[BUSINESS★★] SOME ON WALL STREET SAY $1.2 TRILLION IN STUDENT DEBT COULD TRIGGER THE NEXT MARKET CRASH
(P1) Famous HEDGE FUND manager Bill Ackman believes that there is a crisis in the student loan business and that this crisis could TANK THE ECONOMY.
(P2) He thinks the federal government has loaned out too much money, about $1.2 trillion, to people who can’t pay it back. He thinks that eventually, POLITICAL PRESSURE will force the government to forgive those loans.
(P3) If the government did that, it would seriously damage an entire industry that services these loans.
(P4) Perhaps because they fear Ackman’s prediction will come true, many big banks are fleeing the student loan business.
(P5) Ackman believes a COLLAPSE in this lending market would result in a major hit to the US economy, the same way that the housing market crash did less than 10 years ago.
(P6) Not everyone on Wall Street agrees with Ackman. They believe the demand for education in the US is unlikely to subside. Those students will need to borrow money for tuition.
(P7) There will be lenders to make those loans. It just won’t be the major banks.
(P8) “If the government and major banks cuts back on student loans, there are other private lenders looking to PICK UP THE SLACK,” one economist said.
(P9) Others say there’s no way the government will forgive $1.2 trillion in loans.
(P10) “The federal government is not likely to forgive all student loan debt,” said Mark Kantrowitz, senior vice president with Edvisors, an online financial planning service for students. “The BASELINE DEMAND for student loans continues to increase and overall new volume will start increasing again in a few years.”
If you found the passage difficult to read or had problems understanding specific words or idiomatic expressions, please discuss them with your tutor. The following discussion questions should be answered in your own words and with your own arguments.
- Briefly summarize the content of the article in your own words.
- Borrowing large amounts of money in order to attend university is very common in the United States. Is this as common in your country?
- Do you think that borrowing money in order to attend university is a good idea? What are the pros and cons?
- What does financial advisor Mark Kantrowitz think will happen to the demand for student loans?
- Every 8 or 10 years there seems to be a world financial crisis. In 1999-2001, there was a technology company crisis; in 2006-2009, there was a real estate crisis. Do you worry about the next crisis?
Expressions to Practice
What do the following expressions mean? Practice using each expression in a sentence; extra points if you can use it in conversation.
- Pick up the slack
- Hedge fund
- Political pressure
- Housing market crash
- Baseline demand
- Major hit