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US Household Debt Surpasses 2008 High

nytimes.com

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Re: US Household Debt Surpasses 2008 High

#391

Post by speby »

hollander wrote: post #383
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…

How does the student loan system work? Isn't it that students pay back a percentage of their income? If that is the case, how can it become problematic?

No, it's a regular loan and there is no collateral upon default. Additionally, they typically are not able to be thrown out in bankruptcy either. As a last resort, many student loans are federally guaranteed (so imagine if the borrower died, the government will guarantee the loan is repaid). In essence, this is one of the biggest (but not the only) reasons for ever-increasing costs at universities. They add more staff, more administrative people, more student perks, nicer dorms, and charge ever more money because they can. Students get the loans and in all but the most remotest of chance, that loan will always be repaid in due time. It's almost a no-risk loan for lending institutions making it practically like free money to be collected by universities/colleges.

Re: US Household Debt Surpasses 2008 High

#392

Post by diogenescynic »

TheOtherHobbes wrote: post #196
diogenescynic wrote: post #193

Earlier quoted context omitted.

>went to school in the mid 90s >but it was well understood that majoring in Underwater Basket Weaving The way you make such a condescending argument and blame the victim takes away any credibility in your comment. The issue is that tuition has ballooned since the 90s. Tuition is outpacing income/inflation and most else, so regardless of what school or major, the ROI is going down for most. Also, even if you went to a…

Student loans are one of the biggest and most self-destructively predatory idiocies the "financial industry" has ever invented. Ballooning tuition was an inevitable outcome, as was the speculative financialisation of educational institutions, and the relative loss of value of student teaching and post-grad research. It's really just a form of compulsory loan sharking, and it's politically and economically cancerous.…

I agree with you entirely. Basing everyone's college major on ROI is why public universities should be free, so that people can pursue knowledge regardless of cost or ROI. Otherwise we wouldn't have artists, musicians, journalists, authors, and dozens of other essential careers that help make life worth living.

Re: US Household Debt Surpasses 2008 High

#393

Post by thatwebdude »

runako wrote: post #354
Teknoman117 wrote: post #140

Earlier quoted context omitted.

I went to one of the UC schools and left with $121k in debt ($100k borrowed plus the interest I couldn't pay off while working during school). Basically didn't qualify for any sort of scholarships or grants due to my parents making "enough money." Don't know where they get that figure from, as its not like my parents' could afford to write a check for $25k/yr just for my education (especially not with my sister enter…

Thanks for sharing your story. A couple of thoughts, from a 90s-era student: - $121k in loans is a lot in absolute terms. But compared to the other big purchase people often make, it's not expensive at all (and has a shorter period to expected ROI). The expected ROI on a degree is still massively positive. - The opportunity to be able to earn -- in one's 20s -- a spare $2,350/mo from a job (versus starting a business…

The OP is just super-concerned with paying back and getting out of student loan debt. As you outline, it's somehow more important to pay it off than something else (Maybe it's all they pay for?).

My student loans are over a much longer timeframe than they give. Closer to 30-years on all of them. Paying mine off are important to me, for obvious reasons, but the interest rates I pay on mine are only second to my home in affordability.

Re: US Household Debt Surpasses 2008 High

#394

Post by diogenescynic »

puranjay wrote: post #350
diogenescynic wrote: post #193

Earlier quoted context omitted.

>went to school in the mid 90s >but it was well understood that majoring in Underwater Basket Weaving The way you make such a condescending argument and blame the victim takes away any credibility in your comment. The issue is that tuition has ballooned since the 90s. Tuition is outpacing income/inflation and most else, so regardless of what school or major, the ROI is going down for most. Also, even if you went to a…

Liberal arts grad here. Humanities education has almost completely absolved itself of any responsibility for helping its students build careers. I did not have a single lecture or discussion with any of my professors about how I could use my degree to get a job, what kind of careers I could pursue, and how to use my degree for anything outside of academia. Humanities education has become "education for education's sa…

I also agree, but I'm also a liberal arts grad and it gave me the skills to get to where I am now, so I really can't complain. I agree there needs to be more time spent helping students find career paths. That is truly severely lacking.

