Sunday, November 16, 2014

Investment Insights from Student Loan Data

Direct loans are low-interest loans for parents and students to help pay for the cost of post high-school education. Parent PLUS, available through the Direct Loan Program, lets parents borrow money to pay costs not already covered by a student's financial aid package.

The current PLUS interest rate is fixed at 7.21%. The Parent PLUS, combined with other student loans, should lower the student loan default rate. However, we should note that the financial responsibility rests Parent PLUS not on students, but on parents.

When a borrower fails to make their monthly payment at a scheduled point in time, a default occurs. The cohort default rate is the percentage of a school’s borrowers who enter into a repayment agreement on Direct Student Loans during a given fiscal year and default within the period.

Cohort default rates nearly tripled from 2007 to 2010. The US government is now focused on strengthening the Federal Direct PLUS Loan Program to stop the default rate increase.

While the Parent PLUS helps decrease the probability that a student will default on their loan, the program increases the financial burden on parents. Many middle-class parents have found it difficult to repay the PLUS loan. What’s worse, The U.S. Department of Education doesn't analyze or publish default rates for the Plus program in the same detail that it does for other federal education loans. But there are still some data we can reference, shown below (*click on picture to enlarge):

Here are some conclusions:

· PLUS Proprietary has the highest default rate in either graduate or undergraduate student loan.
· The effective default rate increase of Grad PLUS borrowers is 0.28% while the default rate for Parent PLUS 0.30%.
· There are many more Parent PLUS than Grad PLUS borrowers.
· The trend is that the default rate for Parent or Graduate PLUS programs will increase. I expect the default trend for the Parent PLUS program to decrease. Investment implications should be obvious.

Post by:

Creative Investment and NCS Intern Meng Guo, 2014 Master of Science in Finance, Carey Business School, Johns Hopkins University, Washington DC, United States. Edited by William Michael Cunningham.

Monday, June 9, 2014

Tuesday, June 3, 2014

LeVar Burton and Crowdfunding

(Photo from: Top 50 Crowdfunding Campaigns: Fifty Most Successful Crowdfunding Campaigns Kindle Edition.

We note with interest the recent Kickstarter campaign by LeVar Burton for Reading Rainbow. According to one news report, "Reading Rainbow, the PBS children’s program hosted by LeVar Burton that debuted in 1983 and went off the air in 2006,upset many with its departure. But Burton, who also executive produced the program, has managed to keep the project alive in some form or another in the time since. He launched the show as an app in 2012. And now his new venture is to take Reading Rainbow’s large digital library of books and videos to classrooms nationwide for free. But to do so Burton needs capital. So the Star Trek actor turned to Kickstarter to raise money. He launched his campaign last Wednesday to raise $1 million to launch his PBS children’s series online. Although Burton had allotted 35 days to raise the money, within 24 hours he had reached his goal."

Bravo! Why was this campaign so successful?  See:

Monday, May 5, 2014

Mr. Gary Becker, 1930 - 2014

The photo at left is Mr. Gary Stanley Becker (December 2, 1930 – May 3, 2014). 

Mr. Becker was thesis adviser for my Master's degree in Economics at the University of Chicago. 

The photo was taken at the International Monetary Fund in Washington, DC on September 23, 2013

Thank you, Mr. Becker.

Saturday, April 19, 2014

Federal Reserve Banks show economic activity increased

Quick summary of the US economy:

Overall Activity: +
Consumer Spending: +
Tourism: +
Advertising: +
Transportation: +
Manufacturing: +
Housing: Flat
Loans: +
Ag: mixed
Wages: Flat
Prices: Flat

Wednesday, January 22, 2014


Under Dodd/Frank, "six federal financial regulatory agencies – the Securities and Exchange Commission, the Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency –" must, by law, develop standards and an approach to assessing the diversity policies and practices of entities they regulate. This means looking at diversity at all banks, investment firms, and credit unions. All of them. Each of these agencies will develop a way to determine if the policies of the entities they regulate are fair, or at least, inclusive. They are asking for comments on this.

I suggest you comment, and have even drafted proposed comment text for you at:

Comments are due by Feb. 7, 2014. Submit them via email by going to: Comments on S7-08-13 Joint Standards for Assessing Diversity Policies 

More information can be found at:

PROPOSED INTERAGENCY POLICY STATEMENT ESTABLISHING JOINT STANDARDS FOR ASSESSING THE DIVERSITY POLICIES AND PRACTICES OF ENTITIES REGULATED BY THE AGENCIES AND REQUEST FOR COMMENT. The Agencies extended the deadline through February 7, 2014, to allow the public more time to analyze the issues and prepare their comments on the Policy Statement.
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Thursday, January 9, 2014

DC actually leads the nation in municipal environmental responsibility

Yesterday, I testified on the Sustainable DC Omnibus Act of 2013 (Bill number: B20-573). According to the Mayor, the Bill will:

"1. Require electric and gas utilities to provide aggregated whole building (energy consumption and environmental performance) data to building owners and managers electronically to facilitate their ease of reporting required benchmarking data..on a monthly basis
2. Require sellers to transfer all benchmarking data at time of building sale. This will eliminate a 10% fluctuation in buildings reporting data.
3. Create a broad public engagement venue that will allow District residents and engaged stakeholders to participate in an open process each quarter that allows for information sharing and program examination…
4. Prohibit..polystyrene containers for food services.
5. Provide support for an Environmental Literacy Program.
6. Establish a Radon Contractor database.
7. Require the Mayor create a responsive Apiculture regulatory environment.
8. Require property owners to pay for the loss of a tree.”

DC actually leads the nation in municipal environmental responsibility, and I support these initiatives. I noted that the Advisory Board responsible for insuring public input on these activities is not as diverse or as representative of the City as I believe it should be. For example, there is currently no Low Income Group Representative. I find this disturbing, but not unexpected.

A video of my testimony is included below:

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