Is the US Student Loan System in Big Trouble?

 
A Debt 101 peek behind the economic curtain here...
 
US-based Citigroup was North America's biggest banking empire before the Crash last fall. Since then, it's been typically referred to in business circles as a "zombie bank." (Ask me how I know: I had to sell my Citigroup stock...)
 
Like many banks, Citigroup took on too much debt in search of bigger, faster profits. It assumed that it could keep every debt 'ball' in the air forever. Given it's size and condition, Citigroup has become a poster child for an unsustainable US banking system.
 
But what about the US student loan system? Care to guess just how sustainable that is?
 
Highly privatized, the US student loan system has become a source of scandal. Example: private loan company kickbacks to college financial aid officers for pushing student loans on the kids who seek their help and advice.
 
So is that greed paying off? Well, here's the other side of that 'free market' system...
 
Motley Fool stock data this month shows the so-called "zombie bank" Citigroup with a debt-equity ratio of 444%. (Translated, that means Citigroup has nearly four and a half times as much debt as it has assets.)
 
But the debt/equity ratio of major US student loan lender Student Loan Corp. is nearly four times worse! Student Loan's ratio is 1,735 percent! In other words, for every dollar it holds, it owes more than 17 bucks!
 
Hmmm... these are the institutions telling students how to manage their money??
 
But back to my point... if the US student loan industry is in this much trouble, something big is going to go down...
 
Good luck, US college kids.
 
 
© Jeannine Mitchell 2009-2012
  
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