Student Loan Bubble Putting Hundreds of Colleges at Risk
May 21st, 2012
Via: Business Insider:
The size, scope, and impact of this problem is an enormous anchor weighing down our next generation and our nation’s economy.
Make no mistake, this anchor is not only impacting thousands of students and families but is also having an equally burdensome impact on colleges and universities nationwide.
…
1. Using this post-crash model (and may it not be “mid-crash”), 207 colleges and universities—31% of the 678 institutions in the database— have, under at least some circumstances, more debts than cash and marketable investments. In the model these 207 inadequate-capital institutions have projected net financial asset balances ranging from a negative few hundred thousand dollars to nearly a negative $400,000,000. More than half of the 205 had negative projections from ($10,000,000) to ($100,000,000).
2. This means that the inadequate-capital institutions (which might include a third or more of NAICU members) are exposed to severe disruption from negative factors such as declines in cash and investments, escalation of interest payments on variable-rate debt, and required accelerated repayment of principle, particularly if several negative factors were to coincide.
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