Which way out? A speech on confronting the problems of student loans by Ed Pinto

Pinto Student Loans Presentation

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Outstanding U.S. student loan debt is now estimated at over $1 trillion. The problems of student loans are generating sharp debate, including claims that they represent a new credit bubble. Colleges (and all purveyors of post-secondary education) arguably receive the greatest benefits from student loans, since they pump up colleges’ revenues with no credit risk and allow colleges to keep increasing their prices and expenses. Meanwhile, many students graduate — or even worse: drop out — with mountains of debt and unattractive or no job prospects to boot. Even more dismal is the fact that defaults on student loans are high.

American colleges in effect practice the “originate and sell” model of lending, while the price of their product keeps going up.  This practice is reminiscent of the mortgage bubble that has brokered loans and escalating housing prices. One possible improvement would be for colleges to retain “skin in the game” for student loan credit risk, which is the same treatment Congress has prescribed for mortgage lenders. This event addressed the problems and improvements needed for student loans, beginning with a keynote presentation by former secretary of education Bill Bennett and including this presentation from AEI Resident Fellow Ed Pinto.

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About the Author

 

Edward J.
Pinto
  • American Enterprise Institute (AEI) resident fellow Edward J. Pinto is the codirector of AEI’s International Center on Housing Risk. He is currently researching policy options for rebuilding the US housing finance sector and specializes in the effect of government housing policies on mortgages, foreclosures, and on the availability of affordable housing for working-class families. Pinto writes AEI’s monthly Housing Risk Watch, which has replaced AEI’s FHA Watch. Along with AEI resident scholar Stephen Oliner, Pinto is the creator and developer of the AEI Pinto-Oliner Mortgage Risk, Collateral Risk, and Capital Adequacy Indexes.


    An executive vice president and chief credit officer for Fannie Mae until the late 1980s, Pinto has done groundbreaking research on the role of federal housing policy in the 2008 mortgage and financial crisis. Pinto’s work on the Government Mortgage Complex includes seminal research papers submitted to the Financial Crisis Inquiry Commission: “Government Housing Policies in the Lead-up to the Financial Crisis” and “Triggers of the Financial Crisis.” In December 2012, he completed a study of 2.4 million Federal Housing Administration (FHA)–insured loans and found that FHA policies have resulted in a high proportion of working-class families losing their homes.

    Pinto has a J.D. from Indiana University Maurer School of Law and a B.A. from the University of Illinois at Urbana-Champaign.

  • Phone: 240-423-2848
    Email: edward.pinto@aei.org
  • Assistant Info

    Name: Emily Rapp
    Phone: 202-419-5212
    Email: emily.rapp@aei.org

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