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US Household Debt Surpasses 2008 High

nytimes.com

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Re: US Household Debt Surpasses 2008 High

#51

Post by manacit »

tracker1 wrote: post #43

How is having a higher percentage (double) of student loan debt that should be payable in a few years today any better than higher mortgages... it seems to me, this is a bad trend in general... :-/

Considering the collateral against that student loan debt is nothing (hence them not being dischargeable in bankruptcy), I would think it's much worse than an increase in mortgage values. Of course, there have been other articles on the HN front page as recently as today talking about rising home costs as well.

America (and the world? I don't feel qualified to say that) has a very odd relationship with debt, and it's driving all sorts of weird societal behaviors, like taking $100k+ in debt to get a college degree. I don't forsee it ending well.

Re: US Household Debt Surpasses 2008 High

#52

Post by theparanoid »

bariereefwozere wrote: post #16
manacit wrote: post #10

I don't know if it's a "bubble" (I am not qualified to say that), but I can't imagine that the current trend with student loans will continue. Looking at the numbers for someone entering college in 2017, it feels nearly predatory what a good portion of private and out of state colleges are charging. Even with financial aid, $30-40k a year for 4-5 years is insane. I was fortunate enough to have parents who made saving…

> it feels nearly predatory what a good portion of private and out of state colleges are charging From an outsiders (AU) perspective, it sounds very depressing for youngsters - massive student loans and then you need to jump on the mortgage treadmill (unless you're lucky). It almost sounds to the point where individual students could pay for personal tutors with the amount of cash they're spending* (or borrowing then…

University is about signalling not education (for the most part). University administrators are a large part of the cost increase.

Re: US Household Debt Surpasses 2008 High

#53

Post by runT1ME »

irrational wrote: post #40
subterfudge4 wrote: post #35

Earlier quoted context omitted.

This is one thing about USA I do not understand. Why pay $200K for a degree that can not pay that money off in couple of years ? Just why ?

Because there are almost no jobs available that pay more than minimum wage that do not require a college degree.

Except, you know...software engineer, IT, DevOps, Infosec, WebDev, etc.

Re: US Household Debt Surpasses 2008 High

#54

Post by ryandamm »

yuhong wrote: post #31
ryandamm wrote: post #20

An alternative view, and one I happen to subscribe to: a balance sheet analysis shows that US debt must go up over time to support exogenous capital flows. Whether US debt grows in the housing sector, student loans, revolving debt, etc is a function of internal, domestic dynamics (including laws, local economic structure, etc). But the total capital flow into the US exceeds the outflow; that money ends up on a balanc…

The US economy has been based on debt since the 1970s. The more debt increases, more goods gets imported from other countries. One other important debt is government debt, which was one of the reasons we got off the gold standard in the first place. The more government agencies such as the NSA spends, the more money gets printed. Now you see why Medicare can't negotiate drug prices too. Of course, I suspect that thin…

Well, my point (and Pettis's) is that causality runs the other way: we have debt in the US because non-US entities (individuals, businesses, and governments) continue to invest money here. That investment results in spending in excess of production, i.e., debt.

It plays out in government spending, household debt, corporate debt, and the exact distribution is a function of internal dynamics. But the entire amounts must balance, and must balance with the US accruing more debt.

Re: US Household Debt Surpasses 2008 High

#55

Post by treyfitty »

libria wrote: post #19
mdorazio wrote: post #3

For those who just read the title, the cause of this new high is ballooning student debt, not mortgages. Housing debt is still mostly declining.

Why is student loan debt not dischargable in bankruptcy? If it were, banks would be far less likely to issue them, students would find cheaper education alternatives, and universities would be forced to provide greater assistance.

Largely because of the perverse incentives to declare bankruptcy immediately upon graduation. Think about it: no major purchase on the horizon, such as a mortgage- why not just ditch the loan if it's only going to hurt your credit file temporarily?

Call it a slippery slope fallacy, but it's not fallacious when you realize we are rational beings (for the most part) and this loophole is attractive.

