Thursday, September 1, 2011

ANOTHER SIGN THAT THE STUDENT LOAN BUBBLE WILL SOON BURST?

Discounted consolidation in the student loan arena:

Discover Financial Services says it is buying another $2.5 billion in private student loans from Citigroup. The deal, disclosed in a regulatory filing, comes nine months after Discover bought Citi's private student loan business, The Student Loan Corp., and a portfolio of loans and other assets totaling $4.2 billion.



The price for the latest deal is roughly 99 percent of the face value of the loans, which translates to about $2.48 billion. The purchase is expected to close by Sept. 30.



In June, Discover said it held $52.5 billion in student loans, including a 5 percent increase that reflected the Student Loan Corp. buyout, as of May 31, the end of its fiscal second quarter.



Discover shares fell 15 cents to $25.01 in morning trading. Citigroup Inc. shares fell 50 cents to $30.55.
Perhaps the banks who own a lot of student loans are expecting the bubble to burst and want to either get out completely or get bigger so they are TOO BIG TO FAIL and are guaranteed a federal bailout.

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