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US Household Debt Surpasses 2008 High

nytimes.com

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Re: US Household Debt Surpasses 2008 High

#261

Post by downrightmike »

slg wrote: post #109
tsunamifury wrote: post #7

This appears to be an even worse situation than 2008 because housing debt has gone down not because homes are cheaper, but that people can't buy homes. And other forms of debt with far smaller effect on net-wealth and GDP as well far harsher discharge terms are eating up the difference. This makes for the same (or more) debt load in an even riskier, more individually onerous, combination.

I don't want to say that student loans aren't a big problem or that there isn't a bubble, but I think the panic of a potential repeat of 2008 is missing a big portion of the mortgage crisis. In 2008 there was a feedback loop that caused things to spiral out of control. Every house that was foreclosed on hit the market at a lower and lower price. This made it harder for people to refinance their existing mortgages. Th…

We are kind of in the same place as the 2008 crisis, except the sub prime mortgages have been extrapolated out a level. The comercial product being sold today is the rent collected from the properties and the mortgage is the collateral. So if the renter can't pay, kick them out, The market shouldn't tank all at once, it will continue to go up 20% a year until nearly no one can afford to live in a house period. Then crash. http://www.motherjones.com/politics/2014/01/blackstone-renta...

Re: US Household Debt Surpasses 2008 High

#262

Post by [deleted] »

duncan_bayne wrote: post #78
shriphani wrote: post #58

Earlier quoted context omitted.

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 th…

Welcome to the vicious cycle of Government intervention. "Well we threatened a bunch of people with violence until they behaved against their own judgement. Turns out this led to all sorts of problems. Better do some more threatening to correct it." In addition to being moral, a free market avoids this sort of feedback loop.

[deleted]

Re: US Household Debt Surpasses 2008 High

#263

Post by [deleted] »

malandrew wrote: post #147
lz400 wrote: post #139

Earlier quoted context omitted.

I truly don't understand the USA sometimes. Don't you guys know that in Europe higher education is free? Well where I'm from there was a very low nominal cost but my father was a public servant so cost was waived, I literally studied CS for 0 cost. And these countries are able to afford it all! Magic! I don't understand how people in USA are not aware of this and literally rioting in the streets. At the very least sw…

> Don't you guys know that in Europe higher education is free? Nothing is free. Someone is paying for it.

[deleted]

Re: US Household Debt Surpasses 2008 High

#264

Post by vizeroth »

labster wrote: post #145
austenallred wrote: post #137

Earlier quoted context omitted.

I'd venture a guess that helpful and savvy parents matter as much as (if not more than) coming from money

You need luck or connections or wealth to succeed. Connections can include parents, friends, etc. But something has to break your way -- simply attending college is not enough to tilt the odds in your favor.

Many colleges are being pressured (by accreditation committees, donors, government, etc.) to provide methods for students to acquire connections that make it easier to succeed. Networking opportunities, guest lecturers from industry, internships, and special programs are fairly common ways that colleges can make a difference for students beyond an education.

While some (perhaps many or most in some schools) professors live in the isolation of academia, lecturers or part-time, non-tenure professors often work in a field related to the subject they are teaching, and can be a good source of connections for students.

Sure, simple attendance may not be enough for many students, but most colleges do at least try to give you the opportunities and tools you need to succeed.

Re: US Household Debt Surpasses 2008 High

#265

Post by hourislate »

lz400 wrote: post #139
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 truly don't understand the USA sometimes. Don't you guys know that in Europe higher education is free? Well where I'm from there was a very low nominal cost but my father was a public servant so cost was waived, I literally studied CS for 0 cost. And these countries are able to afford it all! Magic! I don't understand how people in USA are not aware of this and literally rioting in the streets. At the very least sw…

The reason school is so expensive is because of the sports programs. You have football coaches that are earning 3 million a year. You will have 100's of millions invested in football stadiums, basket ball, baseball, and all the supporting infrastructure.

People wonder why they have to pay so much for tuition and extra fees. Somewhere along the line sports became more important than academia and drove the cost of a 4 year degree from a 15k to 100k.

http://www.huffingtonpost.com/dr-philip-l-yeagle/may-you-get...

Re: US Household Debt Surpasses 2008 High

#266

Post by ProfessorLayton »

jellicle wrote: post #243
ProfessorLayton wrote: post #124

Earlier quoted context omitted.

I definitely agree that rapidly rising education costs are a huge issue and need to be addressed. However, most (67%) undergraduate student loan amounts are for less than 20K[1] At 6.8% interest and 10 year repayment that comes to about $2,761 per year, with interest that can be paid with pre-tax money. Yes, thats a hefty amount to many, but earnings with a college degree are still much more than enough to offset tha…

That's a snapshot in time. Yes, some people who have been out of college for twenty years have paid their debt down to less than $10K. Also, a sizeable percentage of homeowners have mortgages of less than $10K, at this instant. But both student borrowers and homeowners started off with more debt. You're assuming they're graduating with $10K debt. Actual average debt at graduation is $37K.

