[veyron]

Education bubble is slowly deflating. Drawing analogies to housing bubble:

    People would "flip" their college education for a high-paying job

    Easy loans made it possible for everyone to participate

    Education prices inflated faster than core inflation, setting a higher hurdle for students

    There are fewer jobs at palatable salaries (various reasons)

    Now we have boatloads of students saddled with an education that they can't pay off 

You can be as nuanced as you wish (e.g. english major as subprime loan) but the aforementioned discussion is sufficient. I expect to see a sharp correction soon.

[ryguytilidie]

The worst part is that just like in the housing bubble, where lenders went into strawberry fields and offered home loans for 300k houses in california to undocumented immigrants making 10/hr and then asked for everyone else to bail them out because they are shocked the person wasn't able to afford the loan.

Same thing applies here. You recruit a bunch of people who have no business being at college and certainly can't afford it, convince them that they NEED college and should take on student loans, they struggle, graduate and have no real marketable skills. Bank that made the loan hassles the student and when millions can't pay them back, I'm guessing we have another bailout on our hands. Glad we learn our lesson last time!

[jchrisa]

If I had student debt I'd be thrilled not to pay it back. This country needs a general debt strike or perhaps a jubilee.

[prostoalex]

This hypothetical situation would work fine for you, but the guy applying for a loan next year would need to put a down payment for 2 years and have parents co-sign their house as collateral, as risk profile for student loans has changed.

[gee_totes]

A debt strike would be the ultimate 'hack' of our current economic system.

[veyron]

The right play is to short Apollo Group and Nelnet (loans) and DeVry and other for-profit schools.

[droithomme]

Student debt is impossible to discharge even through bankruptcy. There is zero risk to these loans because they are federally guaranteed loans. When the student defaults, the government repays the note holder as a matter of course, then the government goes after the student. The bailout is already guaranteed. The students will not be discharged of their debt anymore than the homeowners got their mortgages paid. What happened is the feds bailed out the bank losses, AND allowed the banks to evict the homeowners AND allowed the banks to keep the houses and resell them. But all this was only a tiny amount of the cost. On top of this were the CDOs and CDSs totalling, according to one estimate, one quadrillion dollars, more than all the assets in the world. The banks/investors/speculators are still being bailed out of these "losses" which were never real losses and only represented losses to unearned and absurd gains they hoped to make as part of a pyramid scheme.

The people stuck with the debt at the bottom of the pile don't get bailouts.

[Estragon]

It's a little different, in that as far as I know, no one is trying to flog off CDSs or other swaps on Student Loan Asset Backed Securities. So it will come as a shock to the higher education industry, but may not have the broad impact that the housing and tech bubbles did.

[philwelch]

Give it time. It took entire lifetimes of tradition and "conventional wisdom" (house prices never go down!) to make the housing bubble possible. By the time the higher education bubble bursts, there may very well be the derivatives. Remember that while housing debt was secured by the value of the real estate itself, student debt is secured by the fact that it's impossible to discharge, even in bankruptcy.