Do student loans bear any similarities to mortgage loans, which lay at the heart of the 2008 economic crisis? The short answer is yes. Student loan asset-backed securities (SLABS), much like residential mortgage-backed securities (RMBS), are loans bundled and packaged into securities available for purchase by investors. Bearing ominous resemblance to the precursors to the 2008 financial crisis, the number of student loan borrowers, as well as the average balance per borrower, continues to rise every year, while most recent college graduates are unable to find jobs allowing them to pay back their loans.
According to members of Congress, the U.S. is already in crisis over growing student loan debt. The House Committee on Financial Services held a hearing on Tuesday, September 10th entitled “A $1.5 Trillion Crisis: Protecting Student Borrowers and Holding Student Loan Servicers Accountable.” A five-person panel warned the Committee that there is currently $1.5 trillion in outstanding student loans, from about 44 million borrowers, with approximately 11% of those loans more than 90 days delinquent.Click here to view the full article