The next US bubble

Who can forget Fannie Mae and Freddie Mac, that subprime housing market burst with a vengeance and now there is another. The agency in question is Sallie Mae as reported in the Wall Street Journal.

Sallie Mae (SLM) is the the USA’s largest non-government student lender and it just cancelled a $225 million debt offering. Investors decided they simply were not getting paid enough for risk – amid rising student loan defaults. There’s a limit to what investors will tolerate especially when you factor in the below graph showing students falling behind on payments. Almost one third of those who have taken loans are 90 days behind…this is not good for SLM or as an indicator of the US economy. It infers that the jobs that students were expecting to take up are not there anymore or are not paying as well, the US economy is flagging regardless of what the DOW says!

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