In a price update letter from Corey Steel, CEO Paul Darling described abuses in the student loan market.
Student loans comprise an 85 billion dollar market, small compared to the mortgage market. Colleges promote certain lenders for fees and consideration. Students are charged for default insurance in order to “package” the loans to borrowers.
In one case an 11% loan required $650 fee for default insurance, the bank received a $550 marketing fee, the packager took a $1800 fee and the investor who participated in the “package” got a 6% return. This sounds similar to how the subprime mortgage market got out of hand.
Meanwhile tuition climbs and endowments swell. Professionals such as lawyers and doctors have a good chance at sustaining earnings growth to repay the debts, but liberal arts students would be foolish to acquire such debt.
At some point the market will find better delivery systems for a formal education than our current university system, especially in our information age.
what could you learn for $40,000 a year?