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Wall Street’s New Student Loan Scheme: Subprime Loans Are Coming to Financial Aid


Wall Street wants to own your education destiny.

To the old saying about “death and taxes,” you can now add another: debt.

In fact, in contemporary America, debt is likely becoming at least as all-encompassing as the other two.

An increasingly powerful force behind the debt explosion is not what you might expect: not cars, not homes, not healthcare. It’s education. [...]

These student loan asset-backed securities, or SLABS, have a performance history that has “been very good, and investors’ rate of return has been excellent,” according to an article in Wikipedia.

SLABS are “hot,” a Wall Street Journal headline exhorted its readers in 2013. “Investors are flocking to SLABS,” a more recent article on the Huffington Post reports.

A post on the blog for left-leaning advocacy Demos explains, “Before the SLABS binge, most private student loans were actually made in connection with the college financial aid office, which helped ensure students weren’t taken for a ride, or weren’t borrowing more than they needed to. Between 2005 and 2007, the percentage of loans to students made without any school involvement grew from 40 percent to over 70 percent.”