Wednesday, August 24, 2016

Weimerica Weekly – Student Loan Crisis

New Social Matter Weimerica Weekly podcast is up. This one covers the student loan crisis. I go into the demand portion for universities but also how the government pushed demand to absurd heights. I tackle education as a jobs machine and the history of changing bankruptcy law. This one is 37 minutes as a warning. I broke the 30 minute rule I set for monologue episodes.


Anonymous said...

A little slice of Weimerica for you...

I graduated with a BS in engineering and I graduated with $90,000 in loans. My loans paid for my apartment, my food, late nights at the bar, and several trips with friends. Realizing my mistake after graduation, I paid my loans off in three years living a hand to mouth existence, living in a tiny efficiency apartment, only owning a laptop, a bed, and a couch given to me by my parents. I remember getting lots of pressure to just pay the minimum and buy a house. No way.

My old roommate graduated with a smaller amount but still a lot of loans. He fell for the idea that he was to immediately buy a house. So he did. He got told "you only live once" so he spent (borrowed) nearly $50,000 on a wedding. Him and his also heavily indebted wife spent their 20s travelling to basically every continent except Antarctica. What they did was that they were able to get their loans on forbearance so they just paid the interest, which was still several hundred dollars a month.

Now they are in their early 30s and will need to spend the next 20+ years of their life paying a minimum of $1000 a month between the two of them in student loans. They could tighten their belts and pay off the debt faster but they're millennials and still want to go to the latest restaurants, go on an international trip once a year, and want to be seen in the latest eco friendly car (my old roommate tells me he is trying really hard to shift expenses around to get a Tesla, even if it means trying to go into forbearance again).

If any one of them loses their job, they are in deep trouble. They are pretty flippant about the loans, treating it as a given that will follow them around their adult lives. Of course, they have no kids and have said that they don't want any. My old roommate has come close to getting a vasectomy but hasn't because deep down, I suspect both him and his wife really want kids but they're too busy living the Gen Y life to admit that they eventually want to settle down and raise a family. Thanks to student loans though, they now have a convenient excuse as to why they can't afford a couple of kids.

GoldRush Apple said...

Ryan, have you looked into the "travel lust"/"rejecting the American Dream" types that quit their cubicle jobs (it's always the cubicle workers) and start their own "travel on a dime" business/site?

Here's a start:

The comment section is a hoot.

Portlander said...

Haven't listened yet, but one thing that became evident during the '08 crisis was that there's a psychological tipping point on debt. Once it becomes overwhelming, most people give-up worrying, or even thinking, about it any more. They load-up as much as a bank will extend them and go on their merry way making the monthly min.

However, they aren't building any long-term capital and their assets, such that they have, are depreciating, if not already worthless, consumer schlock. They are, and always will be, wage-slaves to the machine. Which is the way the FIRE economy wants it. Freemen are a threat to the system. They can withhold their productive output, barter under the table, and go the economic equivalent of off-grid. Not so for a wage-slave.

Portlander said...

To clarify, the loading up happened 2004-2006. It became evident when the "tide went out" in 2008.

IOW, if you owe a bank $50k in student loans (that's the gateway drug), $220k on a 30 yr mortgage, and another $2k in unconsolidated, "left-over" credit card debt, it starts feeling insurmountable. So F-it. Why worry?

At that point the person starts taking down whatever credit someone is willing to extend them. They are now chained to the system and the tapeworms in NYC & DC have another sucker that they are going to sponge off of for the rest of that person's days.

Anonymous said...

40 years ago, I graduated from one of the 'Public Ivies'. I had the onerous task of paying back my student loan; $900. It was $18 a month for 60 months. Paid %1080 in all. Of course with inflation, multiply everything by 3.5 and you can see how onerous that actually was.