Re: US Household Debt Surpasses 2008 High

#395

Post by rsync »

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.

"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."

Isn't that only necessary in nominal currency ?

That is, theoretically a country could introduce some factor that caused their currency, held by their trading partner, to increase in value to match their new export output ?

The balance sheet would pencil out nominally, but there could still be an imbalance relative to some other value ...

Isn't this difference between nominal and real values on the balance sheet what causes the tension between what dollar assets the Chinese hold vs. what they set their currency to vs. what our trade balance is ?

Re: US Household Debt Surpasses 2008 High

#396

Post by thatwebdude »

callalex wrote: post #251
prawn wrote: post #231

Earlier quoted context omitted.

Is that 7.5% interest rate standard? Is it high because of the risk inherent in young adults being unable to service the loan?

That's the standard rate for the "federal non subsidized stafford loan"

For a specific bracket (time attended, and level of education). Most undergrads are facings rates half of that.

Can you refinance?

https://www.edvisors.com/college-loans/federal/stafford/inte...

Re: US Household Debt Surpasses 2008 High

#397

Post by diogenescynic »

ryandrake wrote: post #233
diogenescynic wrote: post #193

Earlier quoted context omitted.

>went to school in the mid 90s >but it was well understood that majoring in Underwater Basket Weaving The way you make such a condescending argument and blame the victim takes away any credibility in your comment. The issue is that tuition has ballooned since the 90s. Tuition is outpacing income/inflation and most else, so regardless of what school or major, the ROI is going down for most. Also, even if you went to a…

Sorry, bud. I also went back to school for another go after 2005, still focusing primarily on ROI. So I think I can say I'm well aware of and lived through both current and past student loan / tuition regimes. But please feel free to continue to attack the tone of my argument rather than the content.

Your argument is a straw man and it was a pathetic attempt to blame the victim AND it ignored the vast increases in college tuition. It was a poorly reasoned argument and it was incorrect.

Re: US Household Debt Surpasses 2008 High

#398

Post by rsync »

ced wrote: post #131
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…

I'd like to understand this better. There's two villages. A businessman from village B comes to village A and buys a store from Bob for 100$. Bob keeps the money for a rainy day. Where is debt increasing?

"I'd like to understand this better. There's two villages. A businessman from village B comes to village A and buys a store from Bob for 100$. Bob keeps the money for a rainy day. Where is debt increasing?"

I am not going to rehash the (excellent) answers you have already received, but it's worth summarizing:

The debt increase occurs because of banking, and specifically, fractional reserve banking.

Your instinct is correct - if Bob just puts the money in his desk drawer, no new debt is created.

When we say that your scenario ipso facto creates debt, what we really mean is that it creates debt because of course you immediately deposit the funds in a bank.

Re: US Household Debt Surpasses 2008 High

#399

Post by thatwebdude »

themagician wrote: post #130

I think it's going to hit housing hard (again), but probably not anytime soon. A lot of my friends have student loan debt that will never be paid off. They either can't get a job that pays enough to pay it off in a timely fashion or they choose not to grind for 5-8 years to pay it off. Instead, the plan is to do as little as possible for the next 25 years until it's forgiven, and try to keep as much cash off the book…

This is only possible in certain situations for certain borrowers who borrowed a certain kind of loan.

Too many people think there's forgiveness light at the end of the tunnel. I feel really bad when they realize there isn't. Except death, maybe. I bet we'll see some of that, too.

https://studentloanhero.com/featured/federal-student-loan-fo...

Re: US Household Debt Surpasses 2008 High

#400

Post by rsync »

omgwtfbyobbq wrote: post #128

$13.6 trillion is a ton of debt (literally?). At the same time, I think debt versus net worth is a more descriptive metric. Back in 2008, household net worth (HNW) was about $56 trillion, so household debt was about a quarter of HNW. With HNW at about $93 trillion, reaching $14+ trillion in household debt doesn't sting as much. https://www.federalreserve.gov/releases/z1/current/z1.pdf At the same time, interest rates…

"$13.6 trillion is a ton of debt (literally?)."

It depends ... if trillion dollar coins only weigh an ounce, that could be less than a single pound of debt:

https://en.wikipedia.org/wiki/Trillion_dollar_coin

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