Your children’s debt as an asset class

Eric Garland Education Trends, Generational Conflict 2 Comments

It was a few months back when I gave a speech about the End of Growth and the birth of a new economic narrative. A man in the audience came up after and asked the question so many often do: “OK, smart guy, so what do I do with my 401(k)?” People like this gentleman know that we do not live in “normal” times, so just believing whatever your broker tells you may not be particularly shrewd. I usually pawn this question off since I do not provide investment advice on that level.  But then the man started giving me some additional information.

“I really thought your slide on student loan debt getting larger than consumer debt was compelling. And you know what, it reminds me of an opportunity my broker is telling me about. Apparently, many universities see the indebtedness of their student body as an asset class to be exploited. Risk is relatively low and returns are around 4-5% on average. So these universities are starting their own hedge funds with debt from their students.”

Can somebody in the finance industry confirm whether this is really happening, and if so, the names of the private equity funds that specialize in this “investment?”