If you could invest in student debt, would you?

Discussion in 'Investing' started by Jacob, May 17, 2017.

  1. Jacob

    Jacob New Member

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    Just a random thought that floated through my head recently and got me wondering. I know technically you could by way of a stock like Navient/Sallie Mae but that is still an equity at the whims of the market, or if you happen to be an institution you could do SLABS. But on a more practical level... If there was some kind of financial product that allowed you to directly invest in an individual's or group of individual's loans - would you do it? It seems to me like it could be an interesting strategy, not unlike a bond/cd/annuity, that would guarantee some modest return to the investor while offering better rates than the big lenders to the student. As long as the screening process didn't screw up, it seems like a pretty stable investment since it is non-dischargeable debt too. Anyway... that's my shower thought for the day.
    What do you guys/gals think?
     
  2. StockJock-e

    StockJock-e Brew Master
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    Interesting idea, but isn't the student debt bubble the next one that is supposed to pop?
     
  3. Jacob

    Jacob New Member

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    So they say, but it's a non-dischargable debt and if (just like the housing bubble) you didn't lend to just any random person who came along then it would be pretty secure. I had some other people I mentioned it to say that if they could lend to STEM students only, they would all day long.
     
  4. StockJock-e

    StockJock-e Brew Master
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    If you could by debt owned by doctors and google employees to be, yeah sure! :D
     
  5. T0rm3nted

    T0rm3nted Moderator
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    I would not want to invest in the ridiculous charges that the college system puts on students. It's quite ridiculous how much education costs these days, compared with how hard it is to get a decent enough job that you can pay it off within 10 years in a lot of cases. I do not agree at all with the system, it needs to be modified. So investing in something I would hope changed and therefore I'd lose money seems counter-productive to me.
     
  6. Mark22

    Mark22 Member

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    according to you, you could not have had better words
     
  7. The Brontide

    The Brontide Active Member

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    Absolutely not for me in any form.

    Non-dischargable, yes.

    But many millennials and earlier are desperately hoping they will magically disappear since their six year stint for a four year degree required stereos, trips, furnishings, parties,..... And books and tuition

    I wouldn't touch that elephant in the room for my life.
     
  8. Stoch

    Stoch Well-Known Member

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    There is a way to participate as a private lender called Lending Club. We financed our pool at much better rates than the bank offered and after paying off the loan we continued on as a lender. After diversifying over 147 loads (most at 25-50 dollars each), we did get a 6.8% annual return over 5 years, but the 13 folks who defaulted (just abort 9%), pissed me off so much we stopped adding funds to the account, even though we has a pretty decent return. I can see why the credit card outfits make a great return even with the defaults, but I see its not for me.
     
    #8 Stoch, Jun 14, 2020
    Last edited: Jun 14, 2020
  9. WXYZ

    WXYZ Well-Known Member

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    ABSOLUTELY NOT.

    Ask the investors in Fannie Mae and Freddie Mac how they like their investment.

    The politicians will cave and change the rules as soon as the pressure ramps up, just as is being advocated right now.

    I dont want to invest in ANYTHING that is a social justice issue.....or.....a media issue........to bail out the whining millennial idiots that ran up insane college debt for some worthless degree. (actually a totally FAKE issue....the average student loan debt is about $30,000 TOTALLY in line with the $4000 to $8000 that many people had 20-30-40 years ago if you take into account inflation and higher current wages, etc)

    Good luck investing in debt that can be forgiven by working in some socially "favored" job.

    etc, etc, etc.
     
  10. WXYZ

    WXYZ Well-Known Member

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    HERE is exactly what I mean above.....politicians just cant resist: screwing with programs like the student loans.....so investor BEWARE....BIG TIME:

    "Under a Biden administration, Fannie and Freddie would likely remain wards of the government and would be used to expand homeownership among lower-income people — a move that would allow more Americans to receive mortgages but could be disastrous for holders of Fannie and Freddie stock since the GSEs’ profits would likely be returned to the government as opposed to being retained by the companies."

    I have NO OPINION whether this is good social policy or good government policy or any other POLITICAL comment on this issue.....BUT as an investor.......I dont want to put myself in the middle of a GOVERNMENT PROGRAM. As to........Non-dischargable......if anyone thinks this is set in stone or will not change at the drop of a hat........well you need to get in touch with political reality.
     

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