
Student debt hinders millennial homeownership - aaronbrethorst
https://www.curbed.com/2019/1/17/18186772/credit-student-debt-millennial-homeownership
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asabjorn
So the three largest problems for millenials:

\- large and increasing cost of housing due to artificial restrictions of
housing through zoning and housing permitting

\- large and increasing cost of education due to subsidized education with no
cost control of the product, leading to bloat in administration and
unnecessary spending at universities [cost increase is both monetary and in
time due to grade inflation]

\- opportunities are increasingly centered in jobs and cities where the two
previous problems are aggravated the most

Neither of these are productive uses of the amount of debt millenials accrue
for this purpose.

University education is mostly signaling that you are conscientious, smart
enough and execute an imposed set of tasks over an extended period of time
[1]. The book in the link argue although an individual benefit from graduating
at a good college the society as a whole does not get extra value from more
people needing a college education to get a job. Maybe we could get a cheaper
signal for this?

When buying a home housing has the main purpose of sheltering a family. Short-
term increases in house prices lead to a decline in births among non-owners
and a net increase among owners [2]. With decreasing birth rates that is
already below replacement in the west making it impossible for most to buy and
making rent crazy high seem like an incredibly short sighted idea.

[1] [https://www.amazon.com/Case-against-Education-System-
Waste/d...](https://www.amazon.com/Case-against-Education-System-
Waste/dp/0691174652)

[2] [https://www.nber.org/papers/w17485](https://www.nber.org/papers/w17485)

Edit: added extra info on education having a time cost. This is Peter Thiels
long-standing point.

~~~
pkaler
Exclusionary zoning and high university administrative costs are basically a
transfer of wealth from millennials to baby boomers.

~~~
asabjorn
The student loan bonds probably benefit the ones owning them the most, which
is not baby boomers in general. Maybe retirement funds buy them so they
indirectly benefit?

Exclusionary zoning benefit those that own housing the most, so it does
benefit a bunch of baby boomers. However, those with leverage of existing
rental units seem to benefit the most because they gain leverage through
rental income in the same market as they buy new units in so they can slowly
gain new low-risk wealth over time without changing their cost/revenue
balance.

In general low-risk investments such as student loan bonds and rental
properties should be low-margin. However, due to regulations that stop the
market from doing its thing that is not the case.

~~~
njarboe
I believe the "baby boomer" cohort in the US owns the majority of the wealth,
probably just because of the age and size of it. They have the voting and
economic power to control society. They should be careful not to create a
large angry cohort of young people as they head off to retirement, leave the
power centers, but still draw on the resources of others. So far they have
done a poor job of that. Maybe universal surveillance, AI, and robot soldiers
can prevent the younger generations from clawing back some of the wealth
extracted from them, who knows.

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iambateman
We need to add some nuance to the way we talk about student debt.

My wife and I had $120,000 in student loans, which we were fortunately able to
pay it off in 36 months. Granted, we didn’t do much else.

University degreees are not created equal. Having six figures of debt isn’t a
problem if you have a reasonable expectation to have six figures of income.

On the other hand, my cousin went to a private liberal arts college for a
$90,000 Communications degree before returning to RadioShack. He may never pay
his loans off.

Student loans become a problem when they are used to subsidize high-tuition
schools teaching skills which don’t connect to a wage-premium.

~~~
will_brown
>Student loans become a problem when they are used to subsidize high-tuition
schools teaching skills which don’t connect to a wage-premium.

Only 5.4% of Americans make over $100k. I believe 20% of students graduate
with over $100k in student loans. The problem is the Pandora’s box and
unwillingness to admit we tried an experiment and it failed, it’s great we
wanted to guarantee loans to pay for secondary education, but we have to admit
the American economy sucks and overwhelmingly can’t support this student debt
(good luck finding a politician who will say that, much less be able to take
any action to remove guaranteed student loans.

Other interesting facts:

More Americans hold student loan debt than the population of over 200
countries

Over 7 million (>2%) of the U.S. population has defaulted on their student
loans

Student loan debt is the second highest form of debt in the U.S., second only
to mortgages

Almost 30% student loan borrowers move back in with their parents after
graduation

Over 34% of borrowers have delayed starting a family because of their debt

Over 47% of borrowers have delayed buying a car because of their debt

Over 73% of borrowers have delayed saving for retirement because of their debt

Around 63% of borrowers have delayed buying a home because of their debt

Almost 28% borrowers have delayed getting married because of their debt

~~~
cronix
Those are some nice straight up statistics. To me, a more accurate breakdown
would show the degree type, avg cost to obtain said degree, and average income
for people who hold the degree 1 year, 5 years and 10 years after graduation.
Also how many people with that degree actually end up working in the field
that they hold the degree for. Some fields pay, and will always pay, a lot
more than others. Some fields actually have marketability with demand, and
will pay more. Peoples actual choices play a larger role than most are usually
willing to admit. It's easier to just say "I am x in debt and don't make
enough to ever pay it off and it's the systems fault," rather than "I chose a
field where there isn't high demand, or isn't worth enough in the marketplace
to make enough money to pay off my obligations and have a comfortable life."

