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Started By
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Any way to short Student Loan debt?
Posted on 5/3/16 at 4:09 pm
Posted on 5/3/16 at 4:09 pm
I know some made big dollars off shorting the Housing bubble, but can the same be done with Student Debt? I am also curious to know if some people saw the same thing before the Oil Market took a huge hit?
5
Posted on 5/3/16 at 4:19 pm to TigerSaint1
quote:
I know some made big dollars off shorting the Housing bubble, but can the same be done with Student Debt? I am also curious to know if some people saw the same thing before the Oil Market took a huge hit?
I'd be interested to know how you win this bet now that the Feds own almost all the debt and will forgive the loans in 20/25 years with payments as low as $0. Honestly, no one should default on their loans now, as long as they are Federal, and if they don't pay the tax on the forgiven amount, that is tax owed, not a loan default.
This post was edited on 5/3/16 at 4:22 pm
Posted on 5/3/16 at 5:43 pm to TigerSaint1
SLM (Sallie Mae) or NAVI (Navient) are what you're looking for. Shorting could be a bad idea due to borrowing costs, but puts could be viable if you can figure out what expiry would hit the jackpot (assuming, of course, that there is indeed a jackpot).
Posted on 5/3/16 at 6:04 pm to TigerSaint1
Umm you could try cheaper housing options? Like pulte? Since people aren't getting married and aren't having kids as early and thus aren't buying prefab homes out in the burbs.
Posted on 5/4/16 at 5:31 am to Omada
Puts are cheaper than shorting?
Posted on 5/4/16 at 8:07 am to Teddy Ruxpin
quote:
will forgive the loans in 20/25 years with payments as low as $0.
This is happening?
Posted on 5/4/16 at 8:11 am to TheOcean
quote:
This is happening?
From what I can read yes.
They calculate your monthly payment based off your income above 150% the poverty line. Therefore, if you are below that number from what I can understand that would lead to a $0 payment.
However, any forgiven debt based off those programs becomes taxable income to the IRS. Public Service Loan Forgiveness pay no tax.
That's why I'm not sure how you can win this bet unless you bet against companies such as SoFi, because the companies who service the loans don't hold the bag, the government does.
This post was edited on 5/4/16 at 8:13 am
Posted on 5/4/16 at 8:23 am to TigerSaint1
You're betting against the government.
Most private loans have been sold off and their lending programs abandoned.
Most private loans have been sold off and their lending programs abandoned.
Posted on 5/4/16 at 8:33 am to TheHiddenFlask
I'm assuming that he may face one or more margin calls and may have to sit on the position for a year or more. Shorting could be cheaper depending on when the payoff comes (assuming there is a payoff in the future).
Posted on 5/4/16 at 1:58 pm to Teddy Ruxpin
Neither me nor my wife would qualify for such a forgiveness. Plus it goes against a lot of what I believe in. I borrowed the money to better my future and it has paid off, so I plan to uphold my end of the bargain.
Posted on 5/4/16 at 2:27 pm to Omada
Shorting is cerainly cheaper because you get the premium (effectively) of writing a call.
Margin calls are a risk, and I'm not saying he should definitely short, but it is certainly cheaper.
Margin calls are a risk, and I'm not saying he should definitely short, but it is certainly cheaper.
Posted on 5/4/16 at 3:16 pm to TigerSaint1
quote:
Neither me nor my wife would qualify for such a forgiveness.
I had no idea either way. I just don't see how you can bet against the government here.
quote:
Plus it goes against a lot of what I believe in. I borrowed the money to better my future and it has paid off, so I plan to uphold my end of the bargain.
That's ok, however, loan forgiveness is in the contract of receiving the loans, so it is a part of the bargain. I see no moral issues for debtors to pursue favorable contractual language, but that's beyond the scope of the thread, though again, you should be aware of these provisions because they directly affect your ability to short these loans.
This post was edited on 5/4/16 at 7:30 pm
Posted on 5/4/16 at 4:09 pm to TheOcean
There are programs that will forgive loans after 20 or so years but the amount forgiven will be taxable income so you will have to pay that percentage upfront.
You still have to give 10% of your salary every month for those 20 years as well though
You still have to give 10% of your salary every month for those 20 years as well though
Posted on 5/4/16 at 4:43 pm to TigerSaint1
I think the average loan debt is like 24k. So the price of a car with 5x the payback timeframe. Also, there aren't really any derivatives to student loan debt, so it'd be difficult anyway.
Student loan debt is a problem overblown by politicians that are ccreating the problem.
Student loan debt is a problem overblown by politicians that are ccreating the problem.
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