That 37k average is distorted by graduate and professional degrees [1], which is why I specifically referred to undergraduate debt, which are the bulk of all graduates.

[1] https://static.newamerica.org/attachments/750-the-graduate-s...

Re: US Household Debt Surpasses 2008 High

#267

Post by doyoulikeworms »

hourislate wrote: post #265
lz400 wrote: post #139

Earlier quoted context omitted.

I truly don't understand the USA sometimes. Don't you guys know that in Europe higher education is free? Well where I'm from there was a very low nominal cost but my father was a public servant so cost was waived, I literally studied CS for 0 cost. And these countries are able to afford it all! Magic! I don't understand how people in USA are not aware of this and literally rioting in the streets. At the very least sw…

The reason school is so expensive is because of the sports programs. You have football coaches that are earning 3 million a year. You will have 100's of millions invested in football stadiums, basket ball, baseball, and all the supporting infrastructure. People wonder why they have to pay so much for tuition and extra fees. Somewhere along the line sports became more important than academia and drove the cost of a 4…

Don't these sports programs also bring in money though?

Re: US Household Debt Surpasses 2008 High

#268

Post by edmccard »

ryandrake wrote: post #104
austenallred wrote: post #70

Earlier quoted context omitted.

It sure feels like a bubble to me. I don't know how many friends I have with six figures of student loans and no career, but it's a lot. Considering that those loans don't even go away with bankruptcy, it's waaaay too many. I've noticed that younger students are starting to realize how much risk there is in something like that and shy away when my generation didn't. Maybe it's that I grew up in a "striving" middle cl…

I don't know, maybe it's different now, but my generation (went to school in the mid 90s) was not told to "just go to the best college no matter what": We were also advised to consider the cost and carefully choose a major so as to produce a positive expected ROI. Obviously nobody has a crystal ball and you can never tell when huge, industry-wrecking changes are coming, but it was well understood that majoring in Und…

>it was well understood that majoring in Underwater Basket Weaving was not a great idea from a financial point of view

It's still understood. It's just that, it's not a very useful piece of information, since _all_ degrees are more expensive nowadays -- not just the basket-weaving ones.

Re: US Household Debt Surpasses 2008 High

#269

Post by stale2002 »

nerfhammer wrote: post #200
austenallred wrote: post #70

Earlier quoted context omitted.

It sure feels like a bubble to me. I don't know how many friends I have with six figures of student loans and no career, but it's a lot. Considering that those loans don't even go away with bankruptcy, it's waaaay too many. I've noticed that younger students are starting to realize how much risk there is in something like that and shy away when my generation didn't. Maybe it's that I grew up in a "striving" middle cl…

Bubbles are caused by speculation, often by unsophisticated investors. Since an education is a non-transferrable asset it's difficult to conceive how it could be classified as a "bubble". Speculators buy assets that they aren't going to use themselves purely to sell it to someone else. If speculators are selling to mostly to other speculators and transactions between speculators starts taking up the bulk of the activ…

Here is how the college bubble would burst.

People with large amounts of debt demand high salaries (because they have to pay the debt) .

The bubble would burst when companies realize that they can pay someone who went to a trade school/bootcamp much less money, for a similar quality of work than that produced by the people with expensive degrees.

It is already starting to happen, with the insane amount of bootcampers that have appeared only in the last 3 years.

What is the market going to look like 3 years after NOW, when supply has glutted to an even more ridiculous degree?

(My experience is in the tech markets but I see no reason why this couldn't be the case for other job markets. We are the canary in the coal mine of what is to come )

Well, what will happen is that the market for new grad jobs starts to plummet, and all of a sudden those people who paid 200k are left with a fancy piece of paper, and no high paying jobs.

THEN is when things get even more interesting. Now these people with no high paying job start becoming unable to pay back their loans... At which point the whole thing comes crashing down.

The bubble is not just the college degree. It is the market and loans BEHIND the expensive piece of paper.

Re: US Household Debt Surpasses 2008 High

#270

Post by plaguuuuuu »

Meekro wrote: post #118
ryandrake wrote: post #104

Earlier quoted context omitted.

I don't know, maybe it's different now, but my generation (went to school in the mid 90s) was not told to "just go to the best college no matter what": We were also advised to consider the cost and carefully choose a major so as to produce a positive expected ROI. Obviously nobody has a crystal ball and you can never tell when huge, industry-wrecking changes are coming, but it was well understood that majoring in Und…

My experience was similar to yours. I immigrated from Russia at a young age so we had very little money. I attended a great college mostly on scholarship. My mom had always taught me to work hard and pick a major carefully, taking into account ROI. Thanks to merit-based scholarships and need-based aid, I graduated with minimal debt, despite attending a private college with a $45k per year sticker price. Thanks to a p…

Coming from money isn't a necessity for an individual, but on a statistical basis, the correlation is undeniable - you're so much more likely to succeed if you come from money that the idea is substantially correct.

If I had a "small $1 million loan" right now, I'd be able to take much greater risks in terms of quitting my job to create a startup or whatever. Thus I'd be far more likely to be more successful (financially speaking)

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