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Subprime Goes to College
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Subprime Goes to College

Testimony Before the U.S. Senate Committee on Health, Education, Labor and Pensions

Steven Eisman
U.S. Senate Committee on Health, Education, Labor , 2010
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8

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Recommendation

In this 2010 US Senate testimony, Steven Eisman predicted what could become the next big financial bubble to burst: student loans. Eisman – an American money manager who famously made millions betting against subprime mortgages – argues that the extreme growth of the for-profit higher education industry, fueled by student loans, parallels that of the subprime mortgage industry whose collapse triggered the 2008 global financial crisis. His testimony ultimately spurred Department of Education reforms, serving as an important reminder of the power of government regulation to mitigate unchecked greed and its devastating economic impact. getAbstract recommends Eisman’s insights to those who want to understand the financial risks posed by for-profit education.

Take-Aways

  • Government deregulation and federal student loans have fueled dramatic growth of the for-profit higher education industry.
  • The for-profit business model seeks to maximize the amounts students can borrow. It recruits the people with the biggest financial need and places them in high-cost schools.
  • The quality of education offered by many for-profit schools is so poor that students are unable to find good jobs, forcing student loan default rates to skyrocket.

About the Author

Steven Eisman is an American money manager who became famous for making millions of dollars by shorting securitized subprime home mortgages.

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