Re: US Household Debt Surpasses 2008 High

#56

Post by ryandamm »

rrggrr wrote: post #30
ryandamm wrote: post #20

An alternative view, and one I happen to subscribe to: a balance sheet analysis shows that US debt must go up over time to support exogenous capital flows. Whether US debt grows in the housing sector, student loans, revolving debt, etc is a function of internal, domestic dynamics (including laws, local economic structure, etc). But the total capital flow into the US exceeds the outflow; that money ends up on a balanc…

Yes. Pettis. Anyone on HN commenting on economics must read Pettis. In very brief his simplified thesis: One country's public policy decision to subsidize export-led growth requires another country's public policy decision to also subsidize that growth through import consumption and debt. The accounts must balance.

I agree! His simple-but-not-too-simple model to explain international macro economics is really great, and happens to explain a lot of the dynamics of what we see these days.

It's appealing intellectually; I like small and simple models. I suppose if we see a major dislocation in the Chinese economy in the next 2-3 years, his model will be extra-confirmed. (That's a major point he makes on his blog.)

Re: US Household Debt Surpasses 2008 High

#57

Post by stretchwithme »

libria wrote: post #19
mdorazio wrote: post #3

For those who just read the title, the cause of this new high is ballooning student debt, not mortgages. Housing debt is still mostly declining.

Why is student loan debt not dischargable in bankruptcy? If it were, banks would be far less likely to issue them, students would find cheaper education alternatives, and universities would be forced to provide greater assistance.

I'd say it's because of lobbyists for that industry. But these loans used to be all guaranteed the government. At least that changed. https://en.wikipedia.org/wiki/Student_loans_in_the_United_St...

So now, I guess, lenders at least need to consider whether a student is a flight risk. If not, they'll eventually be able to collect, presumably.

We should have a marketplace where the normal incentives exist. Does an educational plan make sense? Does the student have aptitude and work ethic for the chosen career? Will there be a job waiting for this student when they graduate?

If bankruptcy were possible, these questions would be more important.

Re: US Household Debt Surpasses 2008 High

#58

Post by shriphani »

manacit wrote: post #10

I don't know if it's a "bubble" (I am not qualified to say that), but I can't imagine that the current trend with student loans will continue. Looking at the numbers for someone entering college in 2017, it feels nearly predatory what a good portion of private and out of state colleges are charging. Even with financial aid, $30-40k a year for 4-5 years is insane. I was fortunate enough to have parents who made saving…

I found this comment on Quora:

Through 1992, the top 50 colleges in the USA got together each year to collude on: amount of tuition base salary for assistant professors preventing any bidding wars for applicants

Then the Federal government sued and put a stop to that. However, by that point the tuition was way out of whack and the private elite colleges are still allowed to increase tuition at a rate that is above the inflation rate, therefore keeping tuition very high.

At the same time the endowments have increased to huge amounts.

Elite colleges are being run like corporations with the goal to maximize income and continually increase the endowment.

Therefore, tuition will continue to rise (as every college uses the elite private college tuition as their yardstick) until the Federal government sues and forces the elite colleges to reduce their endowment by using the money to reduce tuition.

Elite colleges will gobble up all the money that they are allowed to........

https://www.quora.com/Why-have-college-costs-increased-so-dr...

Gov intervention is probably needed.

Re: US Household Debt Surpasses 2008 High

#59

Post by tupshin »

rrggrr wrote: post #21

Keep in-mind this household debt is above and beyond each household's share of their municipal, county, state and federal debt. If you live in LA County, CA: - about $4,200 in State Debt. - roughly another $4,000 or in LA County debt. - $161,000 in federal debt. - $16,000 in credit card debt on average. - Car loan, home payment, etc. And on average your savings are minimal. Most importantly, if this isn't you, its st…

I was with you until the end. What policy proposals do you think would realistically restore 5-6% growth?

Re: US Household Debt Surpasses 2008 High

#60

Post by vadym909 »

pilsetnieks wrote: post #18
jjawssd wrote: post #12

Germany provides excellent educational opportunities in many fields for American citizens at close to zero out of pocket expense for the student. Google "Germany Erasmus".

Erasmus is a EU programme for student exchange between cooperating universities for up to a year, it's not relevant in this case. However, they should look at German universities in general because they are practically free for anyone.

Surprised why more Americans don't explore colleges in low tuition countries.
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