More welfare for corporations

by reestheskin on 17/04/2016

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From Rolling Stone

One rarely discussed feature of the “student loan industrial complex” is the $200 billion market for student loan asset-backed securities (SLABS). This is a circular business, involving lenders like Sallie Mae and big banks like Wells Fargo and Bank of America. Like mortgages, student loans get pooled and repackaged into new financial products (securities). The lenders then sell the securities to investors. Investors receive the reward of monthly loan payments, plus interest. They can hold the securities themselves, trade them or bet on them. In turn, lenders receive quick cash, including fees and commissions, and push the risk of the underlying loans onto investors. This shift allows lenders to make more, and larger, loans…….They often have a stake in borrowers defaulting rather than paying smaller amounts over a longer period of time….It’s perverse policy — bankers are pampered because student debtors are hounded and pounded.