Time Inc. describes how the current freeze in securitization markets is tightening credit markets and highlights the steps needed to make it a viable financing vehicle in the future:
- Cites statistics that over the first nine months of 2008, student loan issues were down 42%
- Details the freeze up in the private loan marketplace and the potential "silver lining"
- New securitization of private student loans, for example, has taken a massive hit. At first blush, that seems like a problem we need to resolve immediately--what could be wrong with encouraging higher education? But Mark Kantrowitz, a financial-aid expert who has fielded calls from students who borrowed north of $100,000 for associate's degrees, thinks there might be a silver lining. "There's growing concern that more and more students are overborrowing," he says. "A good rule of thumb is if you borrow more than your expected starting salary, it's going to be hard to repay your debt, and if you borrow more than twice, you're at a very high risk of default." Easy money sets up all sorts of people for failure.
The article also highlights the December 2008 report from SIFMA, the American Securitization Forum and several international groups titled "Restoring Confidence in the Securitization Markets."
Here is a link to their executive summary.