How are educational debt and assumptions about student borrowing related to other forms of financial fraud perpetrated under deregulation?
In "A House is Not A Credit Card," Bethany McLean of The New York Times points out the obvious: encouraging people to take money out of their home equity for consumer spending was a major factor in a foreclosure crisis that is not yet over. "A sizable percentage of mortgages — including most of the risky ones that were made in the run-up to the financial crisis — are not used to buy a home," McLean writes. "They're used to refinance an existing mortgage. When home prices are rising and mortgage rates are falling, many homeowners choose to replace their mortgage with a bigger one, taking the difference in cash. In other words, mortgages are a way to provide credit."
Well here's the news: people also take a lot of money out of their homes to pay for college, because otherwise their kids aren't going. And if you no longer have equity in your home, you turn your kid loose on the commercial student loan market, a way of passing on your own debt to the next generation.
Read more at The Chronicle of Higher Education: http://chronicle.com/blognetwork/tenuredradical/2014/11/i-want-to-borrow-gobs-of-money-for-college-said-no-one-ever/