~~~
LarryDarrell
If degree marketability is the sole point of higher education then let's stop
calling them universities and start calling them what we intend them to be,
trade schools.

I'd hate to think that the ideal American higher education system is one where
only the idle rich get to study what they want or are interested in.

~~~
cronix
No it's not the sole point. Just a practical one that most consumers exercise
when making a consumer decision on what to buy and the cost/benefit analysis
of its practicality. It seems a lot of people don't actually do that when
making one of the biggest decisions of their lives, and this part has nothing
to do with the actual teachings in college. That should be determined before
you even apply. A lot of people do in fact choose to go into fields where the
pay is not that great. That's perfectly fine if someone is willing to accept
that, but if it doesn't pay enough to meet your obligations and have enough
left over for you to be comfortable and have the lifestyle you're striving
for, then that's also a decision that should be accepted. It was a choice.

If you buy a truck that gets 13mpg, and you get mad at how expensive gas is
costing you every time it increases and how fast your vehicle goes through it,
should we get mad at the truck manufacturer or the company that gave you the
loan for _your_ decision, that could have been fairly accurately determined
beforehand with a bit of research and critical thinking (gas prices will rise
in the future)?

I pushed my daughters very hard to research what they wanted to do with their
lives, and made them think hard about the upcoming automation revolution. A
great number of modern day jobs are going to just go away and won't be
directly replaceable. People should be aware of that and go into fields that
aren't as easily automated if they want to do well in the future. We all know
self driving cars/trucks are coming, and fairly soon. Would you encourage
someone to go into the trucking industry today if they are young and figuring
out what they want to do with the rest of their lives?

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ZeroFries
The crazy cost of real estate is far more hindering IMO. Average student
around here is 25k. Average house (detached) price is over 1.3 million.
Toronto area, for reference.

~~~
deadmetheny
Home ownership isn't realistic in every market, especially ones in which
there's such huge demand. The easy answer to this is living somewhere with low
real estate costs (e.g. the Midwest US) instead of massively over-saturated
markets.

~~~
romwell
Sure, the easy answer is to save up a few grand (when you don't have money to
begin with) to move into an area where there are job little opportunities.
That's easy, even easier if you have a partner or a family.

The #1 reason why in-demand markets are that way is _jobs_. Moving out of
these areas is not an _easy_ answer.

~~~
deadmetheny
There's plenty of opportunities around that pay enough to afford real estate.
They won't be as sexy, pay as well as the coasts (the lower COL helps to
offset this), or likely to be working on cutting edge problems, so if you're
looking for that kind of work you're not gonna have much luck. To say there's
nothing anywhere outside of major cities at all is misinformed.

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randomacct3847
At the time, I was mad at my parents for forcing me to go to my public in
state college instead of going out of state to a UC or USC. Now I’m so
relieved that I have no debt from undergrad and a small low interest fed loan
for my grad degree.

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LarryDarrell
Anecdotal, but I don't know anyone my age that has a house that didn't get
their college paid for or had significant down payment help from their
parents.

Every one else has started to view the world with pinko-commie lenses. I'm
genuinely amused at the confusion this causes to the people I talk to who are
at the end of their careers. This really ought to be scaring the upper 20%,
but I guess it's hard to feel the heat when the system is working for you.

~~~
ethanwillis
I'm 27,

I bought my house when I was 22. I received no down payment assistance from my
parents, in fact my parents were actively stealing money from me. I also had a
boatload of student debt, still do.

Now what I did do, was take advantage of government programs that were and
still are in place to qualify for an FHA backed mortgage loan.

My mortgage is $640/mo roughly while my peers see their rent increase
massively year over year..

~~~
danielvf
Yeah, I had no help with a down payment nor college payment help, and bought
around the same age. And I know plenty others young couples and singles who
have done the same thing.

I’m guessing the effect the grandparent is seing is in high cost of living,
coastal cities. It’s certainly not the norm across the US.

~~~
smush
Not to pile on, but I also managed to buy a house at 22 after paying off my
student loans, and I'm not alone in it by any stretch where I am.

Pet theory with zero evidence attempted : Geography really does affect one's
filter bubble / worldview more than we've explored.

Edit: with no down payment or student loan assistance from guardians.

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babyslothzoo
Source study minus the regurgitation:

[https://www.federalreserve.gov/publications/files/consumer-c...](https://www.federalreserve.gov/publications/files/consumer-
community-context-201901.pdf?mod=article_inline)

And a better summary, if you'd prefer an article:

[https://www.bloomberg.com/news/articles/2019-01-16/high-
stud...](https://www.bloomberg.com/news/articles/2019-01-16/high-student-debt-
is-driving-low-millennial-homeownership-rates)

