers of 2008 who leveraged themselves to the hilt with multiple properties.

Yes, but the question is if they'll care. Many people believe it morally important to enforce the unenforceable.

[learc83]

For federal student loans, there isn't a life of indentured servitude. There are income based repayment plans that with fairly low costs per month. A single guy working at starbucks making 30k per year would only pay about $100 per month even with a 200k loan (if he had a wife and kid, he'd pay nothing). Then after 20 years the rest is forgiven.

[macNchz]

That system exemplifies what seems to be a growing issue these days–people with too little income get programs like that to help them squeeze by, people making lots of money pay them back without a problem, and the people in between kind of float along paying enough monthly that they put off buying a house or having kids or starting a business because they have 10+ years of loan payments. The long term outcome of this doesn't seen like a healthy society to me.

[zardo]

In year 20 he pays income tax on the forgiven amount. He'd better be saving up for that.

[learc83]

That's never going to happen. Too many people are affected for congress not to act before the tax bill comes due.

The economic effects are too large for them to ignore.

[s73v3r]

Much like the economic effects of not passing a budget, or the economic effects of a temporary government shutdown for petty reasons?

[learc83]

Most people don't really care about government shutdowns because it doesn't directly cost most people much money. And, even then you'll notice the government never stays shutdown.

If government shutdowns meant a huge chunk of the voting population (across both parties) was suddenly going to owe thousands of dollars in extra taxes, you can bet they'd never happen.

[draw_down]

A lot of the loans that people hold are not federal loans.

[learc83]

There's about $1.2 trillion in outstanding student loans. $1 trillion of that is in federal student loans.

[FrankenPC]

Makes me wonder if there's already some form of credit default swapping going on with student loans that we won't uncover until after the bubble pops.

[andy_boot]

I recall a story of a company that was analysing student loans, finding people most likely to pay the loan off and buying that debt.

So yes I expect there are already student credit default swaps somewhere.

[cryoshon]

We would do well to mobilize people to either #1 or #2, since both would create change.

The trick is convincing people that they're getting screwed over by something that can be changed. Most just accept it as a way of life.

[morgante]

> It would look like tens of millions of young people realizing that they have fallen under the yoke of life-long indentured servitude to the older generation

Nobody forced them to take out loans.

There are lots of options which don't involve crushing debt.

[fluxquanta]

When I was graduating high school student loan debt was something I was encouraged to take on, despite my on uneasiness about doing so. My teachers, my family, everyone whose opinion I was supposed to respect told me that student loan debt was normal and even valuable (to build credit).

So while no, I wasn't FORCED to take out loans, the most trustworthy people in my life taught me that loans were okay, and never presented me with another option. Luckily this paradigm is showing signs of a shift, but for a lot people it's still considered "normal".

[Nicholas_C]

>Nobody forced them to take out loans.

No, but many people feel misled about the post-graduation prospects or are unhappy with their life options and feel trapped in a career they hate and can't take a break from or change due to debt.

[drabiega]

Could you elaborate?

[morgante]

On which part? That there aren't roving bandits forcing people to take on huge loans? Or that there are other options?

In terms of other options, there is (a) community college—very cheap, (b) state school—much cheaper usually, especially if you live at home, (c) attending a slightly less prestigious college when they offer a substantial merit scholarship.

[s73v3r]

Like what?

Long gone are the days in which one could put themselves through school with a